Latest news with #budget
The Independent
3 hours ago
- Business
- The Independent
Warnings of tax rises after Downing Street welfare U-turn
There are predictions of tax rises in the Autumn budget after Sir Keir Starmer U-turned on welfare reforms in the face of a backbench rebellion. The Prime Minister said that the concessions strike 'the right balance', but think tanks have warned that the changes announced in the early hours of Friday morning have made Rachel Reeves's 'already difficult Budget balancing act that much harder'. Downing Street declined to rule out the possibility of increases in the autumn, telling reporters on Friday that 'tax decisions are set out at fiscal events'.The concessions on offer include protecting personal independence payments (Pip) for all existing claimants, while all existing recipients of the health element of Universal Credit will have their incomes protected in real terms. The Institute for Fiscal Studies (IFS) said on Friday that the changes make tax rises in the budget expected in the autumn more likely. Associate director Tom Waters said: 'These changes more than halve the saving of the package of reforms as a whole, making the Chancellor's already difficult Budget balancing act that much harder.' Ruth Curtice, chief executive at the Resolution Foundation, said that 'the concessions aren't cheap, costing as much as £3 billion and more than halving the medium-term savings from the overall set of reforms announced just three months ago'. She added: 'This adds to the already mounting pressure to deliver fresh consolidation in the Budget this Autumn.' The Resolution Foundation noted that extending a freeze in personal tax threshold by one year would save '£4 billion a year'. Labour backbenchers that signed an amendment that would have halted the Universal Credit and Personal Independence Payment Bill in its tracks when it faces its first Commons hurdle on July 1" data-source=""> Asked about how the climbdown would be funded, Downing Street said on Friday that 'There'll be no permanent increase in borrowing, as is standard. 'We'll set out how this will be funded at the budget, alongside a full economic and fiscal forecast in the autumn, in the usual way.' Asked whether they could say there would be no tax rises, a Number 10 spokesman said: 'As ever, as is a long-standing principle, tax decisions are set out at fiscal events.' Some 126 Labour backbenchers had signed an amendment that would have halted the Universal Credit and Personal Independence Payment Bill in its tracks when it faces its first Commons hurdle on July 1. The list of Labour MPs putting their name to the amendment had been growing throughout the week, as Downing Street said that they would be pressing on with next week's vote. After the late-night U-turn, Sir Keir said that 'the most important thing is that we can make the reform we need'. 'We talked to colleagues, who've made powerful representations, as a result of which we've got a package which I think will work, we can get it right,' he added. 'For me, getting that package adjusted in that way is the right thing to do, it means it's the right balance, it's common sense that we can now get on with it.' While leading rebels believe the concessions are likely to be enough to win over a majority, some remain opposed to the plans in their current form. Dr Simon Opher, who represents Stroud, said in a statement that he is glad the Government 'are listening', but that the changes 'do not tackle the eligibility issues that are at the heart of many of the problems with Pip'. 'The Bill should be scrapped and we should start again and put the needs of disabled people at the centre of the process,' he said. It is also understood that talks are underway over rebel attempts to lay another amendment to seek to delay the plans, as reported by The Guardian. The fallout also threatens to cause lasting damage, with some backbenchers having called for a reset of relations between Number 10 and the parliamentary party. Speaking to the PA news agency, a number of Labour backbenchers expressed deeper frustration with how Downing Street has handled its backbenchers since last year's election. The Government's original package had restricted eligibility for Pip, the main disability payment in England, as well as cutting the health-related element of universal credit. Existing recipients were to be given a 13-week phase-out period of financial support in an earlier move that was seen as a bid to head off opposition. Now, the changes to Pip will be implemented in November 2026 and apply to new claimants only, while all existing recipients of the health element of universal credit will have their incomes protected in real terms. The concessions on Pip alone protect some 370,000 people currently receiving the allowance who were set to lose out following reassessment.
