Cut welfare spending by £23bn: calculation note

Central fiscal result

-£12.0bn - Net fiscal impact in 2028-29

Low case: -£23.0bn. High case: -£3.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Model £23bn annual saving as the high-delivery case.
• Central case assumes £12bn is deliverable by 2028-29.
• Baseline uses DWP working-age and disability-benefit forecasts.
• Excludes any separate pensioner-benefit changes.

Affected population

• Affected population is working-age benefit households, not all welfare recipients.
• Low case assumes narrow reassessment; high case assumes broad eligibility cuts.
• Indirect exposure includes councils, NHS, charities and low-income local economies.
• No individual claimant count is inferred from the savings total.

Gross impact

• Conservative target: £23bn annual saving.
• Central: £23bn x 52% deliverability = £12.0bn.
• Administration and appeal costs partly offset savings.
• No dynamic GDP gain is scored.

Fiscal build-up, central case

• Benefit eligibility savings: -£13.5bn
• Administrative and appeal costs: +£0.5bn
• Local authority and crisis support: +£0.7bn
• Lower tax from weaker demand: +£0.3bn

Central net impact: -£12.0bn in 2028-29.

Behaviour and pass-through

• Low case assumes most announced savings are deliverable and spillovers are contained.
• Central case assumes around half the target survives legal, operational and hardship constraints.
• High-cost case assumes only £3bn net savings by 2028-29.
• Employment effects are not scored as automatic fiscal savings.
• Spillover costs rise if cuts fall on people with limited work capacity.

Phasing

• 2026-27: -£0.6bn. Preparation or partial implementation.
• 2027-28: -£5.4bn. Main ramp-up year.
• 2028-29: -£12.0bn. Target-year central estimate.
• 2029-30: -£12.0bn. Continuation at steady-state assumptions.

Main source groups

• Conservative Party, "How can we reform the welfare budget?" (2025): Used to define the pledge wording, policy scope and implementation scenario being modelled.
• Department for Work and Pensions, "Benefit expenditure and caseload tables" (2026): DWP forecasts UK social-security spending and working-age, disability and housing-cost components; anchors welfare-scale assumptions.
• Office for Budget Responsibility, "Welfare spending: disability benefits" (2024): The OBR shows disability-benefit spending rising sharply over the forecast period; relevant to savings that target incapacity or disability claims.
• Office for Budget Responsibility, "Economic and fiscal outlook: March 2026" (2026): The OBR forecast sets the macro, borrowing and receipts baseline used for broad fiscal context; prevents treating tax cuts or spending changes as self-financing.
• Chetty, "Moral Hazard versus Liquidity and Optimal Unemployment Insurance" (Journal of Political Economy, 2008): Unemployment insurance affects job search through both liquidity support and work incentives; shows welfare cuts can raise search pressure but also remove useful income smoothing.
• Card, Kluve and Weber, "What Works? A Meta Analysis of Active Labor Market Program Evaluations" (Journal of the European Economic Association, 2018): Training and activation programmes vary widely; impacts are often stronger over medium horizons than immediately; relevant where savings rely on moving claimants into sustained work.
• Conservative Party, "Our Plan for Britain" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.