Cliff Notes – The five problems with the Chancellor‘s U-turn
- Rachel Reeves’ winter fuel payment U-turn faces scrutiny for lacking clear funding solutions, raising concerns of potential tax increases.
- Despite claims of improved economic conditions, recent forecasts by the OBR and OECD project reduced growth, challenging the government’s narrative.
- The decision intensifies divisions within the Parliamentary Labour Party, highlighting tensions between those advocating for increased spending and MPs needing to justify fiscal responsibility to constituents.
The five problems with the Chancellor‘s U-turn on winter fuel payments | Politics News
There are considerable problems with the winter fuel payment U-turn, but perhaps the political argument in favour outweighs them all.
First, Rachel Reeves has executed the plan without working out how to pay for it.
This, for an iron chancellor, is a wound that opponents won’t let her forget. A summer of speculation about tax rises is not a summer anyone looks forward to.
Politics Latest: Treasury minister challenged over reason for U-turn
Second, the fig leaf that she and Treasury ministers are using is an improvement in economic conditions.
If you were being polite, you’d say this is contested.
The OBR halved growth this year and the OECD downgraded UK forecasts, albeit only by a little, last week.
The claim that interest rates are coming down ignores that their descent is slower because of government decisions of the last six months.
Third, the question immediately becomes, what next?
Why not personal independent payments (PIP) and the two-child benefit cap?
At this stage, it would feel like a climbdown if they did not back down over those.
But then, what will the markets – already policing this closely – make of it, and could they punish the government?
Fourth, this is aggravating divisions in the Parliamentary Labour Party: the soft left Compass group and ministers like Torsten Bell pushing bigger spending arguments.
Those MPs in Tory-facing seats who rely on arguments that Labour can be trusted with the public finances are worried.
Fifth, this has created a firm division between No 10 (the PM) and No 11 (the Chancellor).
No 10 is now conscious that it does not have enough independent advice about the market reaction to economic policies and is seeking to correct.
Others, I am told, are just critical of the chancellor’s U-turn – for she wobbled first.
Given the litany of arguments against it, why has it happened?
The hope is this maxi U-turn lances the boil, removes a significant source of pensioners’ anger and brings back Labour voters, a price they calculate worth paying, whatever the fiscal cost.
We wait to see who is right.
Sources
The winners and losers in Labour’s first spending review – The Guardian
Everything you need to know ahead of the 2025 Spending Review – Home Care Insight
