Economy vulnerable after U-turns, says watchdog

Britain's spending watchdog has issued a dire warning over the public finances, claiming they are in a “ vulnerable position” because of Sir Keir Starmer’s welfare U-turns.

- ARCHIE MITCHELL DAVID MADDOX

In the first major assessment since the government's two major U-turns - on disability benefits and winter fuel payments - last month, the Office for Budget Responsibility (OBR) has warned that recent attempts to shore up the Treasury’s balance sheet are in trouble.

Among the OBR’s stark warnings are forecasts that the cost of the state pension triple lock will be three times higher by the end of the decade than its original estimate.

The health check on the economy will raise further questions about the position of chancellor, Rachel Reeves, who was in tears during PMQs last week as Sir Keir failed to guarantee her future. It was only after the markets reacted badly to the uncertainty over who would run the Treasury that the prime minister publicly backed her.

It comes as a YouGov poll has revealed an all-time low approval rating for the government of minus 54 - just 13 per cent approve, against 67 per cent who disapprove. The OBR said Sir Keir’s U-turns on benefit cuts and winter fuel payments were driving the continued increase in government debt.

The decision to cave in to Labour rebels last week and tear up most of the benefits reforms, especially for people with disabilities, meant that a £5bn saving turned into a small increase. Meanwhile, the decision to hand back winter fuel payments to millions of pensioners has cost a further £1.25bn. Reacting to the OBR report, the Institute of Economic Affairs (IEA) warned: “Two big changes are needed to turn things around. First, the state must become smaller and more efficient. Second, and related to this, productivity has to improve across the whole economy.