Welfare U-turn raises questions over Labour's tax plans
But they also removed a key plank of Sir Keir Starmer's welfare reform agenda, delaying changes to Pip until after a review of the benefit not due to conclude until autumn 2026.
With no clarity on when the changes will be enacted or what they might entail, the Chancellor now faces a fiscal headache as a forecast £4.8 billion in welfare savings have been whittled away to nothing.
Economists at the Institute for Fiscal Studies (IFS) and Resolution Foundation think tanks warned that Tuesday's concessions meant Ms Reeves could now expect no 'net savings' by 2029/30 – a key year for meeting her fiscal targets.
IFS deputy director Helen Miller said the move had effectively halved the Chancellor's 'margin of error' against her main fiscal rule, once again raising the possibility of tax rises in the autumn.
On top of that, a stuttering economy and global instability could mean she has even less room for manoeuvre than expected.
Ms Miller said: 'Since departmental spending plans are now effectively locked in, and the Government has already had to row back on planned cuts to pensioner benefits and working-age benefits, tax rises would look increasingly likely.'
The Resolution Foundation's Ruth Curtice agreed that there would be no savings in 2029/30, but suggested changes to universal credit – almost the only part of the Government's proposals still standing – could save money in the longer term.
On Wednesday morning, the Conservatives accused Labour of making billions in unfunded spending commitments, including both the U-turns on welfare and the partial reinstatement of winter fuel payments.
In a letter to Ms Reeves, shadow chancellor Sir Mel Stride demanded to know where the money was coming from, asking: 'Will you raise tax or increase borrowing?'
Ministers have repeatedly insisted that Labour will not raise taxes on 'working people', specifically income tax, national insurance or VAT.
But Ms Reeves also remains committed to her 'iron clad' fiscal rules, which require day-to-day spending to be covered by revenues – not borrowing – in 2029/30.
Meanwhile, Sir Keir himself will face a grilling from MPs on Wednesday as he attempts to repair relations with his backbenchers.
The weekly session of Prime Minister's Questions comes just a day after 49 of his own MPs voted against his welfare reforms – the biggest rebellion of his premiership so far – while several backbenchers described the Government's handling of the issue as 'chaotic' and 'a shambles'.
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Reuters
35 minutes ago
- Reuters
Dollar drifts as traders hunker down for US payrolls
SINGAPORE, July 3 (Reuters) - The dollar wobbled on Thursday after a trade agreement between the United States and Vietnam fuelled optimism over potential future deals ahead of a July 9 tariff deadline, while investors looked to payrolls to assess the Federal Reserve's next steps. Sterling firmed slightly after a sharp drop the previous session as British Prime Minister Keir Starmer's office rushed to give Finance Minister Rachel Reeves his full backing, hoping to allay investor worries about Britain's finances. The pound dropped nearly 1% and British government bonds tumbled on Wednesday, as a tearful appearance by Reeves in parliament a day after the government backed down on its welfare reforms reignited concern over Britain's finances. The pound last fetched $1.3647, slightly higher in Asian hours, while the euro was steady at $1.1806, hovering close to the September 2021 top it touched earlier this week. The yen firmed a bit to 143.56 per dollar. The dollar index , which measures the U.S. currency against six other units, was at 96.701, still near the 3-1/2-year lows it has been rooted to this week. The index is on course for a 0.5% drop in the week. Investor attention will be on the U.S. Labor Department's comprehensive employment report for June, due to be released on Thursday ahead of the July 4 holiday after data showed private payrolls fell for the first time in more than two years in June. The ADP report released on Wednesday pushed traders to shift expectations of when the Fed will cut interest rates. Traders are pricing in 25% chance of the Fed moving in July versus 20% a day earlier, CME FedWatch tool showed. "The ADP print has certainly raised the stakes for nonfarm payrolls today," said Charu Chanana, chief investment strategist at Saxo in Singapore. "What could earlier have been interpreted as 'bad news is good news' (softer data pushing the Fed to cut) may now simply be seen as bad news, especially if recession concerns take hold." Ahead of the July 9 tariff deadline, President Donald Trump announced Vietnam had struck a trade deal with the U.S. and could push other countries to reach similar agreements on duties. Although details were scant, Trump said Vietnamese goods would face a 20% tariff and trans-shipments from third countries through Vietnam will face a 40% levy. "What's important to watch now is how China responds, given that the move directly targets trans-shipped goods at a higher 40% tariff rate," said Saxo's Chanana. "It's a clear signal that global supply chains are being reshaped, and more disruption may be ahead." Meanwhile, Republicans in the House of Representatives struggled to pass Trump's massive tax-cut and spending bill as a handful of hardliners withheld their support over concerns about its cost. The bill is expected to add $3.3 trillion to the already swelling national debt, stoking fiscal worries. Bond investors, opens new tab around the world are growing increasingly nervous about government deficits from Japan to the United States. Eddy Loh, chief investment officer at Maybank Wealth Management, said the U.S. government may be "somewhat constrained about how much fiscal support they can do to boost the economy without creating too many deficit concerns."
