Botched partial winter fuel U-turn could have profound consequences for Starmer
The utter crass political mishandling of yesterday’s botched partial winter fuel U-turn could have profound consequences for Sir Keir Starmer.
And now, whether bad things flow from his obtuse but significant comments in the Commons chamber yesterday will depend, among other things, on the vagaries of the global economy and the riptides of the trade union movement.
Here is why:
At the point of the autumn budget last year – when Rachel Reeves spent more than signalled in the election campaign, funded by borrowing more than the markets expected and raising taxes that weren’t foreshadowed in the manifesto – those whose livelihood depends on forecasting the response of the debt markets had one question.
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They wanted to know: is that it? Is that the extent of the big spending splurges that the chancellor would perform?
Because, although there was a big unsignaled boost to spending, borrowing and taxing last November, the markets’ judgement was – more or less – that was fine provided she was able to hold the line at broadly this level of spending and borrowing and no more.
Clad in her cast iron armour, Ms Reeves insisted that was it. A “once a parliament” budget, she said, meaning no more substantial tax hikes.
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Winter fuel payment U-turn approach in question
An upfront public spending boost, but then Tory levels of restraint in rises in the second half of the parliament. She would hold the line, she promised.
But the question still lingered: what would happen in a less benign political climate? The manifesto contained tough decisions, like the two-child spending cap which Labour MPs were required to endorse to stand and keep the whip.
Initially, actions like the suspension of the whip from the likes of John McDonnell for rebelling on spending signalled they were prepared to face down spending demands.
Yesterday’s botched partial U-turn has blown that narrative sky high.
No 10 and No 11 have crossed a rubicon. They have provided a precedent whereby they whip out the cheque book in the face of political pressure, even though we are years from a general election.
Not only did No 10 fold, but they evidently did so without any semblance of a plan of what they would actually do with winter fuel allowance or how much they would spend on mitigation, or how that would be funded.
Perhaps they had no plan because they too waited for the Institute for Fiscal Studies press release laying out the options. That’s how we work out what will probably happen – maybe that’s their trick too.
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Ex-PM suggests people on top rate of income tax should be excluded from winter fuel allowance
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Now look at this morning’s Guardian. The excellent Pippa Crerar, the political editor wronged by a Number 10 denial of her winter fuel climbdown story last week, reports more welfare climbdowns on the card, including potentially a change or removal of the two-child cap. Others have said the same to me.
I make no moral judgment about the two-child cap, that’s not my job. Many Labour MPs find it abhorrent. But it performed a vital function in the manifesto: it was a signal to the markets that Labour can take and stick to the difficult fiscal decisions that the current state of the public finances demands.
The two-child cap was Ms Reeves’s pre-nuptial agreement with the buyers of UK government debt. She breaks that as a result of political pressure at her peril.
She may claim better economic news in recent days gives her wiggle room – today’s borrowing figures and the sheer level of global uncertainty (what would Israel bombing Iran do to petrol prices, for instance) suggest caution might be a worthwhile path.
Rachel Reeves resisted calls to lift the two-child benefit cap
Just this morning, Bloomberg is warning long-term bond yields are going up all over the world, including the UK.
The question now is where does the spine crumbling end?
Who knows now how much this government will recoil when there’s the next rebellion. Or when the unions up the pressure, as they surely will at some point before the next election.
Take just one example. Today, public sector pay awards have been flopping into our inboxes. GMB Union has begun balloting NHS and ambulance workers in England on this year’s 3.6% pay award.
How much will ministers be prepared to pay in the next 18 months to stop strikes breaking out?
We just don’t know. And more importantly, we don’t get a sense Ms Reeves does either.
After yesterday, levels of certainty about the course of government decision-making took a hit.
Will they end up being punished by the markets for this? Some believe they could. It seems we must return to watching the cost of government debt for the rest of this parliament.
The economy will have to be “strong enough” for the government to U-turn on winter fuel payment cuts, the business secretary has said.
Jonathan Reynolds, talking to Beth Rigby on the Electoral Dysfunction podcast, also said the public would have to “wait for the actual budget” to make an announcement on it.
Sir Keir Starmer said on Wednesday he would ease the cut to the winter fuel payment, which has been removed from more than 10 million pensioners this winter after it became means-tested.
He and his ministers had insisted they would stick to their guns on the policy, even just hours before Sir Keir revealed his change of heart at Prime Minister’s Questions.
But Mr Reynolds revealed there is more at play to be able to change the policy.
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Winter fuel payment cuts to be reversed
“The economy has got to be strong enough to give you the capacity to make the kind of decisions people want us to see,” he said.
“We want people to know we’re listening.
“All the prime minister has said is ‘look, he’s listening, he’s aware of it.
“He wants a strong economy to be able to deliver for people.
“You’d have to wait for the actual budget to do that.”
Read more:
Gordon Brown suggests people on top income tax rate should be excluded from winter fuel
Chancellor Rachel Reeves has committed to just one major fiscal event a year, meaning just one annual budget in the autumn.
Autumn budgets normally take place in October, with the last one at the end of the month.
If this year’s budget is around the same date it will leave little time for the extra winter fuel payments to be made as they are paid between November and December.
