Economy could have crashed if winter fuel payments for pensioners weren’t cut, Labour minister claims

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2 months ago

September 2, 2024

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The economy could have crashed had the government not found savings by cutting winter fuel payments for pensioners, a minister has said.

Lucy Powell told Sunday Morning With Trevor Phillips that the loss of the benefit, which will now be means tested, was necessary because of a “£22bn blackhole” left behind by the Conservatives.

Politics Live: Labour ‘stands by’ national insurance pledge

Labour claim this is a worse deficit than they had expected, requiring them to make difficult choices.

Asked why pensioners had been targeted in the cuts – when public sector workers are in line for an above-inflation pay rise – Ms Powell said: “Finding savings in the current year that you are in is very difficult indeed.

“And why we had to do that was because if we didn’t, we would have seen the markets losing confidence, potentially a run on the pound, the economy crashing, and the people who pay the heaviest price for that are not you and me, Trevor, the people who pay the heaviest price when the economy crashes are the poorest in society.”

She added the public sector pay awards “were on the desks of ministers before the election, and they chose not to budget for them”.

She said this along with “nearly £7bn underfunding on the asylum system” had left a blackhole of £22bn.

“They knew they had these things on their desk, and they put their head in the sand, and they didn’t take the difficult decisions that they needed to take because they knew they were going to lose the election and it was going to fall to us to do,” Ms Powell said.

“And that’s why we’ve had to make some of these really difficult decisions around means testing the winter payment so that the poorest pensioners continue to receive it but some of the wealthiest pensioners won’t.“

The Conservatives have denied covering up the extent of the shortfall in the nation’s finances and say Labour is using that as a “smokescreen” for cuts they had always planned.

The Tories and Liberal Democrats are pushing for a Commons vote to block the winter fuel payments change when parliament returns from summer recess tomorrow. Some Labour MPs have voiced opposition to the measure too.

A packed legislative agenda is on the cards, with bills on nationalising rail, renters rights and regulating water companies expected to be among the priorities of the new government.

The first budget is set to be announced in October, which Prime Minister Sir Keir Starmer has previously warned will be “painful” – though he said those with the “broadest shoulders should bear the heavier burden”.

Ms Powell, the leader of the House of Commons, would not be drawn on what this could mean, saying she is not part of those discussions.

Inheritance tax, capital gains tax and fuel duty have all been mooted as possible taxes that could go up.

Ms Powell said Labour will “stand by” its election promise not to raise national insurance, VAT or income tax.

Referencing a song by Oasis, which Ms Powell was able to get tickets to, she said: “I’m afraid we do look back in anger at what the last government left to this government in the economic inheritance and now we’re faced with some really challenging choices.”

Politics

NY Supreme Court allows Greenidge to keep mining, but challenges remain

Published

2 hours ago

November 15, 2024

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NY Supreme Court allows Greenidge to keep mining, but challenges remain

The state Department of Environmental Conservation botched the permitting process, but it still gets a do-over.

Politics

UK economy grows by 0.1% between July and September – slower than expected

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2 hours ago

November 15, 2024

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UK economy grows by 0.1% between July and September - slower than expected

The UK economy grew by 0.1% between July and September, according to the Office for National Statistics (ONS).

However, despite the small positive GDP growth recorded in the third quarter, the economy shrank by 0.1% in September, dragging down overall growth for the three month period.

The growth was also slower than what had been expected by experts and a drop from the 0.5% growth between April and June, the ONS said.

Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2%, slowing from the rapid growth seen over the first half of 2024 when the economy was rebounding from last year’s shallow recession.

And the metric that Labour has said it is most focused on – the GDP per capita, or the economic output divided by the number of people in the country – also fell by 0.1%.

Reacting to the figures, Chancellor of the Exchequer Rachel Reeves said: “Am I satisfied with the numbers published today? Of course not. I want growth to be stronger, to come sooner, and also to be felt by families right across the country.”

“It’s why in my Mansion House speech last night, I announced some of the biggest reforms of our pension system in a generation to unlock long term patient capital, up to £80bn to help invest in small businesses and scale up businesses and in the infrastructure needs,” Ms Reeves later told Sky News in an interview.

“We’re four months into this government. There’s a lot more to do to turn around the growth performance of the last decade or so.”

New economy data tests chancellor’s growth plan

The sluggish services sector – which makes up the bulk of the British economy – was a particular drag on growth over the past three months. It expanded by 0.1%, cancelling out the 0.8% growth in the construction sector.

The UK’s GDP for the most recent quarter is lower than the 0.7% growth in the US and 0.4% in the Eurozone.

The figures have pushed the UK towards the bottom of the G7 growth table for the third quarter of the year.

It was expected to meet the same 0.2% growth figures reported in Germany and Japan – but fell below that after a slow September.

The pound remained stable following the news, hovering around $1.267. The FTSE 100, meanwhile, opened the day down by 0.4%.

The Bank of England last week predicted that Ms Reeves’s first budget as chancellor will increase inflation by up to half a percentage point over the next two years, contributing to a slower decline in interest rates than previously thought.

Announcing a widely anticipated 0.25 percentage point cut in the base rate to 4.75%, the Bank’s Monetary Policy Committee (MPC) forecast that inflation will return “sustainably” to its target of 2% in the first half of 2027, a year later than at its last meeting.

The Bank’s quarterly report found Ms Reeves’s £70bn package of tax and borrowing measures will place upward pressure on prices, as well as delivering a three-quarter point increase to GDP next year.