CNA
3 hours ago
- Business
- CNA
US Senate Republicans see delays as they face yawning budget hole on Trump bill
WASHINGTON: Top US Republicans confronted a yawning budget hole in their sprawling tax-cut and spending bill on Friday (Jun 27), signalling that they could miss President Donald Trump's Jul 4 deadline as they rewrite dozens of elements rejected by a nonpartisan referee. With roughly US$600 billion in spending cuts ruled off limits by the Senate parliamentarian, Republicans will have to revise large swaths of the package, which is widely seen as the signature legislation of Trump's second term in office. That includes some of the most divisive elements of the bill, such as a crackdown on Medicaid "provider taxes" that some Senate Republicans fear could threaten rural hospitals. With the legislation still unfinished, Trump acknowledged that Congress might not be able to pass it by his deadline of Jul 4, the US Independence Day holiday. "It's important, it's not the end-all," he told reporters at the White House. "We'd like to get it done by that time, if possible." Asked if the deadline could slip, House of Representatives Speaker Mike Johnson said, "It's possible, but I don't want to even accept that as an option right now," while Senate Majority Leader John Thune said only, "We'll see." Lawmakers will face a far more serious deadline later this summer, when they need to raise the nation's self-imposed debt ceiling or risk a devastating default on the nation's US$36.2 trillion in debt. BILL OVERHAUL Along with Medicaid, the spending cuts at issue also would tighten student aid programmes and limit federal aid to "sanctuary" cities that do not cooperate with federal immigration enforcement, amount to nearly half of the US$1.3 trillion in cuts Republicans have identified to partially offset the bill's US$3.7 trillion in tax breaks. Republicans have also dropped a "retaliatory tax" on foreign investments that would have raised more than US$100 billion, further complicating the budget picture. WIGGLE ROOM They have some wiggle room, as the budget framework they approved earlier this year allows them to increase budget deficits by a total of US$3.3 trillion over 10 years. A version of the bill that passed the House in May would raise deficits by US$2.4 trillion. Nonpartisan experts say that new debt would worsen the nation's fiscal outlook and effectively transfer wealth from younger Americans to older generations. Republicans still must pass the bill out of the Senate and then reconcile any differences with the House before sending it on to Trump to sign into law. With Democrats united in opposition, Republicans can afford to lose no more than three votes from their side in either chamber. Sticking points include healthcare cuts, green-energy incentives and a carve-out for state and local taxes, said Republican Senator Markwayne Mullin of Oklahoma. PARLIAMENTARIAN PUSHBACK Senate Republicans said they would try to rework the provider tax and some of the other rejected elements to meet the approval of Senate Parliamentarian Elizabeth MacDonough, who is tasked with interpreting the chamber's arcane rules. MacDonough has ruled that those elements do not comply with the complex budget rules Republicans are invoking to bypass Democratic opposition. MacDonough so far has rejected healthcare cuts worth a total of US$250 billion, according to Democratic Senator Ron Wyden of Oregon, as well as student-aid cuts worth more than US$300 billion. She has also rejected dozens of other elements of the bill, such as looser regulations for firearms silencers and a forced sale of public lands, that do not have a dramatic budgetary impact. The Republican rewrite has met with some success, as MacDonough signed off on a revised provision that would force states to shoulder more costs of the SNAP food aid programme if they are found to administer it inefficiently, according to Republican Senator John Boozman of Arkansas. The "One Big Beautiful Bill Act" would extend Trump's 2017 tax cuts, fund his immigration crackdown, zero out green-energy incentives passed by his Democratic predecessor Joe Biden, and tighten eligibility for health and food safety net programmes.
CBS News
4 hours ago
- Business
- CBS News
Mayor Adams, NYC Council reach budget deal that expands childcare, library service, more
New York City Mayor Eric Adams and the City Council have reached an agreement on a new city budget for the Fiscal Year that begins Tuesday, CBS News New York's political reporter Marcia Kramer has learned. Some of the new initiatives include: Check back soon for more on this developing story.
