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Telegraph
26-05-2025
- Business
- Telegraph
Starmer's benefits U-turn to blow £5bn hole in budget
Sir Keir Starmer risks blowing a £5bn black hole in the public finances after U-turning on benefit cuts in the face of a backbench rebellion. The Prime Minister will cost the Treasury as much as £1.5bn by bringing back winter fuel payments for most pensioners, while up to £3.5bn more will be lost if he axes the two-child benefit cap. A planned reduction in net migration could cost the Treasury £7bn more, according to Britain's fiscal watchdog. It comes as Rachel Reeves, the Chancellor, braces for another bleak set of forecasts amid speculation she will be forced to raise taxes in her autumn Budget. Left-wing Labour MPs are clamouring for the Government to loosen the purse strings, with whips seeking to head off a potentially major rebellion. Meanwhile Nigel Farage, the Reform leader, will this week attempt to outflank Labour on welfare by calling for winter fuel payments to be restored for all and the two-child benefit cap to go in full. Angela Rayner, the Left-wing Deputy Prime Minister who called for tax rises in a leaked memo revealed by this newspaper, put on a show of support in TV interviews on Sunday. Ms Rayner insisted she 'never' wanted to become prime minister and rejected speculation that the document was leaked to further her leadership ambitions. The Deputy Prime Minister added that she was '100pc' behind Ms Reeves, and said she could not do a better job as prime minister than Sir Keir. In her first public comments since the memo emerged, Ms Rayner said: 'I have no desire to go for the leadership of the Labour Party. My desire is to deliver for the people of this country who have given me opportunities beyond what I could have dreamed of.' She also confirmed a formal leak inquiry is now underway to ascertain how The Telegraph was able to reveal the document, which outlined eight proposed tax increases and two benefit cuts. Winter fuel payments Sir Keir announced last week that more pensioners would get winter fuel payments, which are between £200 and £300, than his Government had originally planned. There is a growing expectation in Whitehall that the specifics of that new position will come in the weeks ahead rather than at the autumn Budget, as Sir Keir first indicated. The Treasury is planning to restore the payments, which had been stripped from nearly 10m pensioners last summer, to almost everyone in retirement except the very wealthy. The money could then be removed from only the most well-off pensioners by clawing it back when they file a tax return, allowing Labour to still claim millionaires will not get the payments. The changes are likely to mean far smaller savings for the Treasury than the £1.5bn that the measure was initially expected to raise. If the payment was stripped only from the million pensioners who are in the 45pc additional income tax rate bracket, for example, it would generate between £200m and £300m. Two-child benefit cap Additional pressure on the finances would come from scrapping the two-child benefit cap, which applies to Universal Credit. Sir Keir initially kept the Tory policy when taking office, but The Observer reported this weekend that the Prime Minister wanted to remove it. Whitehall insiders cautioned that it has not yet been decided what – if anything – might replace the current limit. Announcements on any changes to the cap are expected to come around the Budget, with the poverty strategy delayed from summer until then when the financial situation is clearer. Getting rid of the two-child benefit cap entirely would cost £3.5bn. The possibility of the Treasury losing up to £5bn in annual revenue if both policies are abandoned in full would increase the need for new tax rises, spending cuts or looser borrowing rules. Ms Reeves is already facing a difficult set of decisions with current economic forecasts suggesting she is in growing danger of breaking her fiscal rules. Further factors Other factors will shape how much money the Chancellor has to play with in her autumn Budget. Home Office proposals to reduce net migration by 100,000 a year could have a knock-on impact on the Chancellor's headroom, with estimates suggesting an annual rise in borrowing of £7bn by the end of the decade. Last week's announcement on above-inflation pay rises for the public sector could add drive spending up by £2bn to £3bn each year, creating additional pressures. But new trade deals with America, India and the European Union are expected by the government to boost trade, which could bring much-needed additional tax revenue. Treasury officials are also understood to be pressing the Office for Budget Responsibility (OBR), the Government's official independent forecaster, to accept that the Labour Government's housebuilding drive will boost economic growth more than previously expected. The most unpredictable factor could well be the decisions on trade protectionism taken by Donald Trump, the US President, which have knock-on impacts on UK economic forecasts. Mel Stride, the shadow Tory chancellor, told The Telegraph: 'Labour have already lost control of the public finances and abandoned any pretence of fiscal responsibility. 'Now they are looking at loading up billions more in welfare spending, paid for either by higher taxes for working families or through yet more borrowing. 'When added to the likely cost of their panicked climbdown on Winter Fuel Payments, the Chancellor faces a potential £5bn black hole. 'Rachel Reeves's credibility is having new holes torn in it by the day. She is the 'tin foil' Chancellor, too weak to withstand pressure including from her own colleagues. 'We've already had fantasy economics from Reform – it appears Labour are following suit.' A No 10 insider insisted that no final decisions have been taken on the new winter fuel payment position or the future of the two-child benefit cap.
