(qlmbusinessnews.com Tues. 30th July, 2024) London, UK —
“UK Government Axes Winter Fuel Payments: What You Need to Know”
In a significant policy shift, the Chancellor has announced that approximately 10 million pensioners will no longer receive winter fuel payments. From this autumn, only those on pension credit or other means-tested benefits will be eligible for the payments.
The Chancellor, Rachel Reeves, cited “urgent decisions” due to the previous government's “undisclosed” overspending as the reason for the cuts. However, Shadow Chancellor Jeremy Hunt dismissed these claims as “spurious,” arguing that the previous government had been transparent about the state of public finances.
During her address to a packed House of Commons, Ms Reeves confirmed that public sector pay recommendations would be accepted in full, with NHS workers and teachers receiving 5.5% increases, the armed forces 6%, the prison service 5%, and the police 4.75%. Junior doctors have been offered a 22% pay rise over two years. These pay deals will cost an additional £9bn, with two-thirds funded by central government and the remainder from departmental savings.
The bulk of Ms Reeves' speech focused on cuts due to what she described as a “£22bn hole in the public finances.” Both the Office for Budget Responsibility (OBR) and the Institute for Fiscal Studies (IFS) have supported some of Ms Reeves' claims. However, her decisions have been criticised as a “political choice” by economists and Conservative politicians.
Several major infrastructure projects have been scrapped, including:
– A two-mile road tunnel near Stonehenge, costing £166m in planning
– The A27 Arundel bypass in West Sussex, estimated at £320m
– Former Prime Minister Boris Johnson's plan for 40 new hospitals in England by 2030, costing £22.2bn
– The Restoring Your Railway Fund, which had allocated £500m to reopen closed rail lines
Ms Reeves accused the previous government of committing to spend money it didn't have and failing to inform the OBR. “How dare they?” she exclaimed, calling their economic record “unforgivable.” She highlighted unfunded overspending, including £6.4bn on the asylum system and £1.6bn in transport.
The OBR confirmed it was informed of the spending pressures last week and is reviewing its forecasting methods. Paul Johnson, director of the IFS, noted the £6.4bn asylum overspend appeared “unfunded” but acknowledged the public pay gap was a known issue.
Jeremy Hunt denied any cover-up by the previous Conservative government and accused Labour of misleading the public on tax rises. He predicted that Ms Reeves' first Budget would be a “historic betrayal” due to inevitable tax increases.
Ms Reeves announced the next Budget for 30 October and outlined several other measures:
– Scrapping a planned cap on care charges for older people, saving £1bn
– Halting the sale of publicly-owned NatWest shares
– Ending the Rwanda deportation scheme for illegal migrants
– Instituting biennial public sector spending reviews
– Requiring departments to find at least £3bn in savings
– Cancelling the Advanced British Standard qualification
– Launching a Covid corruption probe to recover £2.6bn from dodgy contracts
– Taxing private schools at 20% from January
– Imposing a windfall tax on oil and gas companies
Liberal Democrat Treasury spokesperson Sarah Olney urged Labour to go further in making large companies “pay their fair share” of tax.
Labour has committed not to borrow for day-to-day costs, meaning it will only use tax revenue for current expenditure, but it will borrow for capital investment. Both Labour and the Conservatives made similar commitments during the election, leading economists to suggest that either party would need to cut spending or raise taxes to meet their fiscal rules.
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