Telegraph
6 hours ago
- Business
- Telegraph
Reeves expected to extend stealth raid on income tax
Rachel Reeves is expected to freeze income tax thresholds in her autumn Budget to fill a £40 billion black hole. The Chancellor has been put under pressure by three policy U-turns by Sir Keir Starmer, which are set to increase public spending by about £4 billion later in the year. Some within the Labour Party believe she may not survive the year if she is forced to raise taxes and impose further cuts at the same time. The latest policy reversal, on benefit cuts, will mean the Government will save just half of the £5 billion it hoped to recoup from sickness and disability payments. But Ms Reeves has left herself with few options to raise funds. As well as committing not to increase the rates of income tax, National Insurance or VAT, nor to raise corporation tax, she has insisted she will not break Labour's fiscal rules. Freezing the threshold for the additional rate of income tax was one of the suggestions in a memo from Angela Rayner, the Deputy Prime Minister, to Ms Reeves which was leaked to The Telegraph last month. The current freeze, which was due to be lifted in 2028, dragged seven million people into higher tax brackets last year, raising around £15 billion. Paul Johnson, the director of the Institute for Fiscal Studies, an independent think tank, said a further freeze in thresholds would be 'pretty high up the attractiveness scale' in this year's Budget. 'I think it's fairly likely, as a politically easy way to raise something of the order of £10 billion in additional revenue by the end of the Parliament,' he told The Telegraph. One Labour MP said the Chancellor was now 'in deep trouble' because she has already ruled out several of the easiest ways to raise revenue. 'It's hard to forgive her for where we are now. She locked herself in, foolishly, to a set of commitments that have become unsustainable,' the MP said. The Treasury was already facing a black hole of between £20 billion and £30 billion because of lower-than-expected growth forecasts, partly driven by Donald Trump's imposition of tariffs. The £4 billion cost of Sir Keir's U-turns is expected to be compounded by a revision to the Office for Budget Responsibility's (OBR) medium-term productivity forecast this summer and growth forecast this autumn, which could have an impact on revenues of between £7 billion and £8 billion. This week's decision to maintain benefit payments for existing claimants has cost the Treasury £2.5 billion, while the U-turn on winter fuel payments for pensioners cost a further £1.25 billion. Ms Reeves is facing backlash from Labour MPs over her proposal to cut benefits, which was designed to bring down the cost of welfare at the expense of thousands of claimants. Sir Keir, who watered down the measures to avoid the biggest rebellion of his career, insisted that his 'common sense' welfare reforms now strike 'the right balance'. But the situation leaves the Chancellor with little choice but to freeze income tax thresholds, which were due to rise in line with inflation from 2028. The policy would likely raise around £8 billion a year in tax receipts, but would cost a worker earning on an average salary thousands more in income tax by the end of the decade. Independent economists say a further freeze in the autumn is now all but certain, and that further increases on smaller taxes or a new raid on pensions could be required to make up the shortfall. Downing Street refused to rule out further tax rises on Friday, with a spokesman saying: 'As ever, as is a long-standing principle, tax decisions are set out at fiscal events.' However, Ms Reeves's team remains optimistic that good economic performance between now and the Budget will reduce the £105 billion cost of servicing government debt, which currently accounts for 8.2 per cent of public expenditure. The Bank of England is widely expected to cut interest rates at its next meeting on Aug 7, although gilt yields are not directly determined by the base rate. Treasury officials also hope that the cost of energy will continue to fall, although it is acknowledged that instability in the Middle East could drive up the price of crude oil once again. Ms Reeves is adamant that she will not break her fiscal rules – to increase public sector borrowing as a percentage of GDP or raise money on the markets to fund day-to-day spending – and believes that maintaining market stability should be the Government's primary goal. Balancing the books with a stealth tax on income has been a favoured policy lever of successive chancellors. The current freeze to 2028 was introduced by Sir Jeremy Hunt in his 2022 Budget. But the policy results in more people paying higher rates of income tax as their wages increase – an economic phenomenon known as fiscal drag. OBR figures show that in 2024-25, some £15.3 billion extra was due to be raised thanks to the frozen thresholds. In the same year, the OBR predicted that the total welfare bill was set to shoot up by £16.6 billion. Figures released on Thursday show that seven million people have been dragged into paying higher rates of income tax as a result of the stealth raid on wages. Frozen thresholds forced an extra 520,000 taxpayers into the 40p bracket in the last year, according to estimates by HMRC. It brings the total to just over seven million in 2025-26, a 60 per cent rise from the 4.4 million in 2021-22 when income tax thresholds were first frozen under the Tories. The number of 45p additional-rate taxpayers has more than doubled from 520,000 to 1.2 million over the same period. Last November, Ms Reeves told MPs she would not raise taxes again or increase borrowing and that the Government would need to 'live within the means we've set ourselves' for the remainder of the Parliament. 'We're not going to be coming back with more tax increases, or indeed more borrowing,' she told the Treasury select committee.