You can listen to the full interview on tomorrow’s Electoral Dysfunction podcast
Opinion by: Ahmad Shadid of O.xyz
Semiconductors scored a rare exemption from US President Donald Trump’s aggressive reciprocal tariffs, but the relief is symbolic at best. Most semiconductors enter the US embedded in servers, GPUs, laptops, and smartphones.
The finished goods remain heavily tariffed, some with duties reaching up to 49%. The exemption looks good politically but delivers little practical benefit. Nvidia’s DGX systems, crucial for training advanced AI models, do not fall under the exempted HTS codes. Nvidia could pay effective tariffs nearing 40% on these vital components. Such costs threaten to stall critical AI infrastructure projects across the country.
Semiconductor tariffs may compromise the goal of the CHIPS Act. The act promised tens of billions of dollars in subsidies to support domestic chip manufacturing. Yet advanced lithography machines — key equipment from countries like the Netherlands and Japan — face 20%–24% tariffs. Ironically, tariffs designed to boost American production increase the cost of essential manufacturing equipment.
The effect of new tariffs is already slowing progress in critical supply chains — just as generative AI and large language models are gaining momentum across sectors like finance and defense. Any delays or cost increases now could blunt America’s technological advantage.
Indirect costs undermine exemptions for AI
Modern semiconductor supply chains are global and highly integrated. An exemption on raw silicon means nothing when servers, GPUs and other finished products face steep tariffs. Tariffs indirectly inflate costs, eliminating any competitive advantage from domestic manufacturing.
Indirect tariff costs hit high-end systems disproportionately hard. The effect ripples through AI model training, data center expansions and major infrastructure projects, significantly slowing the industry’s momentum.
Tariff impasse halts investment
So far, it’s clear that the US president’s tariff plan didn’t follow any conventional economic trends or calculated strategy. The uncertain tariff situation stalls investment decisions across the technology sector. Companies need predictable costs to justify large capital expenditures. Ongoing tariff volatility prevents them from committing resources to new data centers and manufacturing lines.
This mirrors the supply chain chaos of 2020. At that time, uncertainty caused massive order cancellations and slowed industry recovery for years. If tariff ambiguity continues, we could see similar waves of cancellations in 2025. This would further compound existing inventory and revenue issues in the semiconductor sector.
Domestic production is not optimal
The border argument for these tariffs is that they’re meant to boost domestic production. They do little, however, to encourage genuine domestic semiconductor production. Despite subsidies under the CHIPS Act, most US semiconductor companies still rely on international foundries for manufacturing. Instead, they face increased equipment and operational costs.
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The idea that tariffs promote domestic production ignores the reality of global semiconductor manufacturing. Costs rise across the board, putting American companies at a disadvantage rather than offering protection.
AI projects face heightened risk
The blockchain and crypto sectors, particularly AI-driven projects, also feel the pinch. Projects depend heavily on GPUs and high-performance servers for mining, validating transactions and running decentralized AI computations. Increased hardware costs directly affect profitability and growth, potentially stalling innovation in blockchain applications.
AI developments have just started to pick up the pace in the blockchain and Web3 space. The industry saw increased interest from investors and VCs just a year ago. So, they are still on tighter budgets. Elevated costs can, however, lead to stagnation. We might see innovators and developers exiting the market. The ripple effect extends beyond the general technology sector and could threaten future digital economies.
Moreover, these cost pressures disproportionately affect startups and smaller tech firms. Industry giants can absorb additional expenses, but innovative, smaller players face existential threats. This dynamic risks stifling innovation at the grassroots level, harming the entire tech ecosystem.
What to expect
Semiconductors have momentarily escaped direct tariffs, but the exemption provides little benefit. Tariffs continue to hit finished products, driving up indirect costs across the industry. Instead of boosting domestic manufacturing, these tariffs create economic paralysis, stall critical infrastructure projects, and threaten America’s lead in AI innovation. Policymakers must acknowledge these realities and adjust their approach before irreversible damage is done to the nation’s technological future.
Opinion by: Ahmad Shadid of O.xyz.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
California Representative Maxine Waters, ranking member of the US House Financial Services Committee, has announced plans to introduce legislation “to block [Donald] Trump’s memecoin and stop his crypto corruption.”
In a May 22 notice, Rep. Waters said the Stop Trading, Retention, and Unfair Market Payoffs (TRUMP) in Crypto Act of 2025 bill would be aimed at blocking the US President, Vice President, members of Congress, and their families from engaging in “crypto crime.” The US lawmaker referred to Trump and his wife, Melania, issuing personal memecoins in January, his family launching a stablecoin, USD1, through the crypto platform World Liberty Financial, and the president attempting to establish a national Bitcoin (BTC) reserve as his sons back a BTC mining venture.
“Donald Trump is preparing to dine with the top donors of his memecoin who’ve made him, and his family, richer,” said Waters, adding:
“Trump’s crypto con is not just a scam to target investors. It’s also a dangerous backdoor for selling influence over American policies to the highest foreign bidder.”
Waters’ bill was one of many actions announced to oppose the president’s dinner to reward memecoin holders. Senators Chris Murphy and Elizabeth Warren are expected to attend a press event with representatives for the consumer advocacy group Public Citizen, and two Democratic organizations will protest at the Trump National Golf Club outside Washington, DC, where the memecoin dinner will be held.
This is a developing story, and further information will be added as it becomes available.
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