Rachel Reeves is under pressure to find money to fund the winter fuel payment U-turn and ease child poverty amid mounting pressure from within Labour. The Chancellor will set out her spending review next month, allocating funding to departments for the coming years, with £113 billion of capital projects to transform the country’s housing and infrastructure.
But she faces calls to spell out how she will fund Sir Keir Starmer’s goal of restoring winter fuel payments to pensioners and is under pressure to respond to mounting calls for the two-child benefit cap to be axed at a cost of around £3.5 billion. Measures aimed at saving money from the welfare bill and encouraging people on benefits into work could also be watered down in the face of a backbench revolt, adding to the Chancellor’s headaches.
Health minister Karin Smyth said the Prime Minister’s announcement that he wants more pensioners to get winter fuel payments was “the sign of a government that is listening”. She told BBC Radio 5 Live: “The Chancellor and the Treasury will have to review all of these in light of the key mission, which is to grow the economy and maintain economic stability.
“We know government is hard, and I think listening, looking at policies, how they impact, weighing up those costs and benefits, is exactly the right thing to do.” She told LBC Radio that measures to tackle child poverty had to be looked at “in the round”.
Officials have insisted there is no single “silver bullet” to reduce child poverty. Ms Smyth said: “We are looking at all measures to improve money in people’s pockets and to reduce poverty, in the round, as part of the spending review. That’s important, that we take a long-term look at this issue.
“The last Labour government lifted those children out of poverty. Of course it’s a central mission, that opportunity for children and for their families, of course it’s a central mission of this Labour Government.” The policy means parents only receive support for up to two children through the universal credit system.
Campaigning Labour backbencher Stella Creasy said lifting the two-child limit would take “350,000 children out of poverty overnight”.
“It’s worth reflecting on the fact that 60% of those kids are in households where somebody is in work,” she added. The Government’s child poverty strategy, which was due to be published in the spring, is now set to come in the autumn so it can be aligned with the Chancellor’s budget.
Ms Creasy said: “What really matters is that child poverty strategy, because none of us want to be dependent on the welfare system as a way of helping every family make ends meet. And I am painfully aware of how many people in my local community still have too much month at the end of their money.”
Meanwhile the Prime Minister is said to be considering “tweaks” to welfare cuts planned by the Government as he faces the threat of a backbench revolt over the package of measures, which ministers hope will save the public purse £5 billion a year. Benefit claimants could be given longer “transitional periods” to seek out other benefits if they lose out as a result of the reforms, according to the Times.
A backbench rebellion over the proposals, which would tighten eligibility for the personal independence payment (Pip) as part of a package aimed at getting more working age people currently on benefits into jobs, could spread to more than 100 MPs, some reports have suggested. Peter Lamb, the Labour MP for Crawley, told BBC Radio 4’s Westminster Hour he would be “voting against anything which is going to restrict access to Pip further than it’s currently restricted”.
Many Labour MPs across different wings of the party are “deeply uncomfortable” with what ministers are planning, he also said. Elsewhere, Reform UK leader Nigel Farage is expected this week to commit to restoring the winter fuel payment in full, as well as scrapping the two-child benefit cap.
The move is an attempt to outflank Labour with its traditional working class supporters, according to Reform sources. The competing financial and political pressures will weigh on Ms Reeves as she finalises a multi-year spending review which is already expected to cause Cabinet tensions with cuts to some departmental budgets.
She told the Guardian: “We are building homes, building infrastructure, whether that’s transport or energy. I do want to make sure that we’re spending government money to create jobs, apprenticeships, and build supply chains in this country. At the spending review coming up in June, we will invest more in capital, and we’re going to invest £113 billion more in capital spending than the plans we inherited from the previous government. I do want to make sure that every penny of that money works for the British economy and creates jobs.”
Shadow chancellor Sir Mel Stride said: “Labour have already lost control of the public finances and abandoned any pretence of fiscal responsibility. Now they are looking at loading up billions more in welfare spending, paid for either by higher taxes for working families or through yet more borrowing.
“When added to the likely cost of their panicked climbdown on winter fuel payments, the Chancellor faces a potential £5 billion black hole. Rachel Reeves’s credibility is having new holes torn in it by the day.”
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