The Guardian
10 hours ago
- Business
- The Guardian
Reeves expected to freeze income tax thresholds to raise fresh funds
Rachel Reeves is expected to extend a freeze on income tax thresholds to raise fresh funds after the government's U-turn on welfare cuts left her with a growing budget hole. The chancellor was already facing pressure to backtrack on pledges not to increase taxes further as she attempted to fix public services and grow the economy while meeting her fiscal rules. However, Keir Starmer's U-turn late on Thursday has increased the likelihood that she will raise taxes or cut spending in the autumn budget. Independent commentators are all but unanimous in expecting taxes to go up – and many point to the threshold freeze, which is estimated to raise £8bn a year, as the most likely option. The freeze, introduced by the former Conservative chancellor Jeremy Hunt, drags ever more people into paying the higher rate of tax and is due to end in 2028. The number of people in the UK paying income tax at the higher rate is already expected to increase by 500,000 this tax year, to 7 million. 'The most obvious thing would be to extend the income tax thresholds, for another two years,' said Ruth Curtice, director of the Resolution Foundation thinktank – which estimates that the U-turn on disability benefits will cost the chancellor £3bn a year by 2029-30. That bill comes in addition to the £1.25bn price of Reeves' recent decision to reverse most of the cut to pensioners' winter fuel allowance – and the widely held expectation that the Office for Budget Responsibility will downgrade its growth forecasts in the autumn. The Treasury's independent watchdog is revisiting its estimate of productivity – a key determinant of economic growth – which looks optimistic relative to most independent forecasts. Paul Johnson, the outgoing director of the Institute for Fiscal Studies, said the U-turns on benefits could be dwarfed by the probable downgrade from the OBR. 'In one way this [the welfare U-turn] doesn't change anything very much – it's a £3bn-£4bn change at the end of the period, and the OBR forecast could change things by a lot more than that – but obviously if the OBR moves in the wrong direction then this adds to the pressure,' he said. Johnson pointed out that the most straightforward ways of raising large enough sums had been ruled out by Labour's pre-election tax pledges. 'There are always ways of finding small numbers of billions, but if you are looking for £10bn or £20bn it gets really quite difficult, if you're not going to increase income tax or VAT,' he said, adding, 'the threshold freeze is obviously the politically easiest thing to do.' Simon Wells, chief European economist at HSBC, agreed. 'They're boxed in and something has to give,' he said. 'The income tax thresholds is by far and away the line of least resistance.' Mujtaba Rahman, managing director at the consultancy Eurasia Group, said: 'Reeves may have to find up to £20bn to balance the books and give her enough headroom for future emergencies from a series of small-scale changes. They are likely to include extending the freeze on income tax thresholds and allowances for another two years.' The chancellor's team continue to insist that there is no inevitability about tax increases, pinning their hopes on a rosier economic outlook by the time of the autumn budget. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion They claim that firms have become more upbeat about the UK as an investment prospect, and many consumers are benefiting from above-inflation pay rises. 'Sentiment is really changing,' argued a Treasury source. Asked earlier this week about recent worse-than-expected public finances figures, Reeves said: 'I wouldn't read too much into one month's data. It's just one of a number of factors that will affect the next forecast that the Office for Budget Responsibility will produce.' However, there is also frustration in government at the way the OBR's forecasting process, combined with the slim £10bn of headroom Reeves has against her fiscal rules, has led to constant market speculation about the chancellor's next move. One proposal made recently by the International Monetary Fund (IMF) was for just one OBR forecast a year. The Treasury is understood to be sceptical about this idea, as it would make the UK an international outlier – but officials are understood to be looking at the nature of the spring forecast. Downgrading its role could prevent the scramble for savings seen in the run up to this year's spring statement which led to the welfare cuts. The Bank of England governor, Andrew Bailey, this week warned against 'over-interpreting' the Office for Budget Responsibility's forecasts.
