Reeves rejects claim £3.4bn welfare cuts will plunge 250,000 people into poverty as she vows to get Britain working

26 March 2025, 19:51 | Updated: 26 March 2025, 22:04

Watch Again: Iain Dale's exclusive interview with Rachel Reeves

Rachel Reeves has denied "choosing to penalise poor people" in her Spring Budget after the Chancellor announced a slew of benefit cuts, risking plunging a quarter of a million Brits into poverty.

The Chancellor's comments come after she confirmed growth predictions for 2025 had been slashed in half and announced a slew of benefit cuts in her Spring Statement.

Growth is now expected to be just 1% for the year, half of the Office for Budget Responsibility’s previous prediction.

The announcement came as Ms Reeves pinned the UK’s faltering economy on "increased global uncertainty" in a Spring Statement that brought massive welfare cuts and increased defence spending.

Speaking to LBC’s Iain Dale, Ms Reeves defended her budget and rejected the government's own forecast that 250,000 people will be plunged into poverty by the cuts.

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When pressed on the potential of hundreds of thousands of people falling into poverty, Ms Reeves told LBC "I don't think that will happen."

She said: "Well, look, the numbers in that impact assessment about the welfare reform are based on no changes in terms of people going back to work.

"But the whole point of the welfare reforms that we're making is about giving targeted, personal guaranteed support to people who are on sickness and disability benefits to help them to fulfil their potential and find work that that is appropriate for them so that they're not going to be getting less money, but they will actually benefit from employment.

"At the moment, 1,000 people a day are going on to personal independence payments.

"That is simply not sustainable.

"And we've got a situation today where one in eight young people are not in education, employment or training.

"I'm not willing to write off a generation of young people in that way. I don't want them on sickness and disability benefits, I want them in work."

Speaking in the House of Commons on Wednesday, Ms Reeves added the OBR had upgraded its growth forecast "next year and every single year thereafter", saying: "With GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.

"By the end of the forecast our economy is larger compared to the OBR's forecast at the time of the budget."

Ms Reeves added: "Compared to the forecast in the final budget delivered by the party opposite, and after taking account of inflation, the OBR say today that people will be on average over £500 a year better off under this Labour Government."

Reeves also claimed households will be £500 better off under this government.

"That will mean more money in the pockets of working people," she added.

She also said she plans to get more people into jobs and that inflation is expected to fall gradually.

"Having peaked at 11% under the previous government, the OBR forecast that CPI inflation will average 3.2% this year before falling rapidly to 2.1% in 2026 and meeting the 2% target from 2027 onwards,".

Ms Reeves said her statement "does not contain any further tax increases" before she highlighted a crackdown on tax evasion.

She told the Commons: "Today, I go further continuing our investment in cutting-edge technology, investing in HMRC's capacity to crack down on tax avoidance and setting out plans to increase the number of tax fraudsters charged each year by 20%.

"These changes raise a further £1 billion taking total revenue raised from reducing tax evasion under this Government to £7.5 billion."

Fiscal rules set out last year are non-negotiable - Rachel Reeves

Key points from Reeves' Spring Statement

• Growth revised down from 2% to 1%.
• Upgraded growth forecasts for 2026 (1.9%), 2027 (1.8%), 2028 (1.7%) and 2029 (1.8%)
  Reeves cuts £6.1bn from day-to-day spending by 2029/30.
• Govt says people will be on average over £500 a year better off by end of parliament
• Welfare Reforms estimated to reduce spending by £4.8 billion in 2029-30.
• Fiscal rules unaltered.
• Health element of Universal Credit will be cut by 50% then frozen over the course of the Parliament
  Rachel Reeves says global uncertainty demands an active government, a government "not stepping back but stepping up"
• The OBR wiped out Rachel Reeves's fiscal headroom £9.9billion and then some, leaving her with a gap in the public finances of around £14billion.
• Pledged to restore headroom to £9.9bn. Given world volatility, is this not in danger of just getting wiped out again before the next Budget?
• To reduce costs of the civil service by 15%, raising £2bn, and investing £3.25bn in a new "Transformation Fund". AI tools and voluntary exit schemes. £6.1bn to be saved by 2029/30.
• Inflation to average 3.2% this year. Will return to 2% target by 2027.
• Planning Reforms will "permanently increase the level of GDP" by 0.2% by 2029 (effectively the cost of the defence spending rise) and 0.4% within the decade. Biggest growth ever recorded by OBR 'for a policy with no fiscal cost'.
• From 2025-26 to 2029-30, we project around 1.3 million cumulative net additions to the housing stock - within "touching distance" of 1.5 million target
• Spending on servicing debt over £105bn this year.

'Disappointment'

Labour MP for Norwich South, Clive Lewis told LBC Reeves was "balancing the books" on disabled people.

"We as MPs and many of my constituents watched as for 14 years, George Osborne and successive Tory chancellors pillaged, burned, dismantled public services, destroyed our communities, undermined our infrastructure.

"And we thought we'd learnt the lesson that you can't balance the books on broken backs, that you can't cut your way to growth.

"I thought we'd learned that lesson, but it doesn't feel we have.

"And I think that's part of the disappointment."

A coalition of more than 100 disability organisations has said further cuts to welfare will "heighten alarm" among claimants.

Charles Gillies, co-chair at the Disability Benefits Consortium, said: "The Chancellor has chosen to double down on harmful benefits cuts, despite warnings this approach will push more disabled people into poverty and worsen people's health.

"Since the cuts were announced last week, we've seen an outpouring of fear and dread from disabled people, including many with MS.

"The extra cuts announced today will heighten alarm even further, largely hitting those who are unable to work and rely on these benefits to survive.

"People are wondering how they'll continue to cover their basic living expenses and the extra costs of their disability - like visits from carers to help with things like washing, cooking and going to the toilet. The Government has a moral obligation to scrap these cuts before the real damage is done."

'New low'

Oxfam said the spring statement marked " a new low in the fight against poverty and inequality".

The charity's senior policy adviser Anna Marriott said: "Today marks a new low in the fight against poverty and inequality as the Government chooses to cut vital international aid and social security support for millions of people struggling at home and around the world while protecting the soaring wealth of millionaires and billionaires.

"Three-quarters of the British public back Government tax increases on the very richest instead of these cruel and unnecessary cuts, but the Chancellor has decided to turn her back on fairness.

"These cuts are not just numbers on a balance sheet but will cost lives and have a devastating impact on people facing conflict, poverty and climate disasters around the world.

"It's not about tough decisions; it's about political choices. The Government must stop protecting extreme wealth and start protecting people."

Conservative shadow chancellor Mel Stride has accused Labour leaders of having "reneged on their promises to the British people" during last year's general election.

Mr Stride told the Commons: "Given her track record, given the fact that she has failed to control spending and borrowing to date, what does she think the markets are going to make of her latest promises? "But (Chancellor Rachel Reeves) says of course that none of this - none of this - is her fault, that it's the war in Ukraine, it is (US) president (Donald) Trump, it is tariffs, it is (Russian) president (Vladimir) Putin, it is the Conservatives, it is (the) legacy, it is anybody but her.

"But what the British people know is that this is a consequence of her choices. She is the architect of her own misfortune: it was (Ms Reeves) who talked down the economy, who talked down the economy so that business surveys and confidence crashed through the floor. "It was (Ms Reeves) who confected the £22 billion black hole, a smokescreen that was only ever there in order to cover up for the fact that she and the Prime Minister (Sir Keir Starmer) reneged on their promises to the British people during the last general election."