Rachel Reeves has said she cannot leave welfare “untouched” because it would mean putting up people’s taxes, ahead of her Budget in November.
The Chancellor has already acknowledged she is looking at potential tax rises and spending cuts and signalled that taxes on the wealthy will feature in her November 26 statement.
She said welfare reforms still need to happen, in comments during a trip to Washington DC for the annual meetings of the International Monetary Fund (IMF).
An attempt to push through cuts to benefits earlier this year led to an embarrassing last-minute U-turn for the Government.
The Chancellor argued that MPs who previously voted against changes “recognise the welfare system is not working”, in an interview with Channel 4.
She said: “You know we’ve now committed to doing reform in a different way, but we can’t leave welfare untouched.
“We can’t get to the end of this Parliamentary session and I’ve done nothing, basically.
“Because if more and more of our money that we spend as a government is spent on welfare, you’ve got less for the NHS, you’ve got less on schools and you have to put more on people’s taxes.”
The Chancellor will have to fill a black hole estimated at up to £50 billion by some economists in her statement next month.
There's a strong case to build a bigger buffer in order to escape fiscal groundhog day - the size of the fiscal consolidation will be one of the most important decisions Rachel Reeves makes pic.twitter.com/lryvZDpFUo
— Helen Miller (@HelenMiller_IFS) October 16, 2025
The Institute for Fiscal Studies (IFS) said it expected the Chancellor would need to find at least £22 billion to restore the £10 billion of headroom she previously left herself against her self-imposed debt rules.
That does not take into account the cost of widely expected announcements on abolishing the two-child benefit cap and maintaining the freeze on fuel duty.
The IFS urged her to be “bold” and create a bigger buffer.
There have also been reports that the Chancellor is considering removing tax breaks for the Motability scheme, which allows people with serious mobility problems to exchange their personal independence payment, often along with an additional up-front payment, for a lease on a car.
