Chancellor Puts Jobs Over Benefits in Welfare Speech

Chancellor John Healey told Labour's annual conference in Liverpool that cutting welfare spending was "more than an economic must - it's a moral duty," as he positioned work, not welfare, at the centre of the government's offer to young people.

"The best thing we can offer a young person is not a benefit payment - it's a first job with training and a wage," he said.

The speech carries weight well beyond party politics. Healey faces pressure to cut public spending or raise taxes ahead of next month's Budget to bring down government borrowing costs. In an attempt to reassure the markets, he said every promise the government made would be "built on the rock of fiscal discipline," with him and Prime Minister Andy Burnham "united on meeting the fiscal rules."

Fiscal rules are the government's self-imposed constraints on spending and tax decisions. The Budget, he said, would "give families and businesses a bit of breathing space." He also conceded that "the money New Labour had in the '90s is simply not there now."

Healey blamed the Conservative Party's years in government for leaving Britain spending more on debt interest than on the Home Office, Ministry of Defence and Ministry of Justice combined.

Tory shadow chancellor Andrew Griffith fired back. "Labour MPs will never support cutting the out-of-control welfare bill," he said, adding that "with Labour, it's always more taxes if you work and more benefits if you don't."

The apprenticeship deal

The centrepiece announcement was an expansion of the Local Apprenticeships Service for mayors in England. The scheme, initially planned as a pilot in a limited number of areas, will now be available to any English mayor who wants it.

According to the Treasury, the service will roll out across England from March 2027. Local teams will match young people with employers, including small businesses that have never taken on a trainee. The department said an extra £100m is going into the scheme, "fully funded" by savings from the Department for Work and Pensions.

Implementation powers will rest with mayors because "they know which firms are hiring, which colleges are delivering, which estates have been left behind," Healey said.

The chancellor praised young people as "digital natives, whip-smart, questioning, ambitious, brave" who could move from "generation jeopardy to generation hope." But he pointed to the million young people not in education, employment or training — known as Neets — and argued that this made benefits a bridge into work rather than a "trap."

"It is not progressive to allow a bigger and bigger benefits bill, and a system which offers an income but doesn't offer a future," he said.

He added that these young people had been "signed off, written off" — something the Labour government intends to address.

The announcement lands ahead of the final instalment of a major report by former minister Alan Milburn, expected in the coming weeks, which will set out recommendations for tackling the one in eight people aged 16 to 24 in the UK who are Neets.

The fiscal arithmetic

Helen Miller, director of the Institute for Fiscal Studies think tank, told the BBC that sticking to fiscal rules alone would not be enough to reduce debt, because doing so is "basically a promise to get down debt tomorrow." She suggested that reducing the benefits bill, including removing support from some people, could be one way of cutting the national debt sooner.

Elsewhere in the speech, Healey repeated his promise to re-industrialise the country. He said Rolls-Royce would invest £300m more into its British factories in Derby, Bristol, Glasgow and Rotherham.

He also announced the return of the Union Learning Fund in England — established in 1998 and abolished by the Tories — to help working people gain skills in an age of artificial intelligence. How the fund will be financed was initially unclear.

With the Budget weeks away, Healey has now staked out his position: fiscal rules held, welfare trimmed and apprenticeships scaled. Whether markets and his own party accept that bargain is the question the Budget will answer.