Busy week for Labour as Starmer facing pressure over winter fuel payments and first prisoners to be released early

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1 month ago

September 9, 2024

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Labour’s post-election honeymoon looks to be over as it faces pressure this week over winter fuel payments, releasing prisoners early, and the state of the NHS.

Two months after winning a historic majority, Sir Keir Starmer and his ministers have a busy week as they face pressure not just from other parties, but their own MPs.

A vote on winter fuel payments, the prime minister speaking at the TUC conference, prisoners being released early, the publication of a report into the NHS and Sir Keir’s trip to the US are all on the cards this week.

Monday will see Chancellor Rachel Reeves addressing Labour MPs at a Parliamentary Labour Party meeting, where she is expected to face concerns about removing the winter fuel payment from 10 million pensioners.

MPs will vote on Tuesday on whether to limit the winter fuel payment to those on pension credit, after the government announced its intention at the end of July.

Labour MPs will be told they must vote with the government, however several, particularly on the left of the party, have voiced their opposition to the cut.

It is understood they may abstain instead of voting against the government, after Sir Keir set a clear precedent by suspending seven MPs from Labour after they rebelled over the decision to keep the two-child benefit cap.

Sir Keir would not say if he would again suspend MPs for voting against the government, telling the BBC on Sunday: “That will be a matter for the chief whip.”

The prime minister will also address the Trades Union Congress (TUC) conference on Tuesday, where he is set to be questioned about the winter fuel payment cut and workers’ rights.

Sharon Graham, head of the Unite union, told Sky News on Sunday that they want the government to “think again” and called for a wealth tax instead.

She said: “We are in crisis. The Tories left a mess. No one’s denying that. Labour is right about that, but the choices they make to clear it up are really important.

“If we said the top 50 families in Britain are worth £500 billion, why aren’t they being looked at?

“Why are you looking at pensioners who really don’t have any sort of type of money? That’s the wrong choice to make.”

In a packed day for the government, Tuesday is also when the first tranche of prisoners will be released early under the Labour government as it tries to alleviate overpopulated prisons.

The Ministry of Justice admitted this week some serious offenders will be released early if they are serving a sentence for a lesser crime, having completed a sentence for a serious crime.

Reports on Saturday also claimed those serving time for common assault for being violent towards a partner would not be flagged as domestic abusers, so could be released early.

Sir Keir blamed the Conservative government for not building enough prisons, saying he was “forced into this”.

Thursday will see the publication of a report into the state of the NHS by Lord Darzi, an eminent cancer surgeon and former Labour health minister.

The report has already had some sections released in summary, with children’s health and the progression of heart and circulatory diseases heavily criticised.

Sir Keir said the report showed the NHS was “broken” as he again hit out at the Conservatives’ “unforgivable” reforms.

To end the week, the prime minister will head to Washington DC for his second meeting with President Joe Biden since becoming prime minister.

On Sunday, Sir Keir denied the US was angry at the UK for suspending some arms sale licences to Israel and said they had spoken before and after the decision.

He said discussions with Mr Biden will focus on the next few months in Ukraine and the Middle East.

Politics

Chancellor may need to raise taxes by £25bn, IFS warns

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1 hour ago

October 10, 2024

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Chancellor may need to raise taxes by £25bn, IFS warns

The chancellor will need to raise taxes by £25bn if she wants to keep spending rising with national income, according to the Institute for Fiscal Studies (IFS).

In its annual ‘Green Budget’ analysis, the IFS warned that the government would have to dramatically increase the £9bn of tax rises outlined in its manifesto to meet the pressures on public services.

The chancellor is likely to stick to her fiscal rule, which requires day-to-day spending to be met by tax revenues. This means she cannot increase borrowing to fill the gap.

Rachel Reeves will present her first budget in the Commons on 30 October. Paul Johnson, director of the IFS, said this budget could be “the most consequential since at least 2010”.

The new Labour government has already pledged in its manifesto to increase government budgets by £5bn and is spending £9bn to settle public sector pay disputes.

If Labour makes no further changes to the spending envelope, which was outlined by the previous government in 2021, it would register a surplus of £17bn.

However, those spending plans are considered wildly unrealistic and would involve real term cuts to unprotected budgets.

There is very little appetite for further cuts to public spending, so the chancellor could protect those budgets from inflation. That would leave her with a surplus of £1bn.

However, if she opted to protect spending as a share of national income – which better reflects population increase – she would record a deficit of £16bn.

That combined with the £9bn of tax rises already promised would see taxes increase by £25bn, further adding to a tax burden which is at a generational high.

