Budget 2025 latest: Reeves boosts defence spending by £2.2bn as more benefit cuts foreshadowed

Millions of disabled benefit claimants have found out how their entitlements will be changing from next year following Labour’s long-anticipated decision to slash £5 billion from the welfare spending bill.

This has left many of the UK’s health-related benefit claimants concerned for their futures, and unsure if they will be able to afford the essentials.

Welfare recipients tell my colleague Albert Toth what losing their health-related benefits would mean to them:

Rachel Reeves has sought to blame deteriorating public finances on a global rise in borrowing costs as she prepares to unveil a spring statement widely expected to include spending cuts.

Speaking to broadcasters ahead of her statement on Wednesday, the Chancellor said Britain had not been “immune” from global increases in the cost of government debt.

But she insisted she would meet her “non-negotiable” fiscal rules despite expectations that official forecasts also published on Wednesday would show her “headroom” against those targets had vanished.

She said: “We can see that the world is changing, and part of that change is increases globally in the cost of government borrowing – and Britain has not been immune from those challenges.

“The OBR (Office for Budget Responsibility) will set out their verdicts on growth and on the public finances today, but we will continue to meet the fiscal rules I set out in the budget last year.

“Economic stability is non-negotiable, I will never play fast and loose with the public finances like the previous government did.”

An extra £2.2 billion will be spent on the UK’s defence over the next year, the Chancellor is to announce at the spring statement.

The extra funding is being put on the table as the Government aims to hike defence spending to 2.5% of the UK’s economic output by 2027.

Ms Reeves will insist this plan, set out by the Prime Minister in February, was the “right decision in a more insecure world”, adding: “But we have to move quickly in a changing world. And that starts with investment.”

The April funding increase will help pay for new technologies, like long range laser and microwave weapons – collectively known as directed energy weapons – which will be fitted to warships.

Homes for military families will, meanwhile, be refurbished, including the 36,000 recently brought back into public ownership from the private rented sector.

The Chancellor is reportedly set to announce further welfare cuts during her spring statement on Wednesday.

According to The Times, the Office for Budget Responsibility (OBR) rejected the government’s estimate that £5 billion would be saved from planned welfare reforms.

Instead, the watchdog reportedly told ministers it would only save £3.4 billion – leaving Rachel Reeves to fill a £1.6 billion hole in her economic plans.

The Times reported that Ms Reeves will announce around £500 million of further welfare savings on Wednesday.

These are thought to include the freezing of universal credit incapacity benefits for new claimants t be frozen until 2030 rather than increased in line with inflation and a small reduction in the basic rate of universal credit in 2029.

The paper also reported that the rest of the gap will be filled by reducing public spending by £5 billion, with details of the cuts to be announced at the spending review in June.

The Independent has contacted the Treasury for a comment.

Rachel Reeves is gearing up for a major fight with trade unions who warn they will not stand by and allow a second age of austerity in the UK.

In an ominous warning about a potential wave of strikes if pay demands are not met, one leading trade union leader, Steve Wright of the Fire Brigades Union (FBU), told The Independent: “Workers struggling to afford the basics will not accept falling living standards from Labour.”

It has been understood that Ms Reeves will announce major cuts in her Spring Statement, which could amount to billions across several Whitehall departments. There could be as much as 7 per cent taken from the budgets of some departments over the next four years, The Guardian reports.

Alongside the recently announced cuts to welfare spending, these could amount to the “steepest cuts since 2019,” the Institute for Fiscal Studies’ (IFS) associate director, Ben Zaranko, said.

“The government will be hoping that the short-term cash injection provided last year, and efficiency improvements as public services continue to recover from the pandemic, will be enough to deliver service improvements even if money is tight,” he added.

“But we’re in a very different world to 2010 and, even though the pace of cuts would be substantially slower than in the peak austerity years, it would still represent the steepest cuts since 2019.”

There has been speculation that the chancellor may look to effectively increase taxation through extending the freeze on income tax thresholds beyond the current 2028/29 end point. Since 2021, the personal allowance has been frozen at £12,570, with the basic, higher and additional rate also staying at the same level.

The effect of this is what economists call “fiscal drag,” where more people are pulled into higher tax brackets as their earnings increase, but the thresholds stay the same.

While maintaining this policy would not technically be raising taxes on working people – a central Labour election pledge – it would mean that taxpayers on average will be paying more in income tax than they would have been.

Sir Sadiq Khan is concerned that Islamophobic abuse aimed at him is putting people from ethnic minorities off getting involved in politics, sources close to the Mayor have said.

Analysis from the Greater London Authority (GLA) found Islamophobic abuse targeting Sir Sadiq more than doubled last year, making 2024 the second worst year of his mayoralty for such abuse.

A source close to Sir Sadiq said: “The Mayor is extremely concerned about the impact of hateful and abusive content online. This kind of content can have devastating real-life consequences, and it’s a problem which is getting worse not better.

“The Mayor is concerned that his treatment is discouraging young minority Brits from getting involved in politics or public life, meaning we’re losing a lot of talent.

“It could be having a chilling effect on ethnic minorities putting their head above the parapet.”

The Liberal Democrats have urged the UK to “hold firm” on Russian sanctions despite signs the US could be about to ease restrictions on Moscow.

Lib Dem foreign affairs spokesman Calum Miller said: “Russia has terrorised Ukraine and has been rightly shunned by the UK and our allies.

“There is no basis for removing sanctions while Russia continues to occupy Ukraine and menace other countries. The UK and our constant allies should hold firm.

“Trump has had the wool pulled over his eyes if he thinks this Black Sea deal is a fair swap for lifting Russian sanctions. In Trump’s world, Putin can have his cake and eat it: restored Russian access to world markets while he continues to raze Ukraine.”

Mr Miller added that while the deal was “an important first step” towards peace, Vladimir Putin would “continue his illegal invasion across land and air to force Kyiv’s submission”.

He said: “The UK and our allies must double down on our support for Zelensky, to compel Putin to back down from his goal of turning Ukraine into a vassal state.”