UK Welfare Bill Tops 11% of Output as Healey Pledges to Cut Unsustainable Costs

On Oct 29, British Finance Minister John Healey said the government will reduce welfare spending after UK welfare costs were projected to exceed 11% of economic output this year. He said the benefits bill must come down, but rejected crude cuts.

No Timetable

Healey did not commit to a timetable for reducing welfare spending when asked whether costs would fall before the next general election, due no later than mid-2029. He told the BBC: "We have to bring the benefits bill down. You don't do that by crude cuts."

Prime Minister Andy Burnham later told reporters that the government was "working flat out" to reduce the welfare bill as quickly as possible.

Welfare spending includes pensions and support for people considered too ill to work. It is projected to exceed 11% of the UK's economic output this year. The opposition Conservative Party and some bond investors argue the scale of welfare expenditure shows a lack of commitment by Burnham's Labour government to reducing borrowing.

Budget Pressures

Healey's tax and spending plans offered short-term support to households affected by rising energy prices linked to the US-Iran war. Some measures were financed through higher taxes on banks, savers and landlords.

The budget did not resolve longer-term questions, including how to increase defence spending to 3% of economic output, offset the effects of inflation on public expenditure and contain the growing welfare bill. The Resolution Foundation said the budget's £100 energy-bill reduction is spread too thinly.

Financial markets reacted broadly positively to Healey's budget, with 10-year UK government borrowing costs falling to a one-month low on Thursday.

Youth Unemployment

Healey highlighted youth unemployment as a key area requiring action. "This system is unsustainable," he said. "I feel a moral duty to deal with these youngsters (who) have been written off." He said the government would help young people who were out of work and require them to take up opportunities offered to them.

Eduin Latimer, senior research economist at the Institute for Fiscal Studies, said the approach could generate savings, but added that this was "much more uncertain than just directly cutting entitlements".

For Nigerian businesses and the naira, the UK budget matters through trade, diaspora remittances and global bond yields. A softer UK borrowing market can ease pressure on global risk sentiment, but a weaker UK welfare outlook keeps public spending and tax questions in focus.