Times
an hour ago
- Times
The Times letters: Starmer, leadership and the U-turn on welfare
Write to letters@ Sir, Your leading article ('Abject Surrender', Jul 2) outlines very well the vagaries and indecisiveness of our prime minister. You say he has shown how incapable he is of reining in the state and public finances. Further to this it has been widely claimed that he is losing authority. I, and I think many others, would question whether he had any credibility and authority in the first place. Sir Keir Starmer's U-turns and false promises simply make the electorate wonder who is in charge. A leader should lead and if he caves in to 50-odd rebel MPs, as he has done on welfare reform, then what hope is there for the country? Add to this the fact that record illegal immigration is costing the country a fortune and that the government appears to have no plans to tackle it. We lack leaders with substance, clout and an 'action this day' GrundyHartley Wintney, Hants Sir, William Hague is quite right to argue that the prime minister has failed dismally during his first year in office to outline the overarching purpose of his government, let alone offer a vision that is inspiring or even reassuring ('What's Starmer's big idea? He needs to tell us', comment, Jul 1). This should come as no great surprise, however. Even before the general election it was clear that Labour did not have a coherent plan about anything, whether for the economy, education, defence or stopping migrant boats. Having failed to prepare for the realities of power, the party has lurched from one ill-thought-out decision to another, frequently changing tack, in a desperate attempt to mollify everyone. All this does is satisfy no one and that is precisely where we are, 12 months in. Seemingly standing for nothing, always looking for scapegoats and all the while communicating poorly are a recipe for disillusionment and MortimerPerth Sir, Polly Mackenzie says that what is needed is 'a fundamental reset of the prime minister's office' ('Starmer's lost power of political speech', Jul 2). I suggest also that the prime minister needs to be able to rely on a trusted colleague to give him advice, perhaps someone without ambition who has served at the top rank of politics. There must be plenty of candidates to choose from. Margaret Thatcher relied on Willie Whitelaw — 'Everyone needs a Willie' — and his advice proved BenyonBladon, Oxon Sir, Time and again, Sir Keir Starmer and Rachel Reeves justify their actions mainly by saying they are doing 'the right thing'. This continual failure to give wider reasons leaves them exposed when they have to make a U-turn. Has the right thing suddenly become the wrong thing? Has the wrong thing suddenly become the right thing?Peter ClarkLondon SE23 Sir, Dr Karin Englehart (letter, Jul 1) should rest assured that nothing has changed since she was denied the post of a medical assessor because she suggested that a benefit claimant's account should not necessarily be taken at face value. Whenever I expressed a doubt that a patient would be granted a benefit, I was assured that they would be guided in how to do so Surinder Bakhshi (ret'd) Birmingham Sir, Regarding Martha's Rule and the training of doctors (letters, Jul 1 & 2), fellow physicians would often consult my father on cases. His skill as a diagnostician was a source of amusement to our family. He would state mysteriously that the person on the table next to us at a restaurant had a particularly interesting condition. Late in his life, I asked him how he became so good at diagnosis. He told me he had studied hard as a medical student and with no immediate family to return home to, would stay behind during holidays and tour hospital wards to extend his education. He would talk to patients, ask to read their notes and discuss with fellow staff. I doubt such access to patients would be allowed HerseeGreat Missenden, Bucks Sir, Dr Rosemary Alexander seems to have forgotten that Martha's Rule was enacted because doctors, not physician associates, made an incorrect diagnosis, gave a wrong interpretation of facts, missed serious problems and then refused help from medical colleagues. Physician associates are not the only professionals who have been guilty of ordering unnecessary expensive tests — private GPs are much more culpable of that ArulConsultant paediatric surgeon,Birmingham Women's and Children's Hospital Sir, James Kirkup bemoans the cost to the state of 'doctors' comfortable retirements' (comment, Jun 30). As a house officer in 1997 I was paid less per hour to be on call for five surgical wards overnight than I was the previous year as a general assistant in a supermarket. However, I consoled myself with the promise of a comfortable final salary pension. This pension has since been eroded and we have moved on to career-average schemes. Furthermore, many of my generation have faced tax charges amounting to five or six-figure sums for pensions that they may never receive. It is little wonder that the exodus to foreign climes and the private sector continues David W McCareyConsultant rheumatologist and physician, Glasgow Sir, Further to your