Yahoo
26-05-2025
- Business
- Yahoo
Starmer's benefits U-turn to blow £5bn hole in budget
Sir Keir Starmer risks blowing a £5bn black hole in the public finances after U-turning on benefit cuts in the face of a backbench rebellion. The Prime Minister will cost the Treasury as much as £1.5bn by bringing back winter fuel payments for most pensioners, while up to £3.5bn more will be lost if he axes the two-child benefit cap. A planned reduction in net migration could cost the Treasury £7bn more, according to Britain's fiscal watchdog. It comes as Rachel Reeves, the Chancellor, braces for another bleak set of forecasts amid speculation she will be forced to raise taxes in her autumn Budget. Left-wing Labour MPs are clamouring for the Government to loosen the purse strings, with whips seeking to head off a potentially major rebellion. Meanwhile Nigel Farage, the Reform leader, will this week attempt to outflank Labour on welfare by calling for winter fuel payments to be restored for all and the two-child benefit cap to go in full. Angela Rayner, the Left-wing Deputy Prime Minister who called for tax rises in a leaked memo revealed by this newspaper, put on a show of support in TV interviews on Sunday. Ms Rayner insisted she 'never' wanted to become prime minister and rejected speculation that the document was leaked to further her leadership ambitions. The Deputy Prime Minister added that she was '100pc' behind Ms Reeves, and said she could not do a better job as prime minister than Sir Keir. In her first public comments since the memo emerged, Ms Rayner said: 'I have no desire to go for the leadership of the Labour Party. My desire is to deliver for the people of this country who have given me opportunities beyond what I could have dreamed of.' She also confirmed a formal leak inquiry is now underway to ascertain how The Telegraph was able to reveal the document, which outlined eight proposed tax increases and two benefit cuts. Sir Keir announced last week that more pensioners would get winter fuel payments, which are between £200 and £300, than his Government had originally planned. There is a growing expectation in Whitehall that the specifics of that new position will come in the weeks ahead rather than at the autumn Budget, as Sir Keir first indicated. The Treasury is planning to restore the payments, which had been stripped from nearly 10m pensioners last summer, to almost everyone in retirement except the very wealthy. The money could then be removed from only the most well-off pensioners by clawing it back when they file a tax return, allowing Labour to still claim millionaires will not get the payments. The changes are likely to mean far smaller savings for the Treasury than the £1.5bn that the measure was initially expected to raise. If the payment was stripped only from the million pensioners who are in the 45pc additional income tax rate bracket, for example, it would generate between £200m and £300m. Additional pressure on the finances would come from scrapping the two-child benefit cap, which applies to Universal Credit. Sir Keir initially kept the Tory policy when taking office, but The Observer reported this weekend that the Prime Minister wanted to remove it. Whitehall insiders cautioned that it has not yet been decided what – if anything – might replace the current limit. Announcements on any changes to the cap are expected to come around the Budget, with the poverty strategy delayed from summer until then when the financial situation is clearer. Getting rid of the two-child benefit cap entirely would cost £3.5bn. The possibility of the Treasury losing up to £5bn in annual revenue if both policies are abandoned in full would increase the need for new tax rises, spending cuts or looser borrowing rules. Ms Reeves is already facing a difficult set of decisions with current economic forecasts suggesting she is in growing danger of breaking her fiscal rules. Other factors will shape how much money the Chancellor has to play with in her autumn Budget. Home Office proposals to reduce net migration by 100,000 a year could have a knock-on impact on the Chancellor's headroom, with estimates suggesting an annual rise in borrowing of £7bn by the end of the decade. Last week's announcement on above-inflation pay rises for the public sector could add drive spending up by £2bn to £3bn each year, creating additional pressures. But new trade deals with America, India and the European Union are expected by the government to boost trade, which could bring much-needed additional tax revenue. Treasury officials are also understood to be pressing the Office for Budget Responsibility (OBR), the Government's official independent forecaster, to accept that the Labour Government's housebuilding drive will boost economic growth more than previously expected. The most unpredictable factor could well be the decisions on trade protectionism taken by Donald Trump, the US President, which have knock-on impacts on UK economic forecasts. Mel Stride, the shadow Tory chancellor, told The Telegraph: 'Labour have already lost control of the public finances and abandoned any pretence of fiscal responsibility. 'Now they are looking at loading up billions more in welfare spending, paid for either by higher taxes for working families or through yet more borrowing. 'When added to the likely cost of their panicked climbdown on Winter Fuel Payments, the Chancellor faces a potential £5bn black hole. 'Rachel Reeves's credibility is having new holes torn in it by the day. She is the 'tin foil' Chancellor, too weak to withstand pressure including from her own colleagues. 'We've already had fantasy economics from Reform – it appears Labour are following suit.' A No 10 insider insisted that no final decisions have been taken on the new winter fuel payment position or the future of the two-child benefit cap.
