UK Prepares for New Budget Cuts and Public Sector Job Losses

The UK government, despite challenging economic conditions, remains determined to streamline public finances and is set to announce new budget cuts. This time, the cuts are targeting public administration following unpopular measures last autumn that affected pensioners, patients, and disabled individuals. Chancellor of the Exchequer Rishi Sunak, under significant pressure, will announce the new measures on Wednesday (26.3.2025) during the traditional ‘spring statement,’ presenting the country’s economic status. The main announcement involves reducing central government operational costs by 15% until 2029/30, resulting in fewer employees in ministries and public services. This measure aims to save over £2 billion (€2.4 billion), according to the British press. ‘I prefer people working on the front line, in our schools, hospitals, and police, rather than in administrative roles,’ stated Sunak on Sunday (23.3.2025) in an interview with Sky News. The government mentions 10,000 job losses out of approximately 500,000, but unions estimate up to 50,000 positions could be eliminated. Last autumn, the winter fuel allowance for pensioners was scrapped, followed by a £5 billion cut in benefits for disabled individuals and those with chronic illnesses, decisions that some Labour MPs struggled to accept. Additionally, in late October, Sunak announced a £40 billion increase in employer contributions, angering businesses that warned of ‘dramatic consequences’ for the labor market and wages. To appease public opinion, the government highlights increased funding for the National Health Service (NHS) and ambitious labor law reforms to improve workers’ rights. However, with the economy stagnating, the room for maneuver is limited. Meanwhile, Prime Minister Keir Starmer announced a significant defense budget increase, meaning funds must be sourced elsewhere. Recent data shows the UK’s GDP contracted by 0.1% in January, inflation hovered around 3%, the pound fell, and interest rates rose. Another pressing issue Chancellor Sunak faces is potentially scrapping the tax imposed on tech giants, which generated £800 million annually, to avoid tariffs Donald Trump plans to impose on British goods. Sunak neither confirmed nor denied this possibility.