Latest news with #welfare
Daily Mail
5 hours ago
- Business
- Daily Mail
Critics warn Sir Keir's screeching welfare U-turn will now result in a 'two-tier' benefits system and a £3billion tax bombshell to pay for it
Sir Keir Starmer 's benefits climbdown will create a 'two-tier' benefits system with families facing a £3billion tax bombshell to pay for it, critics warned last night. And that will be on top of the £1.25billion bill caused by the Prime Minister's screeching U-turn over winter fuel payments for pensioners. Experts warned the £4.25billion black hole in the public finances caused by the backsliding will probably force Chancellor Rachel Reeves to plug it with more tax rises in her autumn Budget. The Prime Minister was humiliatingly forced to hand Labour 's welfare rebels the concessions in a bid to avoid defeat in a crunch vote on benefits cuts on Tuesday. The compromise deal last night looked like it had peeled off enough of the 126 rebels to pass the vote. However, as many as 50 were still threatening to rebel unless the vote was pulled. The reforms had originally been forecast to save the Government £5billion a year by the end of the Parliament. Charity bosses and Labour MPs still planning to rebel also warned the new proposals would create a 'two-tier' benefits system because existing Personal Independence Payment (PIP) claimants will keep their current level of disability payments. But new claimants after November 2026, when the changes are scheduled to kick in, would be entitled to as much as £4,000 a year less on average, even if they suffered from the same condition which meant they couldn't work. Before the U-turn, both existing and future claimants were facing stricter eligibility conditions for the daily living component of PIP, a working-age benefit for those whose health condition increases their living costs. The concessions on PIP alone protect some 370,000 people currently receiving the allowance who were set to lose out following reassessment. Meanwhile, existing claimants of the universal credit (UC) health element, paid to those with a condition which stops them working, will have their payments protected in real terms. However, new claimants will see it halved and frozen. According to calculations by the Resolution Foundation think tank, the PIP and UC reforms will cost £1.5billion each. Sir Keir yesterday branded his own climbdown 'common sense' and refused to rule out tax increases to pay for it in an interview. During a visit to RAF Valley in Wales, he said how the Government intended to pay for it would be revealed in the autumn Budget, adding: 'The changes still mean we can deliver the reforms that we need and that's very important because the system needs to be a system that is fit for the future. 'All colleagues are signed up to that, but having listened, we've made the adjustments. The funding will be set out in the Budget in the usual way.' Yesterday's climbdown is hugely embarrassing for Sir Keir as it highlights the scale to which he failed to read his MPs' mood over the proposed cuts, with rebels having spoken out for months. Care minister Stephen Kinnock dismissed criticism that the Government was in chaos and that Sir Keir was not 'competent', insisting that the process had been 'positive and constructive' and that the PM was someone who 'gets stuck into fixing problems'. Care minister Stephen Kinnock (pictured) dismissed criticism that the Government was in chaos and that Sir Keir was not 'competent', insisting that the process had been 'positive and constructive' and that the PM was someone who 'gets stuck into fixing problems' But Kemi Badenoch said the debacle left benefits claimants facing 'the worst of all worlds'. Speaking to reporters on a visit to North West Essex, the Tory leader said: 'I think we're seeing a government that is floundering, a government that is no longer in control despite having a huge majority. I don't see how they're going to be able to deliver any of the things they promised if they can't do something as basic as reducing an increase in spending. 'It's a real shame because what they're doing now with this U-turn is creating a two-tier system... this is the worst of all worlds.' Arch rebel Nadia Whittome, the Labour MP for Nottingham East, said: 'These revised proposals are nowhere near good enough, and frankly, are just not well thought through. It would create a two-tier system in both PIP and the Universal Credit health element based on when somebody became disabled.' Sir Mel Stride, the Shadow Chancellor, said: 'Labour promised not to raise taxes on working people, and their Jobs Tax has led to rising unemployment and growth being halved. Now the Government has been unable to rule out that taxes will go up this autumn in order to pay for Keir Starmer's latest U-turns.'
The Sun
8 hours ago
- Business
- The Sun
Keir Starmer ‘put party before country' by caving in to benefit cut rebels, blasts Labour peer
SIR KEIR Starmer has put 'party before country' by caving to rebels and softening his benefit cuts, a Labour peer has warned. The PM was slammed for opting to appease the revolt rather than sticking with flagship reforms. Former benefits minister Lord Hutton said: 'The country cannot afford to sit back and see these welfare levels rising in the way they are and although it's uncomfortable for a lot of Labour MPs we can't go on ducking.' He added: 'I think the people that we mustn't lose sight of in all of this debate are the taxpayers who fund the welfare system.' 'It's rising at a level which I think is really unsustainable over the medium term, and the job of government is to address that, not to try and pretend it's not there." He says that the PM will have 'no choice' but to come back to welfare spending and try and reduce it. The climbdown on benefits and the winter fuel u-turn will force Chancellor Rachel Reeves to find £4.5billion after 126 Labour MPs threatened to derail plans. Downing Street insisted there would be no 'permanent' increase in borrowing but declined to rue out tax rises at the Autumn Budget to pay for it. Sir Keir said: '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.' But hardline Labour rebel Nadia Whittome said the concessions were 'nowhere near good enough'.
