UK's Reeves to increase spending on benefits in next week's budget, Telegraph reports

LONDON (Reuters) -Britain's finance minister, Rachel Reeves, is set to boost spending on benefits in her annual budget, which will be announced next week, the Telegraph reported on Tuesday.

The newspaper reported that Reeves plans to raise benefits spending by 6 billion pounds ($7.89 billion), with payments for working-age people set to increase by 3.8% starting next April.

The finance ministry did not immediately reply to a request for comment.

The government abandoned money-saving welfare reforms in July, which raised doubts over its willingness to take tough fiscal decisions.

Reeves is expected to need to raise tens of billions of pounds to stay on track to meet her fiscal targets in the budget.

British government borrowing costs surged last week following reports that Reeves, in a significant policy U-turn, no longer plans to raise income tax in her budget due to improved fiscal forecasts.

Investors, businesses and think tanks have said that confusing messages about the budget are undermining the government's credibility.

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(Reporting by Catarina Demony; Editing by Leslie Adler)