UK
Why austerity is a political choice not an economic necessity
28 March, 2025
Opinion
Chancellor Rachel Reeves’ Spring Statement is a watershed moment in British politics. A Labour government traditionally associated with the working class has unveiled welfare cuts of £4.8bn, mainly targeting the poor and disabled. It is protecting corporate profits and wealth of the ultra-rich by cutting support for the poor. More than 3m families will lose an average of around £1,720 a year in real terms in this parliament. The government claims that cuts in benefits will force the disabled people to work, assuming that there are suitable jobs. The Office for Budget Responsibility (OBR) states that individuals receiving disability benefits generally have limited capability for work and is unable to substantiate the government’s claims of any savings.
The UK already has 16m people, including 5.2m children, living in poverty. The government’s own analysis shows that as a direct result of the government’s measures the number of people living in poverty will increase by 250,000, including 50,000 children. The Joseph Rowntree Foundation estimates that 400,000 additional people are likely to be plunged into poverty. Inevitably, there will be more holes in the welfare safety net. The current government is set to be the first Labour government under which child poverty is set to increase.
The benefit cut is hurting people who already have too little. The bottom 50% of the population has 5% of wealth, and the bottom fifth has only 0.5% of wealth. The real average wage is unchanged since 2008. Work does not pay enough. Some 37% of the Universal Credit claimants are in work. The poorest are hit the hardest by taxes. The richest fifth pay 30% of gross household income in direct taxes, compared with 16% paid by the poorest fifth. The richest fifth pay 11% of their disposable income in indirect taxes compared with the poorest fifth who pay 27%. Altogether, the poorest pay a higher proportion of their income in taxes, and that is damaging society.
The causes of higher demand for welfare include lack of timely healthcare, access to family doctors and dentists; poverty, poor food and housing, insecure employment leading to insecurity and anxiety, and unchecked profiteering pushing more people to the edge of society. However, these issues receive little attention. Instead, impoverishing the old, poor, sick, disabled and children have become a feature of economic policy. The poor and disabled are being blamed for economic stagnation caused by neoliberal policies.
Progressive taxation, equitable distribution of income and wealth did not get any mention in the Chancellor’s statement. No steps have been taken to reduce billions of subsidies handed to banks, oil, gas, auto, steel, internet and other companies. A relentless squeeze of the less well-off won’t help with rejuvenation of the economy. The Office for Budget Responsibility (OBR) already expects the 2025 economic growth to fall to 1%, half the rate forecast in October 2024. Living standards are on track to fall over the next five years. The package of benefit cuts, job losses and tax rises (income tax thresholds remain frozen) will reduce incomes of the poorest half by 1.5% compared to 0.5% fall for the richest fifth. Yet the Spring Statement removes billions from the economy.
The benefit cut for the poorest and disabled was not part of Labour’s 2024 election manifesto commitment. In May 2024, Prime Minister Sir Keir Starmer declared, “I’m a socialist” and in August 2024 said that “those with the broadest shoulders should bear the heavier burden” in rejuvenating the economy. By January 2025, this morphed into he would be “ruthless” over public spending cuts to help meet the government’s self-imposed fiscal rules. The result is the biggest cut in benefits for poor and the disabled since the one imposed by the Tory Chancellor George Osborne in July 2015. It was partially curtailed by resignation of the Work and Pensions Secretary. This time, the Work and Pensions Secretary is the architect of the cuts. No Labour minister has shown any inclination to resign.
Sir Keir has turned out to be a political chameleon, an admirer of former Conservative Prime Minister Margaret Thatcher and even portrayed himself as a Conservative. He has adopted a raft of Conservative policies that hurt low/middle income families. These include continuation of the two-child benefit cap, freeze on income tax thresholds, and went further by removing the winter fuel payments from pensioners below the poverty line. The last Conservative government’s Data Protection and Digital Information Bill fell because of the May 2024 general election. It sought to give the state unprecedented powers to 24/7 snoop on the bank accounts of benefit recipients without any court order or right to appeal. The government has now resurrected the same through the Public Authorities (Fraud, Error and Recovery) Bill.
