Rachel Reeves has defended huge welfare cuts set to be unveiled next week amid reports of a cabinet backlash and claims ministers are on “resignation watch”.
The chancellor said the government had to “get a grip” of spiralling costs and a “broken” system, days before Labour announces proposals which would save an estimated £5bn.
Ministers are facing a rebellion from dozens of Labour MPs over the cuts, overs fears of the impact of cuts on the vulnerable and those genuinely too ill to work.
Ms Reeves was challenged over her plans to slash welfare and other spending during a cabinet meeting this week, with some ministers said to be considering quitting, depending on the size of the cuts and who they affect.
Sir Keir Starmer has already lost one cabinet minister this month after Anneliese Dodds, the international development minister, quit in protest at a decision to halve the overseas aid budget to fund a hike in defence spending.
But a defiant Ms Reeves insisted the current benefits system was “not working for anyone”.
During a visit to Scotland, she said: “It is not working for people who need support, it’s not working to get people into work so that more people can fulfil their potential, and it’s not working for the taxpayer when the bill for welfare is going up by billions of pounds in the next few years.
“So, we do need to get a grip. We need to spend more on national defence, but we need to reform our public services, and we need to reform our broken welfare system.”
The government says the current system is “effectively abandoning” 1.8 million people “and locking them out of work indefinitely” by offering them no support into employment.
The Department for Work and Pensions said the number of people in this situation had almost quadrupled since the start of the pandemic when it was around 360,000 people.
On Thursday, the prime minister denied Britain was “returning to austerity” with the changes but said the cost of benefits was “going through the roof” and on track to surpass the bill for both prisons and the Home Office combined.
Sir Keir said the existing system could not be justified on “moral” or “economic” terms, added.
A Downing Street spokesman would not be drawn on the reports of cabinet unrest and possible resignations, first reported by Bloomberg, but warned the benefits system would “swallow more taxpayers’ money and leave more people trapped in a life of unemployment and inactivity” if left unreformed.
He added: “That’s not just bad for the economy, it’s bad for people too, and that’s why this government will set out plans to overhaul the health and disability benefits system shortly so it supports those who can work to do so, whilst protecting those who can’t, to put welfare spending on a more sustainable path so that we can unlock growth.”