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Times
11 hours ago
- Business
- Times
The government must push through its welfare bill at all costs
Few matters are so important that a government should risk its future to get its way. The bill to reform the welfare system is one such. Rebel Labour MPs are threatening to kill the bill in a vote next week. The government should do its utmost to stop that happening, even if it means turning the issue into a vote of confidence. Britain's economic future depends on welfare reform. Government debt is the size of the entire economy. With growth stagnant and the war in Ukraine forcing unexpected increases in the defence budget, getting a grip on public spending is essential. The most obvious candidate for cuts is welfare expenditure. Spending on sickness benefits has grown from less than £50 billion a year before the pandemic to £80 billion now. The government's bill would make it harder to access personal independence payments and would reduce the higher level of incapacity benefit. Even after those changes, the cost of sickness benefits is expected to reach £98 billion by 2030. Reasonable people might therefore conclude that the main problem with the government's plan is that it does not go far enough. However, 108 Labour MPs, including 10 select committee chairs, regard these modest economies as excessive. They have signed an amendment which would, in effect, sabotage the bill. Privately, a dozen members of the government have threatened to resign over the proposed cuts. Despite the government's large parliamentary majority, the revolt is big enough to defeat the proposed legislation. Rebels have been emboldened by the U-turn which the government performed earlier this month when it rowed back on an intended cut to pensioners' winter fuel payments. If the government caved on that, surely they can persuade it to back down on this? • Looming welfare rebellion is a battle Starmer can't afford to lose But the benefits bill is far more important than winter fuel, and not just in monetary terms. It represents the most serious attempt yet by ministers to rein in spending. If a bill as modest as this cannot get through parliament, there is no hope of getting the public finances under control. The bond market will be watching the bill's progress closely. Britain's reputation for financial management is already poor enough that the government pays 4.5 per cent on its debt, compared with Germany's 2.5 per cent and France's 3.3 per cent. Further evidence of fiscal irresponsibility could trigger another rise, which would push up interest costs further still. At £108 billion per year, the government already spends about twice as much on debt interest as it does on defence. Neither the government nor the country can afford to see the welfare reform bill fall. If Sir Keir Starmer performs another U-turn or loses the vote, his credibility, already weakened, will be destroyed. If borrowing rates rise further, Britain's finances will be further destabilised. • Welfare U-turns may jeopardise Rachel Reeves's fiscal rules An opposition that placed the country above political advantage would vote for the planned cuts. Kemi Badenoch, the Conservative leader, has promised to back the bill, but only if the prime minister promises in the Commons to levy no new taxes in the autumn, and to cut the welfare budget rather than merely restrict its growth. Given this heavily-qualified offer, Sir Keir must use this week to bring his rebels to heel. To do so, he must rediscover the ruthlessness he demonstrated before the election when he purged Labour's candidates list of left-wingers, and when he suspended seven MPs for opposing his plan to keep the two-child benefit cap. He should make it clear that he is prepared to turn the vote on the benefits bill into one of confidence in his government. That is the nuclear option: if he lost, an election would be called. This bill is not just a tweak to the welfare system. The country's future is at stake. Sir Keir must make it clear to the rebels that for Labour, and for Britain, this is make or break.
Daily Mail
a day ago
- Business
- Daily Mail
Keir Starmer heads for crucial Nato summit TODAY vowing to hit new target for spending 3.5% of GDP on defence... but ministers refuse to say where the extra £30BILLION is coming from
Keir Starmer is heading for a crucial Nato summit today vowing to hit a new target for defence budgets. The PM will join fellow leaders from the military alliance in The Hague 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. There are also claims that the figures are being fiddled and countries are watering down the pledges. A draft communique appears to have pushed back the timetable for hitting the level from 2032 to 2035. The language has also reportedly been watered down from 'we commit' to 'allies commit', with Spain flatly dismissing the idea of meeting the goal. Mr Trump himself has said America is not bound by it. 'We've been supporting NATO so long… So I don't think we should, but I think that the NATO countries should, absolutely,' he said on Friday. By contrast, Germany has said it will accelerate its spending to hit the core defence target by 2029 – six years early – amid growing global instability and the prospect of a war in the Middle East. That involves Berlin finding upwards of $60billion a year more for the military. The summit comes after Sir Keir's meeting yesterday with Volodymyr Zelensky at No10. The Ukrainian president will also be at the summit. The increase to 3.5 per cent in Italy would be equivalent to around $46billion a year, Canada $45billion, France £44billion and the UK roughly $40billion. Spain allocated just 1.24 per cent of GDP on defence in 2024. That could have left it facing funding a $36billion boost despite having a relatively small economy. But left-wing PM Pedro Sanchez said on Sunday that it was only looking to hit 2.1 per cent of GDP. 'We fully respect the legitimate desire of other countries to increase their defence investment, but we are not going to do so,' he said in a TV address. The cash cost of the goal for each country have been estimated by comparing the Nato figures for spending levels in 2024 to World Bank figures for the size of GDP. The current target is 2 per cent, which has not been met by all states. Only Poland currently tops the 3.5 per cent level. The US itself spent 3.38 per cent on defence in 2024, although the sheer size of its economy meant that dwarfed contributions from the rest of the alliance. 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. Nato members effectively decide themselves whether they're hitting the 1.5 per cent element of the target, and there are fears Labour will try to include items not strictly related to defence. Downing Street sources said, for example, that it could include spending on beefing up energy security amid the switch to NetZero and fighting migrant-smuggling gangs. Former defence secretary Sir Ben Wallace posted on X: 'Tomorrow at the Nato summit we will witness the UK Government trying to con the US and Nato with spin on defence spending. 'By folding in other departments' spending and with no real defence £ increases, the PM will claim 5 per cent. 'The threat to our country is real not spin. This Government thinks it can use smoke and mirrors to deceive the public and Donald Trump. 'This is an insult to our troops who will see no significant new money. It fools no one.'