Over-zealous borrowing plans could risk a UK buyer’s strike

The UK risks a buyer’s strike in the bond markets if the chancellor is over-zealous with her borrowing plans.

Rachel Reeves is expected to outline plans to increase borrowing for investment purposes in her Budget on 30 October.

Although she has a debt rule that requires debt to be falling as a share of GDP in five years time, she could change her definition of debt to give herself extra headroom.

In doing so, she could find up to £50bn in additional headroom. However, the IFS warned the government against borrowing this much money.

Economists said the chancellor should be slow and steady with any increases in borrowing, with full oversight of institutions such as the National Audit Office.

They note that the UK has greater liquidity risk than its neighbours, including the EU so it was more exposed to changes in investor sentiment.

It would be bigger than the net tax rises recorded in July 1997 and October 2010, which were both around £13-£14bn.

The government has also penned itself in by promising not to raise income tax and corporation tax or to increase National Insurance or VAT.

The IFS said that, even if Labour’s planned £9bn tax rise is implemented, trying to balance the current budget while avoiding cuts to public service spending would put the budget “on a knife edge” and highly sensitive to OBR judgments.

It said the chancellor has inherited an “unenviable” public finance situation as taxes are already at a historic high and debt is rising, while public services such as prisons, police and local councils are under strain.

Mr Johnson, said: “The first budget of this new administration could be the most consequential since at least 2010… Taxes are at an all-time high, and she is tightly constrained by her pledges not to raise the main rates of income tax or corporation tax, or to increase National Insurance or VAT at all.

“The temptation then is to borrow more, perhaps changing the definition of debt targeted by the fiscal rules. But, given her pledge to balance the current budget, that would not free up additional resource for day-to-day spending.”

Politics

Labour’s employment reforms won’t become law for two years as government seeks to reassure business

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1 hour ago

October 10, 2024

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Labour's employment reforms won't become law for two years as government seeks to reassure business

Major employment reforms promised by Labour will not become law for at least two years, as the government seeks compromise between unions and businesses on measures intended to strengthen workers rights without hindering economic growth.

The Employment Rights Bill, introduced into parliament on Thursday, includes 28 measures, many of which will be subject to extended consultation, while more than 30 other pledges have no clear timetable for delivery.

The major package of reforms includes granting workers protection from unfair dismissal from the first day of their employment, ending the existing two-year qualifying period.

The measure will be accompanied by a statutory probation period of up to nine months for new hires, during which staff can be dismissed under a “lighter touch” process.

Analysis: Labour sweetens its employment rights bill to bring business on side

The consultation required means officials do not expect the measures to reach the statute book until autumn 2026 at the earliest.

Other measures in the bill include:

• The right to statutory sick pay from the first day of illness, ending the current three day waiting period, and removing the lower earnings limit
• Day-one rights to paid and unpaid paternity leave. Currently fathers have to be employed for 26 or 52 weeks respectively to receive the benefits, and there will be a new statutory right to bereavement leave
• The right to flexible working. Where employers say no they will have to demonstrate the decision is reasonable against eight criteria
• A ban on “exploitative zero hours contracts”. Workers on zero or short-hours contracts will have to be offered a contract based on the hours worked in a 12 week reference period, receive notice of shift patterns and entitlement to payment for short-notice cancellation

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Among the measures excluded from the Bill is the introduction of a single category of worker, a measure long-promised by Labour and seen by unions as crucial to ending exploitation and inequality in the gig economy.

Currently there are broadly three categories; employee, worker and self-employed, with many gig-economy providers such as food delivery and ride-hailing apps classifying workers as self-employed, denying them access to sick pay and other benefits.

The “right to switch off”, which would have prevented employers contacting staff outside working hours, has also been left out, and will instead be subject to an agreed code of conduct.

The bill and delayed timetable for other reforms has already been the subject of extended debate and consultation between the new government, unions and business groups wary of the additional cost arising from the reforms.

Despite a programme and timetable that may disappoint some in the union movement, ministers believe it strikes the right balance between improving the lot of workers, and incentivising the economic growth on which its wider programme relies.

Deputy Prime Minister Angela Rayner said: “This government is delivering the biggest upgrade to rights at work for a generation, boosting pay and productivity with employment laws fit for a modern economy. We’re turning the page on an economy riven with insecurity, ravaged by dire productivity and blighted by low pay.”

Jonathan Reynolds, the business secretary, said: “The best employers know that employees are more productive when they are happy at work. That is why it’s vital to give employers the flexibility they need to grow whilst ending unscrupulous and unfair practices.”