Latest news with #taxrises
The Independent
10 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.
The Independent
a day ago
- Business
- The Independent
Starmer expected to announce £2bn welfare concessions sparking tax rise fears
Sir Keir Starmer is expected to announce major concessions on his controversial welfare cuts as concerns grow the government will need to raise taxes in order to pay for the dramatic climbdown. After a day of crisis talks with rebel Labour MPs, The Independent understands the prime minister has agreed to water down his package of reforms, including protecting PIP payments for all existing claimants, meaning only new claimants would be subject to tougher rules. The concessions could shave up to £2bn off the £5bn worth of planned savings from the bill, and follow Downing Street refusal to rule out tax rises for any changes. More than 120 Labour MPs signed an amendment that would effectively kill the welfare cuts off, piling pressure on the prime minister to back down amid fears his bill could be defeated at its second reading next week. Asked whether the government accepts that it would be forced to hike taxes if it waters down the legislation earlier on Thursday, the prime minister's official spokesperson said ministers wanted to get the changes 'right', adding that the chancellor would take tax decisions 'in the round in the future'. The row comes as top economists warned that failing to pass the reforms would wipe out Rachel Reeves's financial headroom ahead of her Budget this autumn, meaning a tax rise or cuts to spending elsewhere would be needed to plug the gap. Tory leader Kemi Badenoch said Sir Keir was in the "fight of his life", after the former Labour cabinet minister David Blunkett warned that if his welfare plans were rejected, Sir Keir would face a confidence vote. With tensions running high, there were reports of MPs in tears after discussions with advisers from No 10. Sir Keir insisted on the need for the reforms on Thursday, warning benefits claimants were 'failed every single day' by a 'broken system' but admitted Labour MPs want to see 'reform implemented with Labour values of fairness'. However, rebels told The Independent that any concessions would have to be wide-ranging if they were to be accepted. Currently, the plans set to be voted on this Tuesday restrict eligibility for Personal Independence Payments (PIP), the main disability payment in England, and limit the sickness-related element of Universal Credit (UC). The government hopes the changes will get more people back into work and save up to £5bn a year. Existing claimants will be given a 13-week phase-out period of financial support, a move which had been seen as a bid to head off opposition by softening the impact of the changes, before this week's revolt erupted. The rebellion comes at a time when Labour MPs are growing increasingly critical of the prime minister's attendance in the Commons, with him having voted less in his first year so far than any of his predecessors up to Sir Tony Blair – while forcing his backbenchers into the Commons to take part in tough votes. Labour MP Rachael Maskell, formerly a member of the Commons health and social care committee, told The Independent the government would have to agree to a multitude of changes if they were to win back support. She said: '[Ministers would need to] ... agree a consultation with disabled people, they would need to end cuts to PIP without first replacing this with a fairer system and they would need to not cut Universal Credit, as this still leaves disabled people worse off, as they have significantly higher living costs. Scope [charity] has evaluated this to be over £1,000 a month.' Another Labour MP said the only solution the government could offer was to pull the bill in its entirety and warned that MPs were unlikely to accept much less. "I'm not going to support anything that will put disabled people into hardship,' they said. 'The government have just not been listening. It didn't need to get this far and the fact that it has is just pretty tin-eared to be honest. 'No 10 sees MPs as irritants and fodder. The disrespect that comes out of there... We're all working hard and this is how they treat us. It goes back to the point about how arrogant and out of touch they are." Another Labour MP said parts of the plans were 'unacceptable' and called for 'investment first', to get people access to mental health professionals or off UC and into work, before the cuts were implemented. Meanwhile, the National Institute of Economic and Social Research (NIESR) think tank warned that without passing the reforms, chancellor Rachel Reeves would be forced to raise taxes or cut other spending to meet her self-imposed borrowing rules. Senior economist Ben Caswell said: 'More considered policy could help reduce political churn and the associated economic cost, particularly when consumer and business confidence is already low.' But Scottish Labour leader Anas Sarwar was optimistic the welfare bill would look different by Tuesday's vote, as a third of all Scottish Labour MPs are backing the rebel amendment. Mr Sarwar told the Holyrood Sources podcast: "The bill's not going to look the same... Legitimate concerns should be addressed. We have to support the principle of the reform." But during a speech on Thursday Ms Badenoch suggested the Tories would go even further than Labour, promising to slash £9bn off the welfare bill. She called for a 'fundamental rethink about which conditions should qualify for long-term financial support' saying that a focus on those with 'really severe conditions' would allow the government to save money. 'That's where we should be focusing our efforts,' she said. 'I know it won't be easy. In fact, things are likely to get worse, before they get better.' Earlier on Thursday, trade minister Douglas Alexander claimed that both ministers and the rebels agree that 'welfare needs reform and that the system is broken' and that the disagreement was over the 'implementation to those principles'. Asked about concessions, Angela Rayner, the deputy prime minister, sought to reassure backbenchers that they would not be expected to betray Labour's traditional values. "I haven't changed my Labour values and we're not expecting our benches to do anything that isn't in check with them,' she said in an interview on ITV's Peston programme. "What we want to do is support people, and that is the crucial bit around these reforms of what Labour are trying to achieve, and we're discussing that with our MPs."
