Spring Statement Sparks Concerns over Welfare Cuts and Public Service Viability
The UK government’s recent Spring Statement, delivered amid warnings of economic uncertainty, has prompted serious concern among local government leaders and policy experts. As outlined during the Independent R&B Discussion Group on 31 March 2025, the policy direction—particularly in relation to welfare reform and local government funding—was widely criticised for prioritising fiscal headroom over strategic, evidence-led reform.
Economic Forecasts and Fiscal Headroom
Paul Howarth opened the session with a sobering overview of the fiscal and economic outlook. While there were modest upward revisions to medium-term growth projections, the Office for Budget Responsibility (OBR) halved its 2025 GDP growth forecast and continues to admit substantial uncertainty in its projections.
“The Chancellor began by saying the world is changing before our eyes—clearly signalling more change to come,” said Paul. However, he noted the more troubling aspect: “Policy now seems to be adjusted to create fiscal headroom rather than being based on coherent policy objectives.”
The government’s self-imposed fiscal rules—requiring a budget surplus and falling debt as a share of GDP by 2029–30—have driven decisions that may undermine social protections and vital services. Despite adhering to these rules, the probability of meeting targets is estimated by the OBR at just over 50%.
Welfare Cuts Under Scrutiny
The most contentious measures relate to welfare. The government announced a freeze on the Universal Credit (UC) health element from 2026–27 and a smaller increase in the UC standard allowance than previously planned. According to DWP’s own impact assessment, 3.2 million families will lose an average of £1,720 annually, while 3.8 million will gain an average of only £420.
Personal Independence Payment (PIP) recipients will also be affected, with 370,000 current recipients losing entitlement and a further 430,000 future claimants expected to miss out. The average loss here is £4,500 per year. These changes are expected to push 250,000 people—including 50,000 children—into relative poverty by 2029–30.
“These aren’t tweaks for policy reasons,” said Paul, “They’re budgetary tools to create artificial headroom.”
Gareth Morgan of Dangos Cymru echoed this concern: “She’s taking more away from those that haven’t got much—simply because they’re the easiest targets.”
Impact on Local Authorities
Council Officers raised alarm over the pressure these cuts will place on already stretched local government budgets. Julie Smethurst (Tameside Council) warned: “We’ve got over 5,000 residents on PIP and projections show new UC health claimants in Tameside will lose over £9 million in just the first year. Councils can’t absorb that.”
Kirsty Brooksmith (London Borough of Hammersmith & Fulham) outlined similar strains. “We’ve been asked to look at stopping taxi cards, closing grants—things that help the most vulnerable. We’re already a financially sound council, and even we’re preparing for deep cuts.”
Both stressed that the combined effect of rising demand and reduced capacity risks widespread failure in local public services. “Local Government is going to start failing as service,” Kirsty said. “And I don’t know what the consequence of that will be.”
Business Rates and Economic Growth
On the business side, Kevin Stewart noted that the tapering of the 75% business rates discount for retail, hospitality and leisure sectors will hit struggling businesses hard. “There’s no light at the end of the tunnel—many of these businesses are already on the brink.”
Employers’ National Insurance contributions were also highlighted as a stealth tax damaging to economic recovery. Sean O’Sullivan pointed out that the £24 billion increase in employers’ NI has contributed to flatlining growth: “That’s being passed onto us, the workers, through stagnating wages and job cuts.”
Policy Choices and Political Constraints
The discussion repeatedly returned to the view that the Chancellor has backed herself into a corner. Malcolm Gardner asked: “Was this really about economic strategy—or just balancing the books with the least resistance?”
Paul responded: “It’s not surprising that public services are struggling—after austerity, COVID, and underinvestment. But instead of being honest about needing higher taxes to restore services, they’ve chosen to cut from those least able to fight back.”
Participants expressed support for a broader tax rise rather than continued stealth taxation and service cuts. A straw poll during the session found that more than half of attendees would have preferred straightforward tax increases.
Nikki Duckworth, speaking from her experience as chair of a pre-school in a deprived area, added: “The damage done by NI increases is incredible. We’re outstanding, but we’re looking at restructuring in year one. That’s how hard it’s hitting frontline services.”
Looking Ahead
Several contributors warned that this cycle of service reduction, rising poverty, and political evasion is unsustainable. Local government reform—also underway—will only exacerbate the uncertainty.
As Kevin concluded: “These are political choices. Even with limited pots, the government has options. It’s choosing to take from the easiest places, not the fairest.”
The next test will come with the summer Spending Review and the autumn budget. If current trends continue, the question may no longer be whether local authorities can maintain services—but whether they can remain solvent.
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