Austerity is a political choice, and not an economic necessity. The government has plenty of options for social investment and letting people live with dignity. It can cut corporate welfare and increase borrowing. It can eliminate tax anomalies favouring the rich, such as by aligning the taxation of capital gains and dividends with wages. It can introduce wealth tax. Just 685,500 Britons in the richest 1% have wealth totalling £2.8 trillion. In comparison, approximately 48m Britons (70% of the population) have a total £2.4 trillion. The richest four Britons have more wealth than 20m people combined. It can introduce a financial transactions tax and reduce the tax reliefs available to corporations. But the government does not wish to upset its corporate and rich backers.
How to curtail the latest dose of austerity and prevent the cuts pushed by the government is a pressing issue. It was people’s power which halted poll tax and bedroom tax. It was people’s power that curbed the 2016 Tory benefit cuts. Resistance was based on petitions, protests and marches in towns and villages. Trade unions, civil society and MPs were mobilised. Letters to newspapers and phone calls to talk shows were used. The same is necessary again, otherwise one-by-one the poorer parts of society will continue to be picked-off. Citizens ought to seek face-to-face meetings with MPs to show their anger. People can send emails and write letters to MPs, but may be fobbed-off with standard replies. A face-to-face engagement has a better chance of jolting MPs out of their comfort zone. A rebellion of Labour MPs is growing and must be fomented. People must come before any political dogma.
The relentless squeeze of low and middle income families is part of a deeper malaise. The political system is captured by big business and the rich. They fund political parties and hand consultancy contracts and fake jobs to too many legislators to exercise power and shape policies. The never-ending austerity and cuts in living standards are being used to transfer wealth from the less well-off to ultra wealthy. Their power needs to be curbed. A start can be made by criminalising the receipt and payment of political donations and gifts to parties and politicians. Legislators must act exclusively as legislators and that means a total ban on second and third jobs for legislators, which in most cases are bribes. This can enable people’s voices to be heard and help to build a just society.
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
‘The chancellor can’t cut her way to growth’ – Unions react to Rachel Reeves’ spring statement
In today’s Spring Statement, Rachel Reeves set out investments in defence, while cutting welfare spending and the costs of running government through civil service reforms.
One focus of Reeves’ budget update was raising revenue by tackling tax avoidance. The chancellor said, under this government, £7.5 billion will be raised by tackling tax avoidance.
Another was Labour’s planning reforms, including reintroducing mandatory housing targets, which the Office for Budget Responsibility (OBR) has said will lead to housebuilding reaching a 40-year high of 305,000 new homes per year by 2029/30. The government also announced an additional £2 billion investment in social and affordable housing earlier this week.
However, Reeves also announced further cuts to welfare benefits. The health element of Universal Credit will be cut by 50% for new claimants by 2029/30 before being frozen. The chancellor said this is to meet Labour’s fiscal rules: balancing the budget so day-to-day costs are covered by revenues and ensuring debt falls as a share of GDP within five years.
Reeves said Labour will also bring forward £3.25 billion of investment to “reduce the costs of running the government by 15% by the end of the decade”. Part of the funding will be for a voluntary exit scheme, to help the government cut around 10,000 civil service jobs.
Here’s how Reeves’ announcements landed with trade unions.
‘Civil servants and the public deserve better than a return to austerity’
Fran Heathcote, general secretary of the Public and Commercial Services union, criticised the chancellor’s plans, stating, “She cannot cut her way to growth.”
“She is persisting with her cuts to the civil service that will both affect our members and the members of the public who rely on the services they provide.”
She also condemned reductions to the welfare budget as “cruel cuts” that will take money away from the most vulnerable in society.
Emphasising the need for fair pay amid 3.2% inflation, she said “civil servants, and the public, deserve better than a return to austerity” and vowed that PCS will continue campaigning against the cuts.
