Chancellor toughens rules on benefits as he announces Civil Service freeze

Published

2 years ago

October 2, 2023

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Chancellor Jeremy Hunt has reiterated the government’s commitments to make benefits sanctions harsher – while also committing to raising the national living wage above £11 an hour.

In his speech to the Conservative Party conference in Manchester, the senior minister also revealed a plan to save £1bn by freezing the expansion of the Civil Service and reducing the level of staffing to pre-pandemic levels.

Mr Hunt‘s intervention comes around six weeks ahead of his autumn financial statement.

While not as tumultuous as his predecessor’s party conference speech last year – where Kwasi Kwarteng had to admit his party was U-turning on a key part of his mini-budget – Mr Hunt is still under pressure.

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Many voices within the Conservative Party want him to cut taxes, including cabinet ministers.

Speaking to Sky News’ Sunday Morning with Trevor Phillips, Levelling Up Secretary Michael Gove said he would “like to see the tax burden reduced by the next election”.

Mr Hunt on Saturday said the government was “not in a position to talk about tax cuts at all” – but all bets are off when it comes to party conferences.

The government has been eyeing welfare changes as a way to cut down on spending, and also encouraging people back into work in a bid to grow the economy.

Mr Hunt told the party membership in Manchester: “Since the pandemic, things have been going in the wrong direction. Whilst companies struggle to find workers, around 100,000 people are leaving the labour force every year for a life on benefits.

“As part of that, we will look at the way the sanctions regime works. It is a fundamental matter of fairness. Those who won’t even look for work do not deserve the same benefits as people trying hard to do the right thing.”

The chancellor also announced that Work and Pensions Secretary Mel Stride would look again at the benefit sanctions regime to make it harder for people to claim benefits while refusing to take active steps to move into work.

And a spokesman confirmed the proposals would be set out in the upcoming autumn statement.

Speaking last month, Mr Stride said that he was consulting on changes to the Work Capability Assessment, the test aimed at establishing how much a disability or illness limits someone’s ability to work.

Mr Hunt also confirmed a new policy that could seek people looking for new jobs, with a freeze on the number of civil servants.

“We have the best civil servants in the world – and they saved many lives in the pandemic by working night and day,” said the chancellor. “But even after that pandemic is over, we still have 66,000 more civil servants than before.

“New policies should not always mean new people. So today I’m freezing the expansion of the civil service and putting in place a plan to reduce its numbers to pre-pandemic levels. This will save £1bn next year.

“And I won’t lift the freeze until we have a proper plan not just for the civil service but for all public sector productivity improvements.”

But the move was criticised by the Public and Commercial Services union general secretary, Mark Serwotka, who said: “Thirty seconds after praising civil servants for their work during the pandemic, Jeremy Hunt announced a freeze on recruitment.

“Shrinking an already-overstretched and under-resourced civil service will inevitably result in cuts to vital services that people depend on.”

He added: “As usual, a Conservative government is seeking to blame working people for the incompetence of their own ministers.”

Raising the living wage

On the national living wage, Mr Hunt said the government was going to accept the Low Pay Commission’s recommendation to raise the baseline to at least £11 an hour from April 2024.

Resisting sizeable pay increases in the public sector has been part of the government’s strategy to keep spending and inflation under control.

Mr Hunt said: “Since we introduced the national living wage, nearly two million people have been lifted from absolute poverty. That’s the Conservative way of improving the lives of working people. Boosting pay, cutting tax.”

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Ahead of the speech, Prime Minister Rishi Sunak, said: “I’ve always made it clear that hard work should pay, and today we’re providing a well-earned pay rise to millions of people across the country.

“This means a full-time worker will receive an increase of over £1,000 to their annual earnings, putting more money in the pockets of the lowest paid.

“We’re sending a clear message to hard-working taxpayers across the country; our Conservative government is on your side”.

Hunt struggles to be heard above tax cut hollers

The chancellor’s speech usually sets the agenda at conference, but today, Jeremy Hut was playing catch up.

He’s been struggling to be heard among the clamour within his party for tax cuts.

Today he attempted to regain control of the narrative – chiefly that bringing down inflation is the “best tax cut” the government can give to the public.

“We’re getting there,” he said. “The plan is working and now we must see it through – just as Margaret Thatcher did many years ago.”

It was a rebuke to members of his own party as much as it was to Labour, as just hours earlier, former prime minister Liz Truss was leading the charge on the issue.

Speaking at a packed fringe event, she said that tax cuts were the key to making the Tories “the party of business again” and “unlocking economic growth”.

And she urged the government to cut corporation tax to 19% at the autumn statement.

But during his appearance, the chancellor warned that while it was easy to support a high growth and low tax economy, it was “harder to make it happen”.

Labour’s shadow work and pensions secretary, Liz Kendall, said her party “believes in responsibility – that those who can work, should look for work and take jobs when they are offered”.

But she said the government also had “a responsibility to create real opportunities and not write people off”, adding: “This is something the Tories have utterly failed to deliver.

“We now have record numbers of people out of work due to long-term sickness, which is costing taxpayers an extra £15bn a year just since the pandemic.

“[Labour] will tackle the root causes of economic inactivity by driving down NHS waiting lists, reforming social security, making work pay, and supporting people into good jobs across every part of the country. Real opportunities matched by the responsibility to take them up – because that’s what fairness is all about.”

