Where does the welfare bill climbdown leave UK public finances? | Public finance

Keir Starmer managed to prevent a parliamentary defeat on the main welfare bill on Tuesday, but only by removing a central element. So where does the government’s last climb leave public finance?

How much will U -return cost?

In March, Rachel Reeves’ personal independence payment (PIP) deductions announced in the spring statement aimed at saving £ 5 billion per year.

The changes in the invoice last week, trying to avoid a Commons defeat – reversing some deductions to universal loan and applying more solid PIP conformity to new plaintiffs – this savings had reduced this savings to about 2 billion.

Once the PIP changes are completely out of the invoice on Tuesday, the Solution Foundation estimates that there will be no savings in five years – the chancellor leaves a hole in the plans of 5 billion pounds.

Reeves also faces a cost of £ 1.25 billion from the last year’s standing from the decision to restore the winter fuel allowance to retirement.

Among them, these U -turns will swallow most of the 10 billion pounds of ceiling caused by the Prime Minister’s financial rules in the spring statement.

Reeves, a course to break the financial rules?

Budget Responsibility Office (OBR) We don’t know until you publish the latest estimates in autumn, but it certainly seems more likely after the last return.

In the Treasury, there were fears that the “Summer Stock” will lead to a decrease in growth expectations of Obr’s estimates at the moment – the course to violate Reeves’ financial rules.

In the assessment of past estimates published on Tuesday, OBR said that during a five -year predictions, the government tends to be very optimistic during the period when it evaluated its compliance with the rules.

There is a widespread view between urban experts and thoughts that OBR can decide to revise growth forecasts-this may have a significant impact on public financing than prosperity.

Reeves’ team warns that there are many factors, including the possibility of more optimistic economic news between autumn and autumn.

However, an increase in the government’s borrowing costs will work in the other direction. Among the speculation on the future of the chancellor, the efficiency on the state bonds – interest rate – sharply rose on Wednesday.

What could be Does Reeves do if a violation is estimated?

Reeves can rewrite the rules or completely scrapped; However, he clearly stated that a more loose approach believes that the bond markets would not be tolerated by the bond markets – which determined the interest rates that the government should pay to its debt.

If it was connected to the framework, the chancellor could have chosen to reduce expenditures in the coming years – the approach he took in the spring expression, which led to a hasty announcement of PIP sections.

Considering that future budgets for departments are determined only in last month’s expenditure examination and that most of the rest of the public expenditures are on the benefits that are very difficult to touch politically.

This leaves the tax increases, which many independent analysts believe that they are increasingly more likely to be more likely to.

When asked whether or not he can determine tax increases on Wednesday morning, the Cabinet Office Minister Pat McFadden told BBC Breakfast that he would “speculate” about the budget, but he added: “We will keep the tax promises in the manifesouuz”.

The Treasury may be reluctant to register for more expenditure measures, such as the cost of removing two children’s limits on the universal loan forced by some workers backbencher.

Which taxes can rise?

The worker refused to increase the main income increases of income tax, VAT and employee national insurance. Reeves may be reluctant to spend more costs for businesses after carrying a £ 40 billion tax increase in tax increases imposed on last year’s budget.

Given these restrictions, many analysts believe that a reasonable option will expand the income tax and national insurance thresholds implemented by Jeremy Hunt for two years – leading more people to pay higher rates.

The chancellor rejected this plan firmly in the budget of last October and implied that Labour’s manifesto would violate the spirit.

“I concluded that the extension of threshold ice cream would harm the people working. He would get more money than their payments,” He said in his budget speech. Orum In our manifest, I receive tax tax on tax. Therefore, beyond the decisions of the previous government, income tax and national insurance thresholds will not be an extension of ice cream. ”

A policy that has been regularly brought up and rejected by previous chancelides to reduce tax reduction in more than other possible income enhancers.

It is also encouraged that Reeves will be encouraged to think more creatively about the tax reform – the more radical the bid is, the less likely to accept OBR’s predictions about what can be raised.

Former Chancellor and Prime Minister Gordon Brown suggested a tax of 3 billion pounds per year in online gambling companies, for example, while financing the abolition of the two children’s limits, the Soldwing Labor deputies call for reserve tax.