Disability benefits likely to be cut to fund increases to defence spending, warns top economist

Leading Scottish economists say Chancellor Rachel Reeves is likely to cut disability benefits to pay for an increase in defence spending.

Last week Prime Minister Sir Keir Starmer announced UK defence spending is to increase from 2.3 per cent of GDP to 2.5 per cent, which will cost around £16 billion.

This comes on the back of rising tensions between Europe and the US over the ongoing war in Ukraine and the angry scenes between US President Donald Trump and Ukrainian President Volodymyr Zelensky in the Oval Office at the end of last month.

Some of the cash for this increase is coming from cuts to the international aid budget, but more cash could end up coming from cuts to the welfare budget as well.

Chancellor Rachel Reeves | Dan Kitwood/Press Association

Professor Mairi Spowage from the Fraser of Allander Institute at Strathclyde University says the chancellor’s spring statement at the end of the month is likely to be a “significant fiscal event” as she tries to find the money needed for this increase in defence spending.

Speaking to BBC The Sunday Show, Professor Spowage said: “This is a significant amount of money - for context that is just slightly less than we spend on the NHS in Scotland.

“That money will have to be found from other parts of spending, or through increases in tax.”

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She says the chancellor is more likely to include cuts to public spending in her spring statement as opposed to introducing more tax increases to cover these costs.

Professor Spowage added: “The UK Government is linking to increases in benefits since the pandemic and linking to the fact more people feel they are unable to work because of ill health and disabilities.

Professor Mairi Spowage

“That suggests she is going to target working age benefits such as incapacity and disability benefits.

“Many governments have tried to cut the benefits bill over the past decade, but it is very difficult to do.

“Incapacity benefits are top-ups to incomes for those who cannot work as much as they would like and they are reserved to Westminster, so if that is targeted it will impact on everyone in the UK in the same way.

“If it is disability benefits, which are to cover the extra costs of a disability, that is devolved to Holyrood so it will impact differently in Scotland and it will depend on what the Scottish Government does in response.

“If the UK Government cuts it in some way, we would need to find [the money] somewhere else in the Scottish budget to maintain that.”

She added the SNP Scottish Government is unlikely to raise taxes to cover the costs of a cut to disability benefits because of the 2026 Scottish Parliament election.

On Friday Labour Scottish Secretary Ian Murray made a speech in Edinburgh where he said his party will work on cutting long NHS waiting lists, which he believes will in turn get more people off sick benefits and back into work.

This ties in with suggestions the UK Government is wanting to cut the number of people claiming sick benefits and reduce the cost of the welfare budget.

Stephen Gethins MP, the SNP’s foreign affairs spokesman, said the UK Government should consider re-joining the customs union to pay for defence rather than cutting benefits.

He said: “It doesn’t have to be a sacrifice.

Stephen Gethins MP

“London Mayor Sadiq Khan reckons Brexit is costing public finances £40bn.

“Rejoining the customs union would have an immediate boost to growth.

“The EU is becoming crucial for security as well, so there is no need to push down on the most vulnerable in society.”

He added: “The changes we have seen is something I’ve been writing about for years - the US is becoming increasingly unreliable and we need a European approach to defence.

“There is a rearmament programme in Europe and we need to see that in the UK too, but I have concerns we are only thinking about weapons.

“We also need energy security and food security, and greater integration with our European partners.”

Mr Gethins also defended his party’s policy of scrapping Trident, the UK’s nuclear deterrent based in the Clyde.

Last week the party’s former Westminster leader Ian Blackford suggested the SNP should U-turn on its opposition to nuclear weapons on the back of the rising tensions on the war in Ukraine.

First Minister John Swinney immediately rejected the idea, and said his party would maintain its anti-Trident approach.

On Sunday morning Mr Gethins echoed this, and said: “The SNP’s policy is very similar to Finland, which has the longest land border with Russia in the whole of Nato.

“If Scotland was independent, Scotland’s policy would align with other Nato countries like Finland, which has been a leader for years on pushing back Russian aggression in Ukraine.”

Meanwhile Shadow Energy Minister Andrew Bowie says Labour should scrap GB Energy to find the cash for increases to defence spending.

Shadow Energy Minister Andrew Bowie

The publicly-owned energy company was a flagship policy of the Labour Party in the 2024 general election, and it will be headquartered in Aberdeen.

However Mr Bowie says it is not proving to be value for money.

The West Aberdeenshire and Kincardine said: “GB Energy is costing £8bn of public money and no-one knows what it is going to do and it will take a long time to get it going.

“It is going to create 200 jobs in Aberdeen and I’m not sure it’s worth £8bn, so if the chancellor is looking hard she could take that £8bn and spend it on defence.”

He added: “Everything must be on the table when it comes to securing the defence of this country.”

Mr Bowie added the Prime Minister should be “applauded” for taking leadership in the breakdown of the relationship between the US and Ukraine in recent weeks.