Rachel Reeves’s series of policy reversals has cost £8.2 billion, according to a new report that marks the first full assessment of the government’s repeated climbdowns.
The Resolution Foundation said uncertainty around policy remains high, despite Labour’s repeated pledges to “restore stability”, reports The Times.
The £8.2 billion figure, calculated using Office for Budget Responsibility data, includes reversals on personal independence payments and universal credit, as well as the winter fuel allowance and the two-child benefit cap.
The report does not include the government’s more recent U-turns on business rates for pubs and inheritance tax rules for farmers, which are expected to cost a further £300 million and £130 million respectively. It also excludes changes to jury trials and the abandonment of ID cards.
The think tank said policy uncertainty is now at its highest level since the index began in 1997.
“Elevated UK-specific policy uncertainty is almost certainly linked to the scale and frequency of fiscal interventions during this parliament,” the report said.
Greg Thwaites, the Resolution Foundation’s research director, told The Times: “There’s lots to welcome in the government’s economic growth strategy. But it has spent much of the past 18 months undermining that strategy with policy U-turns, kite-flying tax ideas and timidity in areas like trade where it needs to be bold.”
Starmer drops digital ID plans
Last week it emerged that Sir Keir Starmer had abandoned plans for mandatory digital ID for workers, marking the 13th significant U-turn of his premiership.
He had previously said the system would be compulsory to verify the right to work as part of a crackdown on migration.
Reeves is now preparing a package of measures to help around 5,000 pubs that have seen their business rates doubled. An announcement is expected soon, following strong criticism from the hospitality industry.
The chancellor is also under growing pressure to provide support for hotels, restaurants and other hospitality businesses, which have been affected by tax rises.
On Sunday, the Federation of Small Businesses urged Reeves to make a “decisive intervention now”, warning that high-street staples such as cafés, shops and hairdressers face an average business rates rise of 52 per cent over the next three years.
Tina McKenzie, the group’s policy chair, said: “Striving small businesses in retail, hospitality and leisure are on the brink unless the chancellor makes a decisive intervention now.
“The tax timebomb that’s currently ticking will see three years of soaring bills, threatening our high streets and the jobs and services they provide. Combined with other cost pressures going up in April as well, the chancellor has to be realistic that without action on business rates relief, the burden will become too much to bear for some, who will either shrink or close down altogether.”
UK economy lags behind peers
The Resolution Foundation report also found that GDP per head in the UK is now level with Italy, having been 8 per cent higher before the pandemic.
It said that after narrowing the gap with the average of Australia, Canada, France, Germany and the Netherlands to just 5 per cent in 2005, the UK is now 15 per cent behind its former peers.
However, the think tank said the economy “could be on the brink of a turnaround, emphasising the need for the government to ramp up rather than run down its economic growth strategy”.
Thwaites added: “With signs that productivity may be turning a corner, the government must capitalise by ramping up its plans. It should redouble efforts to unblock housebuilding in major cities, focus job support for young and older workers, and decide whether to bite the bullet and reverse some of the damage from Brexit.”
