(Bloomberg) -- The UK government will abolish more business regulators and scale back welfare spending to drive stagnant economic growth.
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Chancellor of the Exchequer Rachel Reeves is summoning eight of the UK’s main regulators, including the Financial Conduct Authority, to Downing Street on Monday to discuss her plan to cut regulatory costs on business by a quarter. Work and Pensions Secretary Liz Kendall is expected to unveil plans on Tuesday to cut the welfare bill by up to £6 billion ($7.8 billion) to encourage more people to work.
The measures form an assertive effort to boost the British economy, which has long shown weak growth. Reeves is also trying to meet her fiscal rule that current spending must be paid for from tax receipts, without raising taxes further. She left herself a historically slim £9.8 billion of headroom against that in her budget in October, a margin which has since been wiped out by higher borrowing costs and stagnant growth.
Personal independence payments — a benefit designed to help those with disabilities cope with resulting additional costs of living, which isn’t tied to work — have more than doubled over the past five years to an annual £21.7 billion. They’re projected to almost double again in the next six years. Still, more than half of the cabinet urged Reeves last week to rethink her plans to scale back welfare and wider departmental spending, seemingly prompting her to drop plans to freeze a key disability benefit.
Kendall told the Sunday Times that it was an “absolute principle” for the government to protect payments for those unable to work, and said she’ll instead offer a “right-to-try guarantee” for the disabled and sick who want to find jobs without risking the loss of their benefits.
The Resolution Foundation on Monday warned that Reeves should avoid hitting the living standards of lower income families and instead raise taxes to meet her fiscal rules. It warned that cutting PIP by £5 billion in 2029-30 could see around 620,000 people losing £675 per month on average, with 70% concentrated on families in the poorest half of the income distribution.
“The Chancellor must act decisively to meet her fiscal rules. But with the jobs market in recession territory, lower income households shouldn’t bear the brunt of any consolidation,” said James Smith, Research Director at the Resolution Foundation. “With Britain’s fiscal pressures more likely to intensify rather than fade away, continuing to rule out tax rises is going to make future Budgets even more challenging to deliver.”