Rachel Reeves announced £15 billion in benefits spending at Wednesday’s Budget with increased payments for those receiving Universal Credit, PIP and child benefits
Rachel Reeves unveiled £15 billion in welfare expenditure during Wednesday’s Budget – featuring enhanced payments for recipients of Universal Credit, Personal Independence Payment (PIP) and child benefits. The Chancellor scrapped the two-child benefit cap.
She framed this decision – projected to burden taxpayers with £3 billion each year – as a strategy to rescue hundreds of thousands of youngsters from poverty. Ms Reeves boosted disbursements for “working-age benefits” including Universal Credit, Personal Independence Payment (PIP) and child benefits in accordance with inflation, at 3.8%, commencing in April.
This initiative is expected to cost up to £6billion. Consequently, payments for over 3.8 million PIP recipients are set to climb by 3.8%.
A 3.8% rise would see individuals receiving the maximum awards for both daily living and mobility elements increase from £187.45 weekly to £194.55.
While all benefits rise yearly alongside inflation, in 2026 an extra 2.3% boost beyond inflation will be applied to Universal Credit due to legislative changes this year, the Universal Credit Act 2025, which mandates the benefit must exceed inflation annually until 2030. With September’s inflation rate at 3.8%, Universal Credit recipients will witness an above-inflation increase of 6.2% from April 2026, representing an extra £6 weekly for an individual claimant, or £312 per year, reports Wales Online.
According to the Office for Budget Responsibility (OBR), annual government expenditure on welfare is projected to increase from £333.0 billion in 2025/26 to £389.4 billion in 2029/30. This surpasses previous forecasts of £326.1 billion in 2025/26 and £373.4 billion in 2029/30.
Rachel Reeves announced that the two-child benefit cap, which restricts universal credit and tax credit claims to two children in most households, will be abolished in April.
The Chancellor labelled the two-child cap as a “policy that pushes kids into poverty more than any other”, adding that “it has failed” based on the objectives it was initially introduced to achieve.
“I understand that many families are finding times hard, and that many have had to make difficult choices when it comes to having kids,” Ms Reeves informed MPs.
“And there are many reasons why people choose to have children and then find themselves in difficult times – the death of a partner, separation, ill health, a lost job. I don’t believe children should bear the brunt of that.
“And neither can I in good conscience leave in place the vile policy known as the ‘rape clause’, requiring women to prove if their children have been conceived non-consensually to receive support.
“I’m proud to be Britain’s first female Chancellor of the Exchequer. I take the responsibilities that come with that seriously. I will not tolerate the grotesque indignity to women of the ‘rape clause’ any longer. It is dehumanising. It is cruel, and I will remove it from the statute book.”
Labour MPs bellowed “more” and brandished their order papers, as the Chancellor subsequently declared: “Because I am tackling fraud and error in our welfare system, because I am cracking down on tax avoidance, because I am reforming gambling taxation, I can announce today – fully costed and fully funded – the removal of the two child limit in full from April.”
The updated projections mirror the reversal of previously-announced reductions to winter fuel payments and health-related benefits, alongside scrapping the two-child cap within Universal Credit, the OBR stated.
Annual expenditure on health and disability benefits is now projected to climb from £83.1 billion in 2025/26 to £103.6 billion in 2029/30.
This represents an increase from earlier predictions of £81.2 billion in 2025/26 and £97.7 billion in 2029/30.
Ministers validated the final calculations in the Budget, with the alterations anticipated to commence in 2026.
The suggested modifications constitute part of a broader overhaul that will witness Limited Capability for Work Related Activity payments slashed from £432 monthly to £217, then frozen, whilst the standard rate gains an above-inflation increase.
Based on Joseph Rowntree Foundation data cited by the BBC, Universal Credit’s standard allowance would rise from £92 to £98 weekly for individual claimants, or from £145 to £154 weekly for couples. The Chancellor declared her budget embodied “Labour values” by protecting lower earners from the steepest tax increases whilst backing welfare claimants.
This strategy ensures those with the “broadest shoulders” bear the greatest burden.
The choice to boost benefits expenditure follows Ms Reeves being forced to abandon proposals for a welfare system transformation due to substantial resistance from backbenchers, at a cost of roughly £5 billion. Schemes to strip winter fuel payments from millions of pensioners were also ditched, adding an extra £1.25 billion expense to the government.
After the welfare reforms U-turn, Ms Reeves allegedly chose not to completely eliminate the two-child cap on benefits. Nevertheless, she and Sir Keir Starmer have subsequently encountered mounting political pressure amid worries over possible leadership contests.
Proposals for a more restricted method of scrapping the two-child cap have been dropped in favour of total elimination. The chancellor will announce that the state pension will rise alongside earnings by 4.8%, surpassing the inflation rate.
This indicates the full state pension rate will climb by £550, at a cost of approximately £7.8 billion.
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