Taxes 'almost certain' to rise after U-turns cost £4.5bn

Sir Keir Starmer’s U-turns on benefit cuts and winter fuel payments have blown a £4.5bn hole in the public finances that will “very likely” be filled by tax rises in the autumn Budget, leading economists have warned.

- ARCHIE MITCHELL, MILLIE COOKE, ALBERT TOTH & DAVID MADDOX

The Resolution Foundation said the prime minister's decision to protect existing claimants of disability benefits and health benefits will be far more expensive than expected. And, combined with last month's U-turn on winter fuel payments, Sir Keir will now need to find almost £5bn ahead of his chancellor Rachel Reeves' autumn Budget.

Speaking for the first time about the change of course yesterday afternoon, the prime minister said: "The most important thing is that we can make the reform we need. We talked to colleagues, who've made powerful representations, as a result of which we've got a package which I think will work, we can get it right.

"For me, getting that package adjusted in that way is the right thing to do. It means it's the right balance, it's common sense that we can now get on with it."

The Resolution Foundation said the change to Sir Keir's welfare bill, which will protect all those currently claiming Personal Independence Payments (PIP), will stop 370,000 people from losing the support. That will cost £2.1bn per year by 2030, while protecting the income of all those receiving the health element of Universal Credit, affecting 2.2 million people, will cost up to a further £1.1bn each year.

It will wipe out up to £3.2bn of the £5bn the government had hoped to save through the changes. Institute for Fiscal Studies associate director Tom Waters said the chancellor's already difficult Budget balancing act had been made "that much harder".