Healey Faces Welfare Spending Pressure as Budget Gap Widens

The UK government is facing mounting pressure to explain how it will control rising welfare spending after Chancellor John Healey's first budget left questions about the timing of benefit reductions and the sustainability of public finances. Statements from Healey and Labour figures, reported by the BBC and The Guardian on October 29, 2026, highlighted uncertainty over whether welfare costs will fall before the next general election, which must be held by August 2029.

The Office for Budget Responsibility (OBR) forecasts welfare spending will reach £353bn this year, an increase of £19bn, before rising to £431bn in 2031/32. The Guardian reported a separate projection of £431bn by 2030, while noting that the overall forecast had increased by £8bn since March.

The OBR attributes much of the projected growth to health-related benefits and support for pensioners. Its breakdown for 2031/32 includes £209.8bn for pensioners, including the state pension and winter fuel payments, £110.7bn for Universal Credit and equivalent legacy benefits, and £69.6bn for disability benefits such as Personal Independence Payment.

Healey initially appeared to commit to reducing the benefits bill before the next election, telling BBC Radio 4's Today programme: "There will be, there will be a reduction in the benefits bill, we'll do that in a Labour way."

However, Treasury officials subsequently disputed the interpretation that he had promised a reduction within this parliament. Healey later clarified his position in an interview with Channel 4.

"It's not correct to say that we are going to bring this welfare bill down in this parliament because we've not set a timetable for that." Healey said.

The BBC reported that Downing Street was "not setting an arbitrary target or timetable". The prime minister's official spokesman also declined to clarify whether the government's ambition meant cutting welfare spending below its current level or slowing its projected growth.

Healey had also told the Today programme: "We have to bring the benefits bill down." He argued that continued expansion in welfare costs was undesirable for the country.

"We'll do that in a Labour way and we will do that because it is simply not good for Britain or progress to have a bigger and bigger benefits bill." Healey said.

Greater detail is expected after two reviews scheduled for publication in November. Former minister Alan Milburn is leading a review of young people not in education, employment or training, while Labour minister Sir Stephen Timms is co-chairing a review of disability benefits.

Milburn's review is expected to consider additional upfront spending to help more young people enter employment, with the aim of reducing welfare costs over the longer term. The reviews follow the political fallout from former Prime Minister Sir Keir Starmer's attempt to restrict eligibility for some health-related benefits, which triggered a revolt among Labour MPs and a government retreat in June 2025.

During a visit to Derby, Greater Manchester Mayor Andy Burnham identified the Milburn review as the "big next priority in front of us". He said the government wanted to help benefit recipients move into employment without imposing reductions that could leave vulnerable people in crisis.

"We just want to get stuck into supporting people to help people off benefits and into work. There's no delay there. We want that to happen as quickly as possible." Burnham said.

Burnham also said the government wanted to reduce welfare spending "as soon as we possibly can", but did not guarantee that the reduction would occur before the next election. He cautioned against "crude cuts" and emphasized the importance of "sustainable employment".

"We're working hard to cut the welfare bill as soon as we possibly can. But we're doing it in a way that supports people into work." Burnham said.

He explained that reductions made without helping people find lasting employment could create additional costs elsewhere in the public sector.

"If we just went and made crude cuts, in the end, that leaves people in crisis, and you spend more public money somewhere else, so it's about getting people into sustainable employment." Burnham said.

Former Bank of England chief economist Andy Haldane said a credible plan to restrain benefit spending could improve the government's standing with financial markets. Haldane, who has previously advised Burnham, told the BBC's Political Thinking with Nick Robinson podcast that greater spending discipline could deliver a "huge bonus".

He said a government plan demonstrating "greater restraint" in welfare spending would "play spectacularly well" with financial markets.

"If the government could get that through I think it would come with a huge bonus." Haldane said.

Conservative Party leader Kemi Badenoch criticized Labour's budget and its handling of welfare spending. She described the country as "overspent, overborrowed, overtaxed, and drowning in an out-of-control welfare system".

Responding to government briefings about the timetable for benefit reductions, Badenoch said "foot in mouth syndrome is spreading".

"Don't let anyone tell you this was a 'do no harm budget'. In doing so little, Labour have harmed our economic security and they've harmed our national security." Badenoch said.

Separately, the Institute for Fiscal Studies (IFS) warned that Healey's budget could leave the government facing difficult choices over departmental spending. The think tank said an additional £28bn a year would have been needed to offset inflation's effect on future spending plans and meet the target of spending 3% of gross domestic product on defense by 2030.

IFS director Helen Miller said the budget had left the government facing a potential "spending review that looks pretty brutal for some departments".

"Public service spending plans look extremely tight. They don't look to me like plans that this government would want to deliver," Miller said.

She warned that the pressure could lead to "another season of damaging speculation about tax rises". The welfare bill will not be included in the spending review, which focuses on departmental budgets.

The IFS also questioned whether the £15bn buffer Healey retained against Labour's fiscal rules would be sufficient if energy costs rose more than expected. The chancellor used part of that financial headroom to absorb higher borrowing costs linked to the Iran war, leaving less protection against future economic shocks.

Miller described that decision as "reasonable", while warning that "a lower buffer leaves the chancellor more exposed to future bad news".

Healey said ending the wars in Iran and Ukraine would be the single biggest driver of improved economic prospects for the UK. On Britain's relationship with Europe, he acknowledged the economic consequences of Brexit while rejecting the suggestion that rejoining the European Union or single market would necessarily deliver stronger growth.

"Well, I don't actually accept that. Brexit has certainly hit our level of growth. It's certainly hit our level of trade.

But we had a referendum. We're out of the European Union. The challenge for me now is how do we make the best of an economy which this year has proved remarkably resilient."

Healey said.

Asked whether he expected Britain to rejoin the bloc during his lifetime, Healey replied: "I'm older than Andy Burnham. I don't expect to see that."

The budget also included a £100 winter cost-of-living payment for most households and doubled the surcharge on bank profits from 3% to 6% for 15 months. The Resolution Foundation criticized the government's approach to energy support, arguing that assistance was spread too widely rather than concentrated on households most in need.

Resolution Foundation chief executive Ruth Curtice described the budget as a "scattergun budget" that did little to address Britain's economic challenges.

"Faced with a tough backdrop amid global economic turmoil, the chancellor delivered a scattergun budget that did little to address the sharp challenges facing Britain." Curtice said.

She warned that the support would not adequately protect families from rising energy bills.

"Cost of living support is being spread far too thinly and will leave even those families receiving help facing higher energy bills than they did during the last energy price shock." Curtice said.

Trades Union Congress general secretary Paul Nowak welcomed the decision to increase the bank surcharge but argued that lenders could contribute more toward household energy assistance.

"It was right to tax banks to help people with their energy bills, but I think banks could have been asked to pay a fairer share. He's going to review it in 15 months. We're going to be looking as part of that review – if banks are still making windfall profits – for him to extend and increase the bank tax." Nowak said.

The government has also pledged to reform the state pension triple lock from 2030. Further welfare proposals are expected after the November reviews, although ministers have not established a timetable for reducing the overall benefits bill.