For the first time, the Labour Government is now spending more on welfare than it is raising in Income Tax.
In the 2025/26 financial year, the Treasury raised £331 billion in Income Tax.
In the same year, the Government spent £333bn on welfare.
As I and many others have pointed out, this is unsustainable.
What does this mean?
In short, the Government is spending more on people not working or in receipt of in-work benefits, child benefit or pensions than it collects from people who are working.
What's more, the amount the UK spends on welfare is forecast (by the Office for Budget Responsibility) to reach £407bn - that's 11.2% of GDP - in 2030/31.
This follows news that Government borrowing in February was the second highest on record.
At £14.3 billion, February 2026 was second only to February 2021, when the Government was supporting people and businesses through Covid-19.
This was also £6.9bn more than the Government was forecast to borrow.
Why is this an issue?
For a Government to spend more than it is receiving in tax receipts, it must be borrowing the difference.
For 2025/26, the UK’s cost of servicing debt (paying back the principal amount owed, plus interest) is £111.2 billion.
This is 8.3% of total public spending.
To help put this into perspective: this is more than the entire budget for the Department for Education (£101bn in 2025/26).
And if debt servicing were a Department, it would be the third largest.
What can the Government do?
Rachel Reeves and Keir Starmer know that the welfare bill is too high.
Labour has previously tried to reduce welfare spending so that the Government can live within its means, but backbench MPs blocked proposals that were put forward.
Labour has said they will 'grow the economy' but, with a toxic concoction of higher taxes on businesses and more red tape, the economy is stalling.
If Labour can't cut public spending or grow the economy, it only has two options left: increase borrowing or raise taxes further.