Cuts ‘will cause misery and could cost lives’
The Fire Brigades Union general secretary, Steve Wright, said that the welfare cuts in the spring statement “will cause misery and could cost lives”.
“Working people and hard pressed claimants will face harsh poverty. The brutality of these cutbacks will put vulnerable people in an intolerable situation,” he said.
“It’s a disgrace that a Labour Chancellor would deliver an assault on the welfare state instead of taxing the wealthy to fund public services and increase workers’ pay.”
‘Those with the broadest shoulders must contribute more’
General secretary of the TUC, Paul Nowak, said: “As the last 14 years have shown us, you cannot cut your way to growth.”
He added that taxes in the UK are low compared to the size of the economy, and that “those with the broadest shoulders must continue to contribute more through a fairer tax system”.
On the government’s civil service reforms, Nowak stated: “Any approach to transforming our public services must include clear workforce plans for every part of our public sector, developed in partnership with staff and unions.”
The OBR downgraded the UK’s growth forecast for 2025/26 from 2% to 1%.
In response, Nowak said: “It is time to review both the role of the OBR and how it models the long-term impacts of public investment. Short-term changes in forecasts should not be driving long-term government decision-making.”
‘The chancellor should stop backing herself into a corner with fiscal rules’
UNISON general secretary Christina McAnea, said: “The chancellor’s been left with an unenviable task. The world has changed since the summer. […] With so little wriggle-room, the chancellor should stop backing herself into a corner with fiscal rules and borrow more to invest.”
McAnea added: “Cuts to welfare and attacks on those least able to support themselves are not the right way to deliver a thriving economy, nor good quality public services.
“The Office for Budget Responsibility doesn’t always get things right and forecasts change.”
‘Labour should target the massive concentration of wealth built up by the richest 1%’
Unite’s general secretary, Sharon Graham, said: “Increased defence investment must not come at the expense of our public services and investment in British industry and our industrial infrastructure. Why is the sixth richest economy in the world pitting our safety against our dignity.”
Graham added: “There is another path. Instead of snatching crumbs from workers, pensioners and the disabled, Labour should target the massive concentration of wealth built up by the richest 1%.”
She also said that “If the government pushes down a path of austerity mark two, where yet again workers and communities pay the price, Unite will not stand by and watch it happen. We will do all in our power to fight for the future of jobs, services and our communities.’
Olivia Barber is a reporter at Left Foot Forward
Five key takeaways from Rachel Reeves’ Spring Statement
Chancellor Rachel Reeves has given her long-awaited Spring Statement to Parliament today, as she lays out her latest plans for the public finances.
1.Economy
The Chancellor confirmed that the Office for Budget Responsibility has downgraded growth forecasts for 2025 from 2% in autumn to just 1% today.
Reeves told the House: “I am not satisfied with these numbers. That is why we on this side of the house are serious about taking the action needed to grow our economy, backing the builders, not the blockers, with a third runway at Heathrow Airport … increasing investment with reforms to our pension system and a new national wealth fund.”
2.Welfare
The Chancellor confirmed deep cuts to welfare.
The reforms include stricter tests for personal independence (Pip) payments, affecting hundreds of thousands of claimants. Reeves told the Commons that her measures would ensure a predicted £4.1bn hole in the public finances within five years would be turned back into a £9.9bn surplus.
She also went further than initially planned after the OBR said that the reforms would save less than forecasted. The chancellor said the health element of universal credit would be cut by half and frozen for new claimants.
Reeves also told the House: “The Universal Credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30, while the Universal Credit Health element will be cut by 50% and then frozen for new claimants.”
3. Housing
Arguably one of Reeves’ highlights in the Spring Statement, the Chancellor told the Commons that the government’s planning reforms would lead to housebuilding reaching a 40 year high, as confirmed by the OBR.
It comes after yesterday’s announcement that the Chancellor was investing a further £2bn in grant funding to deliver up to 18,000 new homes in England and go some way to “fixing the housing crisis”.