Argaam
25-05-2025
- Business
- Argaam
Saudi Arabia adopts reforms to counter external shocks: Assistant Finance Minister
Assistant Minister of Finance Abdulmohsen Alkhalaf said Saudi Arabia has adopted several structural reforms and developed a strong financial framework to counter external shocks without compromising development plans or the sustainability of public finances. Addressing a panel discussion held by the International Monetary Fund (IMF) today, May 25, Alkhalaf underscored the importance of adopting structural reforms by GCC countries to improve economic flexibility and support a recovery, according to a statement picked up by Argaam. He added that the Kingdom has a long-term vision to bolster economic transformation. Accordingly, such reforms helped foster a more flexible Saudi economy and provided a comprehensive range of policy options to deal with possible shocks. Further, given the tightening of global financial conditions, increasing economic fragmentation, and continued fluctuations in commodity prices, fiscal policy was mainly used to shape the economic response globally and regionally, according to Alkhalaf. These circumstances require governments to have a mix of fiscal prudence, rapid response, strategic sector investments, and private sector support, the official continued.
The Guardian
17-05-2025
- Business
- The Guardian
Lib Dems claim deeper trade deal with EU would raise £25bn of tax revenue
A deeper trade deal with the EU that stops short of joining the customs union or single market could bring in £25bn of tax revenue and pay for reversing benefit cuts, according to research cited by the Liberal Democrats. The party is writing to all Labour MPs this week asking them to join forces in a push for a much more comprehensive deal with Brussels, saying that backing closer trade ties would help revive the public finances. It said research from the Best for Britain campaign group has found that GDP would be boosted by 2.2% as a result of deep alignment of goods and services, while staying within Labour's red lines of no return to the single market or customs union. A new House of Commons library analysis, commissioned by the Lib Dems, found that a 2.2% boost to GDP would bring in roughly £25bn of extra tax revenues. The party acknowledged that the estimates from the Commons library should be considered rough and a rule of thumb, as tax generated by higher growth depends on how it takes place. However, it said the boost to tax revenues from a fuller deal with Brussels should be more than enough to reverse the winter fuel allowance withdrawal and proposed £5bn cuts to disability benefits. In his letter to Labour MPs, Calum Miller, the Lib Dem foreign affairs spokesperson, will say his party wants to work constructively to secure a new trade deal with Europe in order to boost public finances. 'A far more ambitious trade deal with Europe, including a new UK-EU customs union, would be the single biggest thing ministers could do to boost growth and fix the public finances,' he said. 'The Liberal Democrats stand ready to work constructively with Labour MPs to boost trade with Europe and avoid savage cuts for vulnerable families and pensioners.' The move comes as Keir Starmer prepares to host a crucial summit with Ursula von der Leyen, European Commission president, on Monday, at which a deal is expected to be signed on some greater alignment on defence, fishing and food, alongside other areas. Easing trade restrictions is expected to be an ambition rather than a concrete plan. More than 60 Labour MPs have already urged the government to go further than its plans at Monday's summit – including on a youth mobility deal where a time-limited version is now under discussion. At the same time, more than 100 Labour MPs have signed a letter calling on the government to back down from the welfare cuts, and many of them regard the means-testing of the winter fuel payment as even more toxic with voters. Ahead of the UK-EU summit, the chancellor, Rachel Reeves, said it was a 'step towards' a deeper and ongoing partnership with Europe, saying any deal struck next week will not be a 'one-off'. In an interview with the Guardian on Friday, Reeves suggested the government was looking for closer ties with Europe beyond what was on the table this coming Monday, adding: 'There will be future areas in which we can do more.' Sign up to First Edition Our morning email breaks down the key stories of the day, telling you what's happening and why it matters after newsletter promotion She said the government would show there had been a decisive break with the ideological Brexit battles of the past, saying 'there is a lot of room for improvement' for ways to trade with the bloc. Asked if the UK had raised its future sights beyond fixes, such as a veterinary deal that was set out in the Labour manifesto, Reeves said there would always be the red lines of no single market, customs union or a return to free movement, but suggested there was still more that could be done. 'We think that because of the trust we built, we can get a better deal. The European Union has understood from the beginning those red lines,' she said. 'I am ambitious for our future. This isn't a one-off. There will be things that we achieve, some concrete outcomes on Monday, but there will also be a step towards where we want to go next between our countries. 'And I see that as a journey, not that what happens on Monday is the end; there will be future areas where we can do more.' However, Nigel Farage, whose Reform party is topping the polls, has pledged to undo any deal that Starmer strikes, saying it is a reversal of Brexit.