helpful leading article on the royal finances ('Gravy Train', Jul 2), the King and Prince of Wales are, respectively, Duke of Lancaster and Duke of Cornwall by the will of parliament — the Act of Settlement. The revenues of the duchies are not 'private wealth' but a perquisite of the titles parliament bestowed. In the country's perilous financial situation the time has surely come to end this ridiculous fiction, deploy public money for the public good and pay the head of state and his helpers proper salaries and expenses for the duties they carry RossAuchencairn, Dumfries and Galloway Sir, The decision to retire the royal train would end a tradition dating back to 1842 ('End of the line for royal train', news, Jul 1). More than a symbol of royal travel, it reflects our national heritage and the bond between crown and country. Nowhere is that identity more deeply felt than in places such as Wolverton, in my constituency, where the train found its home. Fitted out there in 1977, it is a part of the town's identity, its legacy woven into Wolverton's rich cultural heritage. At a time of rail revival and infrastructure spending, this is a chance to modernise a cherished tradition, not scrap it. There is time to change track: I believe the train has more miles left in it Curtis MPHouse of Commons Sir, Sir Ephraim Mirvis has criticised Bobby Vylan's chant of 'death, death to the IDF' as being antisemitic ('Change needed at BBC after Bob Vylan fiasco, says Chief Rabbi', Jul 1). The inference to be drawn from the Chief Rabbi's remarks is that criticism of Israel's military activities is automatically antisemitic. This is a dangerous route down which to go. The separation of the racial aspect from the governmental one is important, otherwise any action by the Israeli government can be given carte blanche because criticism may be considered AlexanderChichester Sir, Is it not time to stop conflating disapproval of Israel's government with antisemitism? There are Jewish people all over the world, including in Israel, who do not like the way that Binyamin Netanyahu's government is conducting its war in Gaza. If that is regarded as supporting terrorism, then God help CookeClavering, Essex Sir, The science behind cheese and dreaming (news, Jul 1; letter, Jul 2) is straightforward: cheese is rich in tryptophan, one of the building blocks for neurotransmitters that influence sleep and moods. Wallace and Gromit never eat Wensleydale before Jeremy AuchinclossElgin, Moray Sir, James Marriott ('AI will leave a gaping void for workaholic world', Jul 1) repeats the canard that bankers in the past worked only from 10am to 3pm. This was far from the case. We started at 9am. After closing we had to balance the books — this was before calculators and computers — and this often meant working until well after 5pm. Overtime was paid only if we worked until 6pm (it was remarkable how often we were ushered out at 5.55pm). Saturday mornings were worked too, and annual leave was two weeks. My annual salary when I joined in 1954 was £170. I couldn't afford a meal at a café, and there was no staff room at the bank, so I had to cycle six miles home for lunch and be back again within the SprattFormer Lloyds Bank manager, Upton St Leonards, Glos Sir, Rohan Silva (comment, Jul 2) praises the benefits of AI which, with some transitional friction, will do us all good. But he doesn't mention the consequences of AI in the hands of bad people. In future years will we be able to believe anything we see on the internet, TV or newspapers? Only physical meetings will be acceptable for serious decision-makers. Perhaps we can hope that AI can be adapted to recognise lies created by ToozeDarlington, Co Durham Sir, I take issue with Emma Duncan's assertion (Notebook, Jun 30) that 'backing creative kids may do them no favours' and that young people pursuing careers in the creative industries 'will find themselves in their thirties without a profession or a useful skill'. The arts have always been a lottery. But other professions have their dropouts too: many teachers, lawyers and doctors change jobs in their thirties. What should we do — only train armies of bankers and business people? What a sad society it would be that did not encourage the creative spirit and the outspoken, brave young people who make the arts happen. Our country needs their stories, plays, dance and music — they are attempts to understand IrelandAmbassador, Action for Children's Arts Sir, Wimbledon's linesmen and women are rather like the Beefeaters at the Tower of London — not strictly indispensable but the visual essence of their place of work. Wimbledon has lost its unique character without DallingHartley Wintney, Hants Sir, Mark Riley (letter, Jul 2) should be ashamed of himself. Those are eye-stalks on the Daleks' domes, not weapons. Disgraceful knowledge of Dalek HarrisSittingbourne, Kent Sir, Matthew Parris should venture to Northern Ireland to see, and walk, a real wall (Notebook, Jul 2). The Mourne Wall in Co Down is 19 miles long, 5ft high and 2ft wide, built in the early 20th century using only granite boulders and reaching 2, ShieldsBanbridge, Co Down Write to letters@
