UK faces bankruptcy without benefit cuts, Badenoch says

Kemi Badenoch and shadow chancellor Sir Mel Stride set out their plans for the economy

The UK is facing bankruptcy if Labour increases taxes without cutting welfare spending, Conservative leader Kemi Badenoch has warned.

The Tory leader accused Chancellor Rachel Reeves of plotting a "stealth tax bombshell" in next week's Budget to fund increased welfare payments because of her failure to cut the benefits bill.

She added: "If she comes back for more taxes without having serious cuts in public spending, especially on welfare, then she is going to ruin our economy."

Labour said Badenoch's plans would mean a return to austerity and cuts for schools, hospitals and police.

Reeves is widely expected to scrap the two-child benefit cap, which means low-income families do not receive further benefits when they have a third or subsequent child, to tackle child poverty.

She is also expected to freeze income tax thresholds to plug a gap in her spending plans, which would mean people would be dragged into paying more tax as wages rise.

Badenoch said her party would oppose this "every single step of the way".

In a speech setting out her party's plans for the economy, she claimed the government's U-turn on welfare reforms and the expected scrapping of the two-child benefit cap will leave the chancellor needing to find an extra £8.5bn.

"If Labour do scrap the two-child benefit cap, the future Conservative government would bring it back," she told reporters after her speech.

"The cap makes sure people on benefits have to make the same decisions about having children as everyone else. This is fairness."

Badenoch repeated her call for Reeves to be sacked if she broke her promise made after last year's Budget not to come back for more taxes, telling reporters: "If she puts up tax she should get the axe."

The Tory leader argued that cutting spending was the Christian thing to do, because not doing so would "leave debts for the next generation".

She offered to send the new Archbishop of Canterbury Dame Sarah Mullally, who in 2018 signed a letter criticising the two-child benefit cap, "a briefing on the facts".

"If we keep this spending going I am afraid we are going to go bankrupt," she claimed, adding: "There isn't going to be any money for people in need."

Reform UK leader Nigel Farage, who backs an end to the two-child benefit cap, made a rival speech at the same time as Badenoch, setting out his party's plans to save up to £25bn a year through spending cuts.

The Tory leader attacked his plan to end universal credit for EU citizens living in the UK, arguing that it was "completely ridiculous" for Farage to suggest he could just renegotiate this agreement with the EU.

She later told BBC Radio 5's Matt Chorley these were "hard-fought reciprocal rights", which applied to Brits abroad and to renegotiate them would risk "re-opening Brexit".

Labour Party chair Anna Turley said: "Reform and the Tories can argue all they like about who will return us to austerity faster - the fact is their plans don't add up and would be a disaster for Britain."

She claimed the Conservative were proposing £47bn of spending cuts, which "would mean money drained out of your local hospital, your child's school, and your local police".

Liberal Democrat Treasury spokesperson Daisy Cooper said the Conservatives' "irony meter" was broken because they had "hammered people with years of stealth taxes and broken promises".

"Both Labour and the Conservatives seem intent on punishing the public instead of unleashing growth through a better trade deal with the EU," she added.