London announces austerity and social cuts

British Chancellor Rachel Reeves presented an updated budget plan in Parliament on Wednesday, announcing far-reaching cuts in government spending. At the same time, the government plans targeted investments in the defense sector.

"The increased global uncertainty has two consequences. First, for our public finances. And second, for the economy," said Reeves. In this context, the growth forecast for 2025 was revised significantly downward – from two percent to one percent.

At the same time, the minister pointed to improved long-term forecasts: stronger economic growth is expected for the next ten years than previously assumed.

However, the government expects inflation to remain high. It is expected to average 3.2 percent – ​​significantly higher than the previous estimate of 2.6 percent. A decline to 2.1 percent is expected for 2026, and inflation is then expected to stabilize at 2 percent from 2027 onwards.

In the area of ​​social policy, the government is planning significant cuts: the health component of Universal Credit payments – the UK's central instrument for supporting the unemployed and low-income earners – will be halved for new applicants and then frozen.

At the same time, the government aims to get more people into work with a total package of 1.4 billion pounds. One billion pounds will go into labor market integration programs, and another 400 million pounds will go into supporting job centers. The goal is to reduce the number of recipients of disability benefits.

The Office for Budget Responsibility estimates the savings from the package of measures at around £4.8 billion.

Reeves also emphasized her party's security policy ambitions: They want to make Britain a "defense industrial superpower," with armaments serving as a central driver of economic growth. In the coming fiscal year, the Ministry of Defense will receive an additional £2.2 billion to respond to "increasing global insecurity."

At least ten percent of the equipment budget will be invested in new technologies in the future. This will also be used to specifically strengthen production at locations such as Derby, Glasgow, and Newport.