Iceland chief blasts Labour as ‘benefits party’ amid decision to rule out ‘crude cuts’ to welfare bill

Iceland boss and Labour peer Lord Richard Walker has sent a stark message to Andy Burnham, warning: “I did not join the benefits party”.

The Prime Minister has ruled out “crude” cuts to the nation’s welfare bill amid fears that spending will continue to balloon in John Healey’s upcoming budget.

Despite pledges to make “big changes to the way our welfare system operates”, costs are set to rise, with high upfront costs to youth services reform outpacing any potential cuts.

Research from the Office for Budget Responsibility stated that Britain’s welfare bill will rise to £409 billion per year by 2030–31, up from around £ 315 billion in 2024–25.

Lord Walker became a Labour peer in January and was appointed Sir Keir Starmer's cost-of-living tsar.

Under Mr Burnham’s leadership, the supermarket tycoon said the party needed to rethink its approach to tackle the bloated benefits bill.

Last month, he cautioned the Prime Minister that it was time to stop behaving like “Father Christmas” and start making unpopular choices.

Now, Lord Walker has warned: “I joined the Labour Party, not the benefits party.”

“Labour needs to become much more comfortable saying that, because a progressive government’s ambitions for public services depend on a private economy capable of paying for them,” he wrote in a paper submitted to the think tank Progress.

His intervention comes just days before the Chancellor delivers his first Budget on Wednesday, with Lord Walker pressing for sweeping tax reform and a fundamental rethink of the state's size.

In his Progress paper, the supermarket executive urged Mr Healey to deploy tax policy "more aggressively to reward genuinely additional investment" ahead of next week's fiscal statement.

Among his most significant proposals, Lord Walker called for employers' national insurance contribution reliefs to be broadened to cover all workers aged under 25.

LATEST DEVELOPMENTS

• Welfare bill to rise despite Labour reforms to get young people into work
• Kemi Badenoch demands John Healey’s resignation if his Budget fails to make defence spending pledge
• 'He is not a serious Prime Minister!' Andy Burnham slammed after Celebrity Gogglebox announcement

He said the move would encourage businesses to hire young people currently outside the workforce.

He also pressed the Chancellor to revisit Rachel Reeves' £25bn tax increase from 2024, arguing it should be redesigned so it “does less to discourage hiring people moving off benefits”.

On corporation tax, the Iceland chief executive advocated a graduated structure for businesses earning above the £250,000 profit threshold.

Lord Walker argued that the current system fails to distinguish between expanding firms and multinationals that meaningfully generate billions.

He argued that companies ploughing profits back into technology, skills and jobs should receive “aggressive breaks” through the tax code.

The Iceland chief demanded that the government's new jobs and career service must have “one brutally clear measure of success – sustained employment.”

Lord Walker's paper, entitled “Our moral and economic duty to make the Labour Party the party of work,” went further, calling for significant reductions in the overall size of the state.

“The expectation of increased state intervention has had disastrous consequences over time,” he wrote, noting that the tax burden was on course to hit a post-war peak without corresponding savings being made elsewhere.

He highlighted that when Tony Blair entered Downing Street in 1997, public expenditure accounted for 38.5 per cent of GDP, a figure the OBR now forecasts will reach 44.9 per cent in 2026-27.