‘Slash welfare, slash benefits!’ Rachel Reeves told to make drastic cuts as Britain faces ‘vicious downwards spiral’

He insisted there must be strict limits on unemployment support, stating: "There has to be a limit on how long you remain unemployed. There has to be an obligation on you to get work. You must lose your support and benefits from the state if you do not respond to those imperatives."

Habib also argued that benefits should be restricted to British citizens only, declaring: "There should be no one on benefits in this country other than British citizens."

His proposals include ending what he sees as abuse of mental health claims, stating: "We have to wake up to the fact you cannot claim you had mental health issues for three years and continue to get bailed out by the state."

Habib argued for creating a wider gap between benefits and wages through tax cuts for workers. "We also need to slash taxes on the working class," he said. "If you slash taxes on the working class and slash benefits, you create a much bigger gap between what you can earn if you work and what you can get if you're on benefits."

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He claimed this approach would deliver a "double benefit to the country" as people move from claiming benefits to paying tax.

These comments come as Labour faces a major rebellion over its own welfare reforms, with around 127 backbench MPs threatening to vote against the government's plans next Tuesday.

The Universal Credit and Personal Independence Payment Bill aims to change who qualifies for certain disability and sickness benefits, with the Office for Budget Responsibility projecting savings of £13.7 billion by 2029/30.

Of this total, £9.2 billion would come from scaling back Personal Independence Payments.

Downing Street confirmed it is holding talks with Labour MPs about the proposals, with a source telling the BBC: "Delivering fundamental change is not easy, and we all want to get it right, so of course we're talking to colleagues about the bill and the changes it will bring."

Chancellor Rachel Reeves is understood to be involved in discussions with the rebels.

Habib warned that Britain faces a "vicious downward spiral" under current policies, telling GB News: "The more they tax, the less the economic organism will respond and down we go."

He cited welfare, benefits and pensions as "now pushing £400 billion-a-year" and singled out support for those who "criminally entered the United Kingdom" as costing "the thick end of £10bn a year".

Meanwhile, economists have warned that if Labour's welfare reforms are blocked, Chancellor Rachel Reeves could be forced to raise taxes.

Ben Caswell, senior economist at NIESR, said defeat of the bill would be "large enough to erase the narrow £9.9bn headroom against the Chancellor's stability rule", leaving her to choose between cutting spending or raising taxes to meet fiscal rules.