The Independent
8 hours ago
- Business
- The Independent
What can Rachel Reeves do to pay for Starmer's welfare U-turn?
Taken together, the cost to the public finances of recent reversals on welfare payments is estimated to be around £4.5bn. Restoration of the pensioners ' winter fuel payment for most recipients will cost some £1.2bn, while keeping the present arrangements on personal independence payment and the health element of universal credit will mean the chancellor loses some £2.1bn and £1.1bn, respectively. While these aren't catastrophic changes in a total public spending universe of about £1.3 trillion, Rachel Reeves allowed herself very little fiscal headroom. So she'll be looking to make up for the cost of the recent U-turns. Given that she's only just delivered a spending review that set out plans for the next three years, including tighter budgets for many government departments, she is reportedly more willing to consider tax hikes. The uncertain outlook for economic growth will make her even more cautious. Despite constraints, she has some options… What won't Rachel Reeves do? All the signs are that she won't make any further changes that could be interpreted as a direct contravention of the 2024 general election manifesto promise: 'We will ensure taxes on working people are kept as low as possible. Labour will not increase taxes on working people, which is why we will not increase national insurance, the basic, higher, or additional rates of income tax, or VAT.' The 2 per cent hike in employers' national insurance at the last Budget hit smaller businesses quite hard, and will affect wage rises, so it was very close to the letter of that pledge. She's not going to go there again. But bear in mind that the freeze on tax thresholds will remain in place until 2028 – a hidden rise in income tax for many. Is anything else ruled out? Lots: there's a whole herd of sacred cattle that she can't touch, politically. These include the rate of corporation tax, about which the manifesto says: ' Labour will cap corporation tax at the current level of 25 per cent, the lowest in the G7, for the entire parliament'. Slapping VAT on zero-rated items is effectively ruled out, as are increases in most other business taxes. There's zero chance of any further capital gains tax being applied to homeowners, which would make eminent economic sense but would be electoral suicide. Reeves may also have run out of scope for squeezing rich non-doms – for fear of ending up with lower tax revenues due to flight and increased avoidance. Council tax procedures are being tweaked, but there is little chance of any thorough reform of the eccentric system of local government finance; memories of the imposition of the poll tax remain raw, almost four decades on. The big picture here is that the UK tax base is artificially narrow, for historical and political reasons. For example, personal taxation in the UK is still low by international standards, even when the overall tax burden is near a post-Second World War high, but UK business rates are correspondingly high and uncompetitive. Wealth is taxed marginally and haphazardly. This is bad for long-term growth, and every year means taxes are loaded too high onto a too-narrow base. What is an easy hit? Capital gains tax, as usual, but again Reeves will need to be careful not to go too far and risk discouraging savings and encouraging avoidance. The same goes for changing the rules on personal pensions: higher-rate tax relief on contributions and reducing the tax-free allowance for a cash withdrawal from a pension pot. Given the need for orderly retirement planning, radical changes would be undesirable and unpopular. But there could be adjustments. Will petrol go up? It certainly should. Unbelievably, fuel duty has been frozen since 2011, at 57.95p per litre, with an additional 5p per litre 'temporary' cut in 2022 to ease the cost of living crisis. Technically, this is due to be ended next year, with the duty now scheduled to rise. For Reeves to raise more than planned she'd have to up it by, say, 10p per litre. It would raise enough to pay for the U-turns, but would attract the scorn of the motorist and 'white van man'. The wider problem here is that the switch to electric vehicles is already depressing fuel duties. Sin taxes? Alcohol and tobacco are mostly maxed out, but there's still some scope with online gambling and duties on sugary and fatty foods. The sugary drinks levy worked very well on health grounds alone, but any 'tax on food' has always been anathema to the British public (albeit VAT is levied on confectionery). Reeves will also be mindful of the great 'pasty tax' fiasco of 2012 when George Osborne tried to make some rational changes to the VAT regime, including on 'ambient' takeaway food. His 'omnishambles' Budget soon collapsed, and Greggs customers have steadily got flabbier in the succeeding years. Rachel will be steering clear. What does the Labour left want? A wealth tax: a 2 per cent levy for those with assets in excess of £10m. No chance. What about a tax on interest the Bank of England pays the banks on deposits? That does crop up as a suggestion. It's very abstruse stuff, but this basically boils down to another tax on the commercial banks. It isn't paid by 'rich bankers' as such (though it might dent some bonuses) but by the banks themselves. Other things being equal, it would mean lower returns for savers, less availability of business finance and mortgages, and a less resilient banking system. The Bank of England says it could make managing monetary policy more difficult. But it could reduce the cost of borrowing to the Treasury by maybe £10bn a year. The chancellor may find the temptation irresistible.
The Independent
9 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.
