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Public finance

Labour's U-Turn on Benefits Bill: Experts Warn of Economic Consequences

Strategic Insights

— 1 min read

Labour's decision to protect personal independence payments (Pip) for existing claimants has mitigated the impact of the government's benefits bill. Economists estimate the changes could reduce the expected £4.8bn savings by up to £3bn. Meanwhile, farming groups have proposed amendments to the inheritance tax reforms that could raise almost £2bn for the Exchequer. Research by Family Business UK warns that the current proposals could hit Treasury revenue by £1.9bn and wipe £14.9bn from the UK economy.

Key Takeaways:

  • Economists at the Institute for Fiscal Studies and the Resolution Foundation estimate that the concessions on Pip could reduce the expected £4.8bn savings by up to £3bn.
  • Farming groups propose amendments to the inheritance tax reforms that could raise almost £2bn for the Exchequer.
  • Research by Family Business UK found that the current proposals could hit Treasury revenue by £1.9bn and wipe £14.9bn from the UK economy.
  • Almost a quarter of family businesses and almost one in five family farms have cut jobs or paused recruitment since the Budget.
  • Shadow Farming Minister Robbie Moore questions the government's $500m inheritance tax target, citing independent research that suggests it will lose money.
  • The government's proposals would introduce a 20 per cent inheritance tax rate on agricultural land and businesses worth more than £1m.
  • The Country Land and Business Association's Jonathan Roberts suggests using a 'clawback mechanism' to take inheritance tax at the full 40 per cent rate on inherited assets sold within a certain time period.

Statistics:

  • £4.8bn: expected savings from the government's benefits bill
  • £3bn: reduction in expected savings due to concessions on Pip (estimated by economists)
  • £1.9bn: reduction in Treasury revenue due to inheritance tax reforms (research by Family Business UK)
  • £14.9bn: potential loss to the UK economy due to inheritance tax reforms (research by Family Business UK)
  • 200,000: jobs that could be lost due to the changes (National Farmers' Union)
  • £1billion: reduction in gross value added (GVA) in the Yorkshire region due to the changes (The Yorkshire Post)

Sources:

  • [The Yorkshire Post]
  • [The Chancellor under pressure to find billions of pounds in the public finances]
  • [Institute for Fiscal Studies]
  • [Resolution Foundation]
  • [Family Business UK]
  • [The Country Land and Business Association]
  • [National Farmers' Union]
  • [Shadow Farming Minister Robbie Moore]

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