The Chancellor told Parliament that her previously announced planning reforms, including reintroducing mandatory housing targets and developing grey belt land “will permanently increase the level of real GDP by 0.2 per cent in 29/30, an additional £6.8 billion for our economy.”
4.Living Standards
Reeves told the Commons that under this Labour government working people would have more money in their pockets.
The Chancellor said: “The OBR has confirmed today that people will be on average over £500 a year better off under this Labour government. That will mean more money in the pockets of working people.”
Following the statement, Labour MP Dan Tomlinson posted on X: “Our number one priority as a government is higher living standards.
“Compared to last year, living standards are up £500 a year.
“More to do, but this is progress – opposed every step of the way by the Conservatives.”
5.Defence
The Labour government announced that there would be an extra £2.2bn next year for the Ministry of Defence.
Reeves confirmed the government met its pledge to spend 2.5% of GDP by 2027, which comes as Trump pressures European countries to fund their own defence as the US begins to pull back from its commitments to NATO and European allies.
Basit Mahmood is editor of Left Foot Forward
26 March, 2025
Left Foot Forward
'As the last 14 years have shown us, you cannot cut your way to growth.'
Left Foot Forward
'As the last 14 years have shown us, you cannot cut your way to growth.'
In today’s Spring Statement, Rachel Reeves set out investments in defence, while cutting welfare spending and the costs of running government through civil service reforms.
One focus of Reeves’ budget update was raising revenue by tackling tax avoidance. The chancellor said, under this government, £7.5 billion will be raised by tackling tax avoidance.
Another was Labour’s planning reforms, including reintroducing mandatory housing targets, which the Office for Budget Responsibility (OBR) has said will lead to housebuilding reaching a 40-year high of 305,000 new homes per year by 2029/30. The government also announced an additional £2 billion investment in social and affordable housing earlier this week.
However, Reeves also announced further cuts to welfare benefits. The health element of Universal Credit will be cut by 50% for new claimants by 2029/30 before being frozen. The chancellor said this is to meet Labour’s fiscal rules: balancing the budget so day-to-day costs are covered by revenues and ensuring debt falls as a share of GDP within five years.
Reeves said Labour will also bring forward £3.25 billion of investment to “reduce the costs of running the government by 15% by the end of the decade”. Part of the funding will be for a voluntary exit scheme, to help the government cut around 10,000 civil service jobs.
Here’s how Reeves’ announcements landed with trade unions.
‘Civil servants and the public deserve better than a return to austerity’
Fran Heathcote, general secretary of the Public and Commercial Services union, criticised the chancellor’s plans, stating, “She cannot cut her way to growth.”
“She is persisting with her cuts to the civil service that will both affect our members and the members of the public who rely on the services they provide.”
She also condemned reductions to the welfare budget as “cruel cuts” that will take money away from the most vulnerable in society.
Emphasising the need for fair pay amid 3.2% inflation, she said “civil servants, and the public, deserve better than a return to austerity” and vowed that PCS will continue campaigning against the cuts.
Cuts ‘will cause misery and could cost lives’
The Fire Brigades Union general secretary, Steve Wright, said that the welfare cuts in the spring statement “will cause misery and could cost lives”.
“Working people and hard pressed claimants will face harsh poverty. The brutality of these cutbacks will put vulnerable people in an intolerable situation,” he said.
“It’s a disgrace that a Labour Chancellor would deliver an assault on the welfare state instead of taxing the wealthy to fund public services and increase workers’ pay.”
‘Those with the broadest shoulders must contribute more’
General secretary of the TUC, Paul Nowak, said: “As the last 14 years have shown us, you cannot cut your way to growth.”
He added that taxes in the UK are low compared to the size of the economy, and that “those with the broadest shoulders must continue to contribute more through a fairer tax system”.
On the government’s civil service reforms, Nowak stated: “Any approach to transforming our public services must include clear workforce plans for every part of our public sector, developed in partnership with staff and unions.”
The OBR downgraded the UK’s growth forecast for 2025/26 from 2% to 1%.
