Tax rises and hikes are now seen as the primary way out of the £300 Winter Fuel Allowance being reinstated by the Labour Party government and Department for Work and Pensions, or DWP.
State pensioners warned reinstating £300 Winter Fuel Payment has backfired
Reinstating the Winter Fuel Payment may have backfired on the Labour Party government – with UK households now facing tax rises as a result.
Tax rises and hikes are now seen as the primary way out of the £300 Winter Fuel Allowance being reinstated by the Labour Party government and Department for Work and Pensions, or DWP.
Daniel Casali, the chief investment strategist at at wealth management firm Evelyn Partners, explained: “Efforts to find further savings are complicated by internal Labour Party divisions, with MPs rebelling against measures such as means-testing the Winter Fuel Allowance and cutting welfare spending.
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“This leaves tax increases as the primary lever to balance the books. However, the Labour manifesto pledged not to raise any of the ‘big three’ taxes – National Insurance, VAT, or income tax – which together account for nearly 75% of total tax revenues.”
“There will be scrutiny on how the Chancellor can credibly raise additional revenue. Potential options could include closing tax loopholes, reforming capital gains and inheritance tax. However, each option comes with political and economic trade-offs.”
Mr Casali added: “Gilt yields reflect more than fiscal policy alone. They also capture expectations around short-term interest rates, inflation and broader monetary conditions.”
Cabinet ministers have been told they will not be able to use the Treasury reserve to fund public sector pay rises and cannot access it unless there are exceptional circumstances.
In the run-up to the budget, James Murray, the chief secretary to the Treasury, has written to ministers setting out a decision to clamp down on departments’ access to the reserve.
Murray told colleagues that “departments must take responsibility for managing pressures and making choices about priorities without relying on the reserve”.
He wrote: “We must deliver the efficiency plans set out in June – reducing administrative budgets, including those of arm’s-length bodies and agencies – and deliver comprehensive digital transformation.”