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Building societies step up protest against Reeves’s cash ISA reforms

Published

2 hours ago

July 7, 2025

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Building societies step up protest against Reeves's cash ISA reforms

Building society chiefs will this week intensify their protests against the chancellor’s plans to cut cash ISA limits by warning that it will push up borrowing costs for homeowners and businesses.

Sky News has obtained the draft of a letter being circulated by the Building Societies Association (BSA) among its members which will demand that Rachel Reeves abandons a proposed move to slash savers’ annual cash ISA allowance from the existing £20,000 threshold.

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The draft letter, which is expected to be published this week, warns the chancellor that her decision would deter savers, disrupt Labour’s housebuilding ambitions and potentially present an obstacle to economic growth by triggering higher funding costs.

“Cash ISAs are a cornerstone of personal savings for millions across the UK, helping people from all walks of life to build financial resilience and achieve their savings goals,” the draft letter said.

“Beyond their personal benefits, Cash ISAs play a vital role in the broader economy.

“The funds deposited in these accounts support lending, helping to keep mortgages and loans affordable and accessible.

“Cutting Cash ISA limits would make this funding more scarce which would have the knock-on effect of making loans to households and businesses more expensive and harder to come by.

“This would undermine efforts to stimulate economic growth, including the government’s commitment to delivering 1.5 million new homes.

“Cutting the Cash ISA limit would send a discouraging message to savers, who are sensibly trying to plan for the future and undermine a product that has stood the test of time.”

The chancellor is reportedly preparing to announce a review of cash ISA limits as part of her Mansion House speech next week.

While individual building society bosses have come out publicly to express their opposition to the move, the BSA letter is likely to be viewed with concern by Treasury officials.

The Nationwide is by far Britain’s biggest building society, with the likes of the Coventry, Yorkshire and Skipton also ranking among the sector’s largest players.

In the draft letter, which is likely to be signed by dozens of building society bosses, the BSA said the chancellor’s proposals “would make the whole ISA regime more complex and make it harder for people to transfer money between cash and investments”.

“Restricting Cash ISAs won’t encourage people to invest, as it won’t suddenly change their appetite to take on risk,” it said.

“We know that barriers to investing are primarily behavioural, therefore building confidence and awareness are far more important.”

The BSA called on Ms Reeves to back “a long-term consumer awareness and information campaign to educate people about the benefits of investing, alongside maintaining strong support for saving”.

“We therefore urge you to affirm your support for Cash ISAs by maintaining the current £20,000 limit.

“Preserving this threshold will enable households to continue building financial security while supporting broader economic stability and growth.”

The BSA declined to comment on Monday on the leaked letter, although one source said the final version was subject to revision.

The Treasury has so far refused to comment on its plans.

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Govt declines to rule out wealth tax after ex-Labour leader Lord Kinnock calls for wealth tax

Published

4 hours ago

July 7, 2025

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Govt declines to rule out wealth tax after ex-Labour leader Lord Kinnock calls for wealth tax

The government has declined to rule out a “wealth tax” after former Labour leader Neil Kinnock called for one to help the UK’s dwindling finances.

Lord Kinnock, who was leader from 1983 to 1992, told Sky News’ Sunday Morning With Trevor Phillips that imposing a 2% tax on assets valued above £10 million would bring in up to £11 billion a year.

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On Monday, Sir Keir Starmer’s spokesperson would not say if the government will or will not bring in a specific tax for the wealthiest.

Asked multiple times if the government will do so, he said: “The government is committed to the wealthiest in society paying their share in tax.

“The prime minister has repeatedly said those with the broadest shoulders should carry the largest burden.”

He added the government has closed loopholes for non-doms, placed taxes on private jets and said the 1% wealthiest people in the UK pay one third of taxes.

Chancellor Rachel Reeves earlier this year insisted she would not impose a wealth tax in her autumn budget, something she also said in 2023 ahead of Labour winning the election last year.

Asked if her position has changed, Sir Keir’s spokesman referred back to her previous comments and said: “The government position is what I have said it is.”

The previous day, Lord Kinnock told Sky News: “It’s not going to pay the bills, but that kind of levy does two things.

“One is to secure resources, which is very important in revenues.

“But the second thing it does is to say to the country, ‘we are the government of equity’.

“This is a country which is very substantially fed up with the fact that whatever happens in the world, whatever happens in the UK, the same interests come out on top unscathed all the time while everybody else is paying more for getting services.

“Now, I think that a gesture or a substantial gesture in the direction of equity fairness would make a big difference.”

The son of a coal miner, who became a member of the House of Lords in 2005, the Labour peer said asset values have “gone through the roof” in the past 20 years while economies and incomes have stagnated in real terms.

In reference to Chancellor Rachel Reeves refusing to change her fiscal rules, he said the government is giving the appearance it is “bogged down by their own imposed limitations”, which he said is “not actually the accurate picture”.

A wealth tax would help the government get out of that situation and would be backed by the “great majority of the general public”, he added.

His comments came after a bruising week for Prime Minister Sir Keir Starmer, who had to heavily water down a welfare bill meant to save £5.5bn after dozens of Labour MPs threatened to vote against it.

With those savings lost – and a previous U-turn on cutting winter fuel payments also reducing savings – the chancellor’s £9.9bn fiscal headroom has quickly dwindled.

In a hint of what could come, government minister Stephen Morgan told Wilfred Frost on Sky News Breakfast: “I hold dear the Labour values of making sure those that have the broadest shoulders pay, pay more tax.

“I think that’s absolutely right.”

He added that the government has already put a tax on private jets and on the profits of energy companies.