In response, Nowak said: “It is time to review both the role of the OBR and how it models the long-term impacts of public investment. Short-term changes in forecasts should not be driving long-term government decision-making.”
‘The chancellor should stop backing herself into a corner with fiscal rules’
UNISON general secretary Christina McAnea, said: “The chancellor’s been left with an unenviable task. The world has changed since the summer. […] With so little wriggle-room, the chancellor should stop backing herself into a corner with fiscal rules and borrow more to invest.”
McAnea added: “Cuts to welfare and attacks on those least able to support themselves are not the right way to deliver a thriving economy, nor good quality public services.
“The Office for Budget Responsibility doesn’t always get things right and forecasts change.”
‘Labour should target the massive concentration of wealth built up by the richest 1%’
Unite’s general secretary, Sharon Graham, said: “Increased defence investment must not come at the expense of our public services and investment in British industry and our industrial infrastructure. Why is the sixth richest economy in the world pitting our safety against our dignity.”
Graham added: “There is another path. Instead of snatching crumbs from workers, pensioners and the disabled, Labour should target the massive concentration of wealth built up by the richest 1%.”
She also said that “If the government pushes down a path of austerity mark two, where yet again workers and communities pay the price, Unite will not stand by and watch it happen. We will do all in our power to fight for the future of jobs, services and our communities.’
Olivia Barber is a reporter at Left Foot Forward
Five key takeaways from Rachel Reeves’ Spring Statement
26 March, 2025
Chancellor Rachel Reeves has given her long-awaited Spring Statement to Parliament today, as she lays out her latest plans for the public finances.
1.Economy
The Chancellor confirmed that the Office for Budget Responsibility has downgraded growth forecasts for 2025 from 2% in autumn to just 1% today.
Reeves told the House: “I am not satisfied with these numbers. That is why we on this side of the house are serious about taking the action needed to grow our economy, backing the builders, not the blockers, with a third runway at Heathrow Airport … increasing investment with reforms to our pension system and a new national wealth fund.”
2.Welfare
The Chancellor confirmed deep cuts to welfare.
The reforms include stricter tests for personal independence (Pip) payments, affecting hundreds of thousands of claimants. Reeves told the Commons that her measures would ensure a predicted £4.1bn hole in the public finances within five years would be turned back into a £9.9bn surplus.
She also went further than initially planned after the OBR said that the reforms would save less than forecasted. The chancellor said the health element of universal credit would be cut by half and frozen for new claimants.
Reeves also told the House: “The Universal Credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30, while the Universal Credit Health element will be cut by 50% and then frozen for new claimants.”
3. Housing
Arguably one of Reeves’ highlights in the Spring Statement, the Chancellor told the Commons that the government’s planning reforms would lead to housebuilding reaching a 40 year high, as confirmed by the OBR.
It comes after yesterday’s announcement that the Chancellor was investing a further £2bn in grant funding to deliver up to 18,000 new homes in England and go some way to “fixing the housing crisis”.
The Chancellor told Parliament that her previously announced planning reforms, including reintroducing mandatory housing targets and developing grey belt land “will permanently increase the level of real GDP by 0.2 per cent in 29/30, an additional £6.8 billion for our economy.”
4.Living Standards
Reeves told the Commons that under this Labour government working people would have more money in their pockets.
The Chancellor said: “The OBR has confirmed today that people will be on average over £500 a year better off under this Labour government. That will mean more money in the pockets of working people.”
Following the statement, Labour MP Dan Tomlinson posted on X: “Our number one priority as a government is higher living standards.
“Compared to last year, living standards are up £500 a year.
“More to do, but this is progress – opposed every step of the way by the Conservatives.”
5.Defence
The Labour government announced that there would be an extra £2.2bn next year for the Ministry of Defence.
Reeves confirmed the government met its pledge to spend 2.5% of GDP by 2027, which comes as Trump pressures European countries to fund their own defence as the US begins to pull back from its commitments to NATO and European allies.
Basit Mahmood is editor of Left Foot Forward
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