The UK government’s plan to cut £5 billion from sickness and disability benefits is set to be announced next week, amid growing debate over its potential impact. While ministers argue the system needs urgent reform, concerns are mounting within Rachel Reeves’ own party.
As reported by GB News, financial experts warn that the cuts could trigger economic instability. With official figures showing a 0.1% drop in GDP, questions remain about whether these measures will ease financial pressures—or create new ones.
Welfare Reform Amid Economic Uncertainty
The UK government’s plan to cut £5 billion from sickness and disability benefits has sparked concern among financial experts, policymakers, and members of Chancellor Rachel Reeves’ own party, with warnings that the reductions could have far-reaching consequences for both vulnerable individuals and the wider economy.
While the government insists that the welfare system is “broken” and in need of reform, critics argue that the move could push more people into poverty and weaken economic stability.
The announcement comes as official figures from the Office for National Statistics (ONS) reveal that the UK’s gross domestic product (GDP) shrank by 0.1% in January, adding further pressure to an economy already struggling with sluggish growth.
The move to cut benefits is seen as part of an effort to plug a £20 billion black hole in public finances, exacerbated by rising debt interest costs that have eroded the government’s financial headroom.
Government Seeks to Curb Rising Welfare Costs
The proposed cuts are part of a broader effort to control the surging costs of health-related benefits, which have significantly increased since the Covid-19 pandemic. In 2023-24, incapacity and disability benefits cost the UK approximately £48 billion, a figure projected to reach nearly £76 billion by 2030.
Chancellor Reeves has defended the cuts, insisting that “getting a grip” on welfare spending is essential for long-term economic stability. Prime Minister Sir Keir Starmer has also expressed concerns over the current system, describing it as “the worst of all worlds” and arguing that substantial changes are necessary.
However, opposition to the plan is growing within the Labour Party itself, with several MPs warning that the policy could disproportionately impact those with disabilities and chronic illnesses. Concerns have also been raised about the potential political fallout should these cuts lead to increased hardship and public discontent.
Economic impact and warnings from financial experts
Despite the government’s push for reform, financial analysts warn that reducing welfare support could exacerbate economic instability and have unintended long-term costs.
Steven Kibbel, a financial planner and Chief Editorial Advisor at Gold IRA Companies, has emphasised the potential for a ripple effect across the economy, arguing that the cuts could increase demand for NHS services while also hitting consumer spending.
He explained :
Many recipients have chronic conditions, disabilities, or mental health struggles that make working difficult or impossible. Cutting their support won’t push them into jobs—it’ll push them deeper into crisis.
Some won’t be able to afford medication. Others may lose access to treatments that keep them stable. That puts more pressure on the NHS, which is already stretched thin. Short-term savings on welfare will lead to long-term costs elsewhere.
Kibbel also warned that reductions in benefit payments could harm local economies by reducing consumer spending, which plays a key role in driving growth.
If payments shrink, consumer spending takes a hit, and the effects ripple through local economies. Cutting benefits to balance the budget might look good on paper, but in reality, it can drag down economic growth instead of strengthening it.
Rising Financial Hardship and Public Reaction
The cuts come at a time when millions of UK households are already struggling with financial instability.
Reeves’ proposed reforms add to growing concerns, as new data from Opinium, commissioned by debt charity CAP, reveals that 11.6 million people in the UK currently have a deficit budget—meaning their income does not cover their basic living costs. This equates to one in five UK adults.
Further data shows that 38% of those facing financial hardship cite the rising cost of essentials as the main cause, while over 2.7 million people have borrowed money to pay their energy bills.
With inflationary pressures continuing, analysts suggest that further welfare reductions could push more families into financial distress and debt.
Steven Kibbel pointed to previous rounds of benefit cuts as an indication of what could happen next.
The last round of benefit cuts led to a spike in food bank usage and higher poverty rates. If history repeats itself, the backlash will be strong. The Government may be looking for ways to trim spending, but this approach could come with consequences they aren’t prepared for.
