LABOUR’S repeated policy reversals have cost the public purse £8.2billion and created the highest level of political uncertainty in nearly three decades, a new report has claimed.
The Resolution Foundation said that the government has generated instability despite Sir Keir Starmer‘s repeated pledges to “restore stability” to the UK economy.
The report details how the Rachel Reeves, has backed away from tough fiscal decisions, leading to an £8.2billion bill that will ultimately fall on the taxpayer.
The government abandoned plans to tighten the rules on Personal Independence Payments (PIP) and Universal Credit sickness benefits.
These reforms were originally designed to crackdown on the soaring costs of sickness payments and were projected to save the public coffers £5 billion a year by 2030.
The government also executed a major U-turn on the two-child benefit cap, removing the limit on how many children can be claimed for despite previously insisting the cap was necessary to keep welfare spending under control.
This reversal alone is set to add £3billion a year to the country’s ballooning welfare bill, a move to appease the Labour Left that risks the wrath of voters who overwhelmingly supported keeping the limits on claims.
The cost of the chaos was further driven up by the Chancellor’s humiliating flip-flop on the winter fuel payment.
The decision to means-test the benefit, removing eligibility for 10million state pensioners, and then reinstating it for all just a year later also added to the £8.2billion cost of U-turns.
This figure does not include several more recent reversals.
These include changes to inheritance tax rules for farmers (expected to cost an extra £130million) and the planned business rates cut for pubs (around £300million).
It also excludes the impact of the U-turn on digital ID cards and changes to jury trial proposals.
Greg Thwaites, research director at the Resolution Foundation, said the government has spent much of the past 18 months “undermining” its own growth strategy.
He said “kite-flying tax ideas” and timidity in areas like trade have contributed to a climate where policy uncertainty is at its highest level since records began in 1997.
Sir Keir Starmer abandoned plans for mandatory digital ID for workers last week, which marked the 13th significant U-turn of his premiership.
The report revealed that the UK’s economic standing has suffered, with GDP per head now level with Italy despite being 8% higher before the pandemic.
Britain is now languishing 15% behind peer economies such as Australia, Canada, and Germany, according to the analysis.
Meanwhile, Chancellor Rachel Reeves is currently under pressure to announce measures to help 5,000 pubs that have seen their business rates double.
The Federation of Small Businesses has also warned that high-street staples such as cafés and hairdressers face an average business rates rise of 52% over the next three years.
Tina McKenzie, the group’s policy chair, stated that many businesses are “on the brink” and will close down without decisive intervention from the Chancellor.
The Resolution Foundation’s report suggested that elevated uncertainty is scaring off business investment and making it harder for households to plan their spending.
A government spokesman defended their record and insisted that their plan for growth is the right one.
They stated that the UK is set to be the fastest-growing European G7 economy this year and highlighted recent trade agreements and planning reforms.
Keir’s catalogue of chaos
- WINTER FUEL FIASCO Labour stripped the Winter Fuel Payment from 10 million pensioners before humiliatingly reinstating it just a year later following a public outcry.
- SICKNESS BENEFIT SHAMBLES Ministers scrapped plans to tighten Personal Independence Payments and Universal Credit rules, blowing a £5billion hole in the budget by abandoning reforms meant to curb soaring costs.
- TWO-CHILD CAP CAVE-IN The Chancellor bowed to pressure and removed the two-child limit on benefit claims, adding £3billion a year to the welfare bill despite previous warnings it was unaffordable.
- FARM TAX FLOP The Treasury was forced into a retreat on inheritance tax rules for farmers, a blunder that is expected to cost taxpayers £130million.
- PUB RATES RETREAT Ministers are primed to perform a hasty reversal on business rates for pubs after an industry revolt, with the climbdown set to cost the Exchequer £300million.
- JURY TRIAL U-TURN Plans to shake up the jury trial system are expected to be watered down following cross-part backlash.
- DIGITAL ID DUMPED Sir Keir Starmer has abandoned his flagship plan for mandatory digital ID cards for workers, which he had claimed were vital to stopping illegal migration.