Times
9 hours ago
- Politics
- Times
How Liz Kendall can stop this national sickness
The welfare trap has become so vast and bewildering — an incomprehensible maze of acronyms and despair — that it's easy to lose sight of those trapped inside it. Keir Starmer, like others before him, ended up losing his way in the institutional fog. The Treasury needed savings so welfare cuts were ordered to provide them. But no one seemed to ask the most basic question: what about the people? How would MPs explain the cuts to them, and others? And in what possible way would this be politically deliverable? Take Amy, a single mother in Keighley I met last year while filming a documentary. During childbirth, her pelvis fractured. Multiple surgeries have left her walking (with a stick) but in constant pain. Incapacity benefit lets her care for her eight-year-old son and provide something rare in her part of town: a stable home. Still only 30, Amy is bright and eager to train. She once wanted to be a barrister. But she has never worked and has no idea how to start, nor has anyone offered serious help. Starmer's welfare reform would cut payments significantly from next April: the promised 'employment support' looks paltry and unlikely to reach Amy. This is a Treasury raid, disguised as welfare reform. Official forecasts admit that the sickness benefit surge will continue apace: 3.3 million at the last count, 4.1 million within five years. So the obvious mission — reverse the rise — will not be accomplished. Labour rebels were right to reject this combination of penny-pinching, ineptitude and lack of ambition. People like Amy are the hardest cases: the longer you're on welfare, the harder it is to get off. So the first, easiest, most urgent task should be to reduce the rise in sickness benefit claimants. The old, shocking statistic was that 2,000 were being signed off every working day under the Tories. The figures were updated this week: under Labour it's now closer to 3,000 a day. Lives are being squandered on a scale that's hard to fathom and harder to forgive. Once on sickness benefits, claimants are unlikely to work again. This is especially tragic given how many under-35s are claiming: up 60 per cent in five years. It would be callous, if those in charge realised what was going on. Which, even now, they largely don't. Jeremy Hunt, a former chancellor, is a case in point. He recently claimed to be responsible for the sickness benefit surge because, as health secretary, he gave mental health the same status as physical health. But his mea culpa was wrong. A steady fall in sickness benefit claimants, which started under Blair, was suddenly and viciously reversed not following Hunt's 2014 Care Act but in 2019. Why? The Office for Budget Responsibility (OBR) has gone into this in detail. The answer lies in bureaucratic mistakes that were never spotted and lie uncorrected even now. During lockdown, in-person interviews for sickness benefits were replaced with cheaper phone interviews. The new system had a big, unexpected side effect. Assessors told me the prospect of a sit-down interview deters those who are, actually, not too sick to work. Large numbers of them dropped their claims at the last minute. But a phone call? Far less daunting, especially if it's a scripted process that can be easily gamed — and whose questions (and accepted answers) are now all online. Something dull and technical — a reduction in the pre-interview dropout rate — is responsible for a half a million extra sickness benefit awards since 2019. But that figure accounts for only half of the overall surge of one million extra awards in that time. Another factor is the rise in approval rates, now at 80 per cent, double the 2010 level. Why so high? Assessors are incentivised to get through as many claims as they can, and are paid an £80 bonus for every one over a certain minimum. The only way of speeding up is to assess someone as too sick to work. Do so and you can 'curtail' — end the interview — and move on to the next claim. You can be hauled up for rejections (in case the claimant appeals) but approvals are almost never checked. One assessor, a former NHS nurse, told me how appalled he was that the interviews are not recorded. This, he said, leaves the system wide open to abuse. Liz Kendall, the work and pensions secretary, could fix this now. Tell all applicants their interview will be in-person. Switch to a phone call last minute if needs be, but restore that deterrent effect. Record and spot-check all claims, not just rejected ones. Publish all sickness benefit data, daily. How many applied, and were approved? How many bonuses were paid? Such transparency could be transformative. A Covid-style live-data dashboard would focus minds more than any ministerial edict. Last autumn I met Gavin, a taxi driver on the south coast who told the DWP he did not need his sickness benefits any more. No, he was told: you must wait to be reassessed. Three years later, he was still waiting. What he didn't know was that reassessments were stopped in lockdown — and were never properly restarted. Once, 350 a day were moved back into work this way. Now, it's just 50 a day. Reassessments would not threaten people such as Amy, whose case is all too verifiable. No vote is needed in parliament. Kendall has been increasing them, but by nowhere like enough. She does not need new laws, just grip. And to rediscover a sense of urgency, a willingness to take on activists. This is about duty both to the taxpayer and to those stuck in the system. Not long ago, Britain led the world on welfare reform and it was Labour that started the process. The problem isn't a workshy population but a broken system, one that forgets its purpose, loses sight of the individual and now traps more than it helps. The real sickness is political: a kind of fatalism that says welfare is too big to fix, that no one can grip it and that any remedy must wait for some distant white paper. Reassessments, deterrents, scrutiny, transparency — none of these are radical ideas. They worked before and can be made to work again. This isn't about whether Starmer can pass legislation but whether he can govern. Whether he sees the likes of Amy not as costs to be reduced but as citizens to be helped. This was, once, the founding purpose of his party. If a prime minister forgets that purpose, then no majority, however large, will save him when the reckoning comes.