The Independent
4 days ago
- Business
- The Independent
Starmer leaves door open for tax rises to fund rise in defence spending
Sir Keir Starmer has left the door open for tax rises in order to pay for mammoth increases to defence spending, amid growing questions over how the UK will afford the £30bn pledge. On Tuesday, Britain joined its Nato allies in committing to spending 5 per cent of GDP on defence and related spending by 2035. But IFS director Paul Johnson warned that the planned increase in defence spending would cost more than £30bn - a sum that he said could only come from tax increases, "because in the end there's nowhere else it can come from". Just three weeks ago, ministers struggled to explain how Britain would reach a target of 3 per cent defence spending by 2034 – casting doubt over the fresh target of 5 per cent. Speaking to journalists on the plane to the Nato summit in The Hague, the prime minister pointed to current manifesto commitments which commit the government to no tax rises for working people. But any tax hikes to fund the 2035 pledge are likely to come after the next election in 2029, which will see Labour campaign on an entirely separate manifesto - meaning current manifesto commitments will no longer apply. Asked whether he plans to hike taxes in order to pay for the pledge, Sir Keir said: 'Every time we've set out our defence spending commitments, so when we went to 2.5 per cent in 2027/28, we set out precisely how we would pay for it, that didn't involve tax rises. Clearly we've got commitments in our manifesto about not making tax rises on working people and we will stick to our manifesto commitments.' As Iran and Israel traded further strikes overnight, Sir Keir warned that Britain is facing 'volatile times, probably more volatile than most of us have lived through recently'. 'We have entered a new era for defence and security. And the first duty of prime minister is to keep the country safe, and that sits above all other duties, and I take it really seriously.' Amid a growing rebellion over the government's controversial plan to slash the welfare bill by cutting disability benefits, the prime minister also denied that money for defence spending is coming from welfare receipts. 'The commitment we've made on defence to go to 2.5 by 2027/28, it's absolutely clear that we've set out where the money comes from, and it's not coming from welfare. It's coming from the overseas development aid. 'So it's a misdescription to suggest that defence spending commitment we've made is at the expense of money on welfare, and obviously on the welfare front, we're making huge commitment to the money we're putting in to get people back to work.' IFS director Paul Johnson warned that the defence spending increase would need to be funded by '£30 or £40bn more taxes'. Speaking to Times Radio about the increase, he said: 'Where that's going to come from, goodness only knows. Well, I think we do know it's going to come from; £30 or £40bn more taxes, because in the end there's nowhere else it can come from. 'I can't really see this government cutting spending on pensions or the health service or welfare or what have you by that amount. I mean they can't.' The prime minister's remarks on the flight to The Hague also saw him insist that Donald Trump is still a 'close ally' - just minutes before the US president declined to commit to Nato's Article 5, which requires members to defend each other from attack. Over the weekend, Mr Trump launched strikes on Iran, despite Sir Keir saying he has "no doubt" the prime minister supports his goal of de-escalation. Speaking on Tuesday, the PM said that while de-escalation was his priority, he had also been preparing to take "necessary measures should there be American action taken". Asked by The Independent whether the US president is still a reliable enough partner for British lives to be put on the line alongside the US, Sir Keir said: "We're a close ally, we work together. "As you'll have seen on Tuesday as I immediately landed back from Canada from the G7 we went straight into a COBRA in Downing Street because we obviously had the G7 statement on the Monday after the session over dinner which was clear about deescalation. "I obviously wanted to take necessary measures should there be American action taken. So where we had the G7 statement my first step on getting back was to cover all eventualities - including the eventuality of a US attack. "We had then been talking to the US all of last week into the attack on Saturday. We were kept informed at all stages of what they were doing and working as allies as you'd expect." Asked if he would commit to the mutual defence clause of Nato, Mr Trump responded that it 'depends on your definition' of Article 5. 'There's numerous definitions of Article 5. You know that, right? But I'm committed to being their friends, you know, I've become friends with many of those leaders, and I'm committed to helping them,' the US president told reporters aboard Air Force One on Tuesday.