South Wales Guardian
an hour ago
- South Wales Guardian
MPs declare more than £1m of gifts and hospitality in year since election
Rows over free tickets and other gifts given to senior Labour figures, including Prime Minister Sir Keir Starmer, posed an early problem for the Government, which had made restoring trust in politics a major part of its election campaign. But analysis of the MPs' Register of Interests by the PA news agency shows hundreds of MPs have declared receiving gifts in the past year. Some 236 MPs declared gifts from UK sources, totalling £477,539, while 144 said they had been on overseas trips paid for by donors, charities, think tanks or foreign governments, worth another £810,761. In total, 318 MPs declared that they had received gifts in the year since the election, just under half the number sitting in the Commons. Reform UK leader Nigel Farage declared the highest value, receiving gifts worth a total of £98,709 over the past year. The bulk of these took the form of flights and accommodation on a number of trips to the United States, paid for by Reform donor Christopher Harborne and party volunteer George Cottrell. But they also include £8,413 for a helicopter journey from JC Bamford, whose owner has previously backed the Tories, and tickets worth £2,000 from boxer Derek Chisora to watch his fight against Joe Joyce last August. The biggest recipient of hospitality from UK sources was the Prime Minister, thanks to his regular attendance at Arsenal games. Sir Keir declared £11,170 worth of football tickets over the past year. A long-standing Arsenal season ticket holder, he has previously said that he is no longer able to sit in the stands because of security concerns, but has been offered a seat in the club directors' box so he can continue to attend matches with his son. The Prime Minister declared a total of £17,344 in hospitality and other gifts since the election, with other donations including tickets from Universal Music and the FA to see Taylor Swift and the loan of clothes to his wife. Conservative leader Kemi Badenoch declared just one gift – £14,350 from Tory donor Neil Record to cover work space, accommodation and hospitality for a series of meetings in Gloucestershire in March this year. While several MPs received significant sums in gifts, most declared lower amounts or none at all, with the median MP receiving £1,208 in gifts over the year. Some 49 MPs received free tickets to football matches in the past year, totalling almost £59,000. But gifts from football clubs and organisations such as the FA and the Premier League totalled more than £70,000, and included concert tickets as well as hospitality at matches. The single largest gift of sporting tickets, however, was declared by shadow business minister Greg Smith, who received hospitality worth £5,160 at last year's British Grand Prix from hosts Silverstone. Four other MPs, including Leader of the Commons Lucy Powell and shadow foreign secretary Dame Priti Patel, also received hospitality at Silverstone last year. Eight MPs received hospitality from the Lawn Tennis Association at Wimbledon in 2024, while golf's R&A provided tickets for four MPs at the Open. Another 49 MPs received tickets to awards ceremonies including the Baftas, the Brit Awards and the British Kebab Awards, while 23 were given tickets and hospitality for horse racing events, and 21 received tickets to concerts. The most popular of those concerts were part of Taylor Swift's Eras Tour, with nine MPs receiving free tickets totalling £14,628, mostly from the Premier League and the FA. As well as the Prime Minister, they included Cabinet ministers Darren Jones, Peter Kyle, Bridget Phillipson and Wes Streeting, and Liberal Democrat leader Sir Ed Davey. During the last election, Labour campaigned on a pledge to restore probity to public life after the scandals that had plagued the previous Conservative government. Last year Sir Keir sought to toughen up transparency rules for ministers, introducing a new monthly register of gifts and hospitality for ministers rather than the previous quarterly releases. He also changed the Ministerial Code in November to include the seven principles of public life directly in the rules and allow the independent adviser on ministerial standards to launch his own investigations. But Alastair McCapra, chief executive of the Chartered Institute of Public Relations, warned the continued culture of gifts and hospitality in British politics risked creating a 'full-blown crisis of legitimacy'. He said: 'At the heart of this credibility gap is the shadowy relationship between business and politics. 'The entrenched culture of gifts and hospitality in British politics creates the perception of corruption, and the suspicion of back doors to access are damaging a Labour Party that campaigned on promises of transparency, integrity and a break from the past. 'Political scandals thrive in the gaps between information and silence. 'If the Government and the business community are serious about building back trust, they must prioritise and accept a relationship that is transparent and accountable to the public.'
