Reeves poised to make further welfare cuts as budget watchdog gives its verdict

Rachel Reeves will be forced to make further welfare cuts as she seeks to balance the books after the budget watchdog said the Government’s plans will not save as much as ministers hoped.

The Chancellor will set out the measures as she delivers her spring statement in response to a gloomy economic assessment by the Office for Budget Responsibility (OBR).

The watchdog’s assessment is that changes to disability and incapacity benefits will save £3.4 billion in 2029/30 rather than the more than £5 billion claimed by ministers.

Asked about the shortfall Cabinet minister John Healey told Times Radio: “That’s a calculation we may see confirmed by the Office for Budget Responsibility about the longer-term savings that our plans to change the welfare system may bring.”

Defence Secretary Mr Healey said: “You can’t have a benefits system that is failing people and out of control in this way.

“That’s why the plans that (Work and Pensions Secretary) Liz Kendall laid out last week, and that you’ll hear more from the Chancellor this afternoon in the spring statement, are so important.”

With mounting unease on the Labour benches about the scale of the welfare cuts, The Times reported that Ms Reeves will not attempt to make up the entirety of the £1.6 billion shortfall but will instead set out plans to save a further £500 million.

Universal credit incapacity benefits for new claimants will now be frozen until 2030 rather than increased in line with inflation and there will also be a small reduction in the basic rate in 2029, the newspaper reported.

Alongside the statement, the Government will release an impact assessment indicating how many people will be hit by the previously announced plans to cut the welfare bill.

There was some good news for Ms Reeves ahead of her statement as official figures showed inflation fell in February.