Telegraph
4 days ago
- Business
- Telegraph
Households face ‘a lot more' tax rises after defence pledge
Households face a fresh wave of tax rises to fund tens of billions of pounds in extra defence spending, one of the country's leading economists has warned. Paul Johnson, director of the Institute for Fiscal Studies, said 'a lot more' tax increases will be needed to meet renewed commitments on defence, particularly as Sir Keir Starmer comes under pressure to water down spending cuts. In a post on social media, Mr Johnson said: ' Another £30bn on defence. U-turn on winter fuel. Rebellion on plans which just slightly slow huge increases in spending on disability benefits. 'If spending goes only one way, then so, inevitably, will tax. Historic increases already this decade. Looks like a lot more to come.' The threat of further levies comes after Rachel Reeves's £40bn tax-raising Budget last October. Along with a change in the fiscal rules to allow more borrowing, the autumn Budget was intended to cover the Government's spending plans for much of the rest of this parliament. However, those plans have been thrown off course after a year dominated by weak economic growth and stubbornly high borrowing costs. Fiscal pressures have grown in recent months after the Government was forced to back down on planned cuts to winter fuel payments, while the Prime Minister is also under mounting pressure to limit welfare savings. The debate over tax rises has been renewed as Sir Keir is attending the Nato summit in The Hague, where he is expected to commit the UK to spending 5pc of GDP on 'national security'. This is up from the current 2.4pc, meaning the Government will have to consider raising some of the main tax rates to pay for the increase. An extra £30bn of spending could be paid for with a 3p rise in the basic and higher rates of income tax, for instance, taking those to 23pc and 43pc respectively. A similar amount could be raised by increasing VAT from 20pc to 23pc, according to HMRC estimates, or raising corporation tax from 25pc to 32.5pc. However, this would no doubt spark criticism after Labour promised not to raise any headline taxes in its election manifesto last year.
Daily Mail
4 days ago
- Business
- Daily Mail
Brace yourself for MORE tax rises as Keir Starmer ploughs billions into defence and the NHS and Labour backbenchers rebel over welfare cuts to pay for it
Hard-pressed Brits have been warned to brace themselves for tax rises later this year as Keir Starmer pours money into defence and the NHS and Labour MPs vow to block welfare cuts that would help cover the cost. The PM will join fellow Nato leaders in The Hague today after signing up to the goal of spending 3.5 per cent of GDP on defence. Another 1.5 per cent will be committed to related measures such as cyber security, under the package demanded by Donald Trump. However, ministers have refused to say where the UK will find the extra money - around £30billion on top of existing plans - with Rachel Reeves already scrambling to balance the books. The announcement today comes after the Chancellor committed tens of billions into trying to improve the NHS in her spending review earlier this month. At the same time, Sir Keir and Ms Reeves are facing a major backbench rebellion over an attempt to claw money back by tightening disability benefit criteria and getting people back into work. Some 108 MPs have signed a 'reasoned' amendment that would effectively kill off the legislation in a Commons vote on July 1. Sir Keir has also already announced a softening of cuts to winter fuel payments that mean many more pensioners will remain eligible, after a major uproar. Economist Paul Johnson, director of the Institute for Fiscal Studies, said: 'If spending goes only one way then so, inevitably, will tax. 'Historic increases already this decade. Looks like a lot more to come.' The Nato summit comes after Sir Keir's meeting yesterday with Volodymyr Zelensky at No10. The Ukrainian president will also be at the summit. Britain allocated 2.33 per cent of GDP to defence last year, and Keir Starmer has committed to reaching 2.5 per cent by April 2027. There is an 'ambition' of increasing that to 3 per cent at some stage in the next parliament - likely to run to 2034. At the same time the scale of the welfare rebellion - reaching into every corner of the party - could be enough to overturn the government's massive majority. It raises the prospect of Sir Keir being forced into yet another humiliating U-turn - and Ms Reeves having to find a way of covering the £5billion the reforms are meant to save. Just yesterday Ms Reeves was insisting there will be no major concessions. Touring broadcast studios this morning, Cabinet Office minister Pat McFadden admitted the insurrection was 'very serious' and stressed there would be 'discussions' with MPs. Ministers including Deputy Prime Minister Angela Rayner have refused to rule out kicking MPs out of the party if they vote against the change, leading some to threaten to form 'Labour 2' if that happens. Some 108 Labour MPs have signed a 'reasoned' amendment that would effectively kill off the legislation in a Commons vote on July 1 The amendment, published on the Commons order paper today, notes there is a 'need for the reform of the social security system'. But it calls for the Commons to decline to continue scrutinising the Universal Credit and Personal Independence Payment Bill 'because the Government's own impact assessment estimates that 250,000 people will be pushed into poverty as a result of these provisions, including 50,000 children'. There has been no formal consultation with disabled people who will be impacted by the changes, the MPs said. They also point to the fact that an analysis of the impact of the reforms on employment from the Office for Budget Responsibility will not be published until the autumn. Several Labour select committee chairs were among those who put their name to the amendment, including chairwoman of the Treasury committee Dame Meg Hillier, and Debbie Abrahams, chairwoman of the work and pensions select committee. Helen Hayes, the chair of the education committee who was a shadow education minister for three years under Sir Keir in opposition, also signed it. She said: 'Reform of our benefits system is needed, but the cuts to PIP will push some disabled people out of work and increase poverty. 'That's unjustifiable. Ministers must rethink to get this right.' Earlier this month Ms Reeves put a £29 billion-a-year rise in NHS funding at the heart of her spending plans but other Whitehall budgets will be squeezed and experts warned tax rises may be needed later this year. Ms Reeves acknowledged that 'too many people in too many parts of our country' were yet to feel the benefits of the change they voted for when Labour was swept to power last year as she pushed money towards projects outside of London and south-east England. She insisted she would not need to mount another tax raid to pay for her plans but experts warned the money for the NHS might still not be enough even before the decision to increase defence spending.
