The comments come as Chancellor John Healey prepares to unveil his Budget on 28 October, with pressure from investors and analysts to maintain efforts to reduce the UK’s fiscal deficit. The debate centres on the future cost of welfare payments and the government’s approach to public spending.
Burnham Calls for Further Action on Welfare Spending
Speaking about public assistance spending, Andy Burnham said the country must continue efforts to bring welfare costs down. “We’ve got to get really serious as a country at getting the welfare down,” he said.
Burnham also highlighted the role of support for people who need help returning to work. “I think we need to continue down that approach and where mental health support is needed, for instance, it’s provided in work to support people in an opportunity,” he said.
The comments come as overall DWP welfare spending is forecast to reach £353bn, compared with £314bn when the Labour Party entered government in 2024. The figures reflect wider pressure on government finances as benefit payments continue to represent a significant area of public expenditure.
According to the Institute for Fiscal Studies (IFS), if inflation remains at 2.9 per cent into the autumn, the government would need to find an extra £1.7bn from 2027-28 onwards if it increases benefits in line with price rises. Working-age benefits are normally adjusted using September’s inflation figure. Before the rise in inflation linked to global events, the Office for Budget Responsibility had forecast inflation would be at 2.1 per cent.
Inflation Outlook Adds Pressure to Budget Decisions
The potential rise in benefit costs is linked to inflation, which affects the annual uprating of payments. The IFS said that inflation at 2.9 per cent would also increase spending on public sector pensions by around £0.7bn.
The issue comes as John Healey faces decisions over taxation, spending and fiscal rules ahead of the October Budget. Investors have warned the government against easing measures aimed at reducing the deficit, amid concerns about public finances.
Neil Mehta, portfolio manager for investment grade at RBC BlueBay, said: “Fiscal rules can be reinterpreted to unlock more money, and so can the promise of spending cuts down the line. But where this government hangs is on credibility.” He added that inflation, spending and long-term investment would remain central issues for economic policy. “Inflation needs to be quashed, spending needs to be reined in and investment needs to be growth-enhancing in the long run,” Mehta said.
According to the Treasury, fiscal discipline remains a central part of the government’s approach. A spokesperson said: “Fiscal discipline is the bedrock of economic stability and national security.”
The Treasury also said the prime minister and chancellor were aligned on meeting fiscal rules, adding that the government was reducing the deficit faster than any other G7 economy and aiming to reach the lowest level in six years. The coming Budget will set out the government’s next decisions on spending, including how it manages the rising costs associated with welfare payments and other areas affected by inflation.
