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.

Politics latest: Starmer’s Chagos Island deal gets last-minute green light

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.

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.

Read more:
Ex-PM suggests people on top rate of income tax should be excluded from winter fuel allowance
Net migration halves in UK

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.

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.