Britain’s benefits bill forecast to hit £431billion

The country’s budgetary watchdog had previously estimated in March that welfare spending would hit £406.2billion by 2030-31, equivalent to 11 per cent of GDP.

Updated projections now show costs climbing even faster, with the bill expected to reach £413.1billion by the end of the decade.

A surge in incapacity benefit claims is fuelling the increase, dealing a further blow to Mr Healey as more people are forecast to enter the welfare system over the next five years.

Rather than tackling the ballooning welfare bill head-on, Mr Healey has postponed the Government’s promised overhaul until next year.

Prime Minister Andy Burnham has pledged to reduce benefits spending but has ruled out what he describes as “crude cuts”.

Mr Healey confirmed that the final reports from Alan Milburn’s review and the Timms panel will be published next month.

The Government intends to respond before the end of 2026, with a White Paper and legislation expected to follow in 2027.

The delay comes after rebel Labour MPs blocked a package of welfare reductions put forward by Sir Keir Starmer last year.

To fund cost-of-living support, the Chancellor targeted banks, bookmakers, landlords and savers.

The surcharge on bank profits above £100million will double from three to six per cent for 15 months starting in January.

Tax rates on property and savings income will rise by two percentage points from April, though Mr Healey insisted 88 per cent of people would pay no more tax on their savings.

Machine Games Duty on higher-stakes gambling machines increased from 20 to 25 per cent.

Mr Healey honoured Labour’s manifesto commitment not to raise headline rates of income tax, national insurance or VAT. However, frozen income tax thresholds will drag hundreds of thousands of workers into higher bands.

Conservative leader Kemi Badenoch attacked the Budget as not “good enough”, accusing Labour of presiding over record taxation and a welfare system spiralling out of control.

Next year, under Labour, the tax burden will be the highest in our country’s history and our benefits bill is going up by tens of billions of pounds because this Government has put welfare first,” she told the Commons.

Mrs Badenoch added: “We are overspent, over-borrowed, overtaxed and drowning in an out-of-control welfare system.”

She dismissed the overall package, saying most people watching would be asking themselves: “Is that it? Really, is that it?”

Scott Gardner, investment strategist at J.P. Morgan Personal Investing, said the OBR’s forecasts presented a “mixed picture” for the UK economy.

Although growth for 2026 was upgraded slightly, the OBR cut its forecast for next year from 1.5 per cent to one per cent as the conflict in the Middle East and higher energy prices weigh on households and businesses.

Mr Gardner said the Chancellor’s £100 energy payment and planned reforms to standing charges would provide some help.

However, he warned: “The OBR still expects inflation to hit a peak of 3.8% early next year and real wage growth to stall, suggesting cost-of-living pressures are here to stay.”

Government borrowing forecasts have also increased, reducing the Chancellor’s financial headroom.

Mr Gardner added that stronger growth expected towards the end of the decade “really hinges on the global picture improving and energy prices falling back”.