The utter crass political mishandling of yesterday’s botched partial winter fuel U-turn could have profound consequences for Sir Keir Starmer.

And now, whether bad things flow from his obtuse but significant comments in the Commons chamber yesterday will depend, among other things, on the vagaries of the global economy and the riptides of the trade union movement.

Here is why:

At the point of the autumn budget last year – when Rachel Reeves spent more than signalled in the election campaign, funded by borrowing more than the markets expected and raising taxes that weren’t foreshadowed in the manifesto – those whose livelihood depends on forecasting the response of the debt markets had one question.

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They wanted to know: is that it? Is that the extent of the big spending splurges that the chancellor would perform?

Because, although there was a big unsignaled boost to spending, borrowing and taxing last November, the markets’ judgement was – more or less – that was fine provided she was able to hold the line at broadly this level of spending and borrowing and no more.

Clad in her cast iron armour, Ms Reeves insisted that was it. A “once a parliament” budget, she said, meaning no more substantial tax hikes.

Please use Chrome browser for a more accessible video player 1:07 Winter fuel payment U-turn approach in question

An upfront public spending boost, but then Tory levels of restraint in rises in the second half of the parliament. She would hold the line, she promised.

But the question still lingered: what would happen in a less benign political climate? The manifesto contained tough decisions, like the two-child spending cap which Labour MPs were required to endorse to stand and keep the whip.

Initially, actions like the suspension of the whip from the likes of John McDonnell for rebelling on spending signalled they were prepared to face down spending demands.

Yesterday’s botched partial U-turn has blown that narrative sky high.

No 10 and No 11 have crossed a rubicon. They have provided a precedent whereby they whip out the cheque book in the face of political pressure, even though we are years from a general election.

Not only did No 10 fold, but they evidently did so without any semblance of a plan of what they would actually do with winter fuel allowance or how much they would spend on mitigation, or how that would be funded.

Perhaps they had no plan because they too waited for the Institute for Fiscal Studies press release laying out the options. That’s how we work out what will probably happen – maybe that’s their trick too.

Read more:

Ex-PM suggests people on top rate of income tax should be excluded from winter fuel allowance

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What are the options for winter fuel payments? The Institute for Fiscal Studies has looked into the government’s options after Sir Keir Starmer said he is considering changes to the cut to winter fuel payment (WFP).

The government could make a complete u-turn on removing the payment from pensioners not claiming pension credit so they all receive it again.

There could be a higher eligibility threshold. Households not claiming pension credit could apply directly for the winter fuel payment, reporting their income and other circumstances.

Or, all pensioner households could claim it but those above a certain income level could do a self-assessment tax return to pay some of it back as a higher income tax charge. This could be like child benefit, where the repayment is based on the higher income member of the household.

Instead of reducing pension credit by £1 for every £1 of income, it could be withdrawn more slowly to entitle more households to it, and therefore WFP.

At the moment, WFP is paid to households but if it was paid to individuals the government could means-test each pensioner, rather than their household. This could be based on an individual’s income, which the government already records for tax purposes. Individuals who have a low income could get the payment, even if their spouse is high income. This would mean low income couples getting twice as much, whereas each eligible house currently gets the same.

Instead of just those receiving pension credit getting WFP, the government could extend it to pensioners who claim means-tested welfare for housing or council tax support. A total of 430,000 renting households would be eligible at a cost of about £100m a year.

Pensioners not on pension credit but receiving disability credits could get WFP, extending eligibility to 1.8m households in England and Scotland at a cost of about £500m a year.

Pensioners living in a band A-C property could be automatically entitled to WFP, affected just over half (6.3m).

Now look at this morning’s Guardian. The excellent Pippa Crerar, the political editor wronged by a Number 10 denial of her winter fuel climbdown story last week, reports more welfare climbdowns on the card, including potentially a change or removal of the two-child cap. Others have said the same to me.

I make no moral judgment about the two-child cap, that’s not my job. Many Labour MPs find it abhorrent. But it performed a vital function in the manifesto: it was a signal to the markets that Labour can take and stick to the difficult fiscal decisions that the current state of the public finances demands.

The two-child cap was Ms Reeves’s pre-nuptial agreement with the buyers of UK government debt. She breaks that as a result of political pressure at her peril.

She may claim better economic news in recent days gives her wiggle room – today’s borrowing figures and the sheer level of global uncertainty (what would Israel bombing Iran do to petrol prices, for instance) suggest caution might be a worthwhile path.

Image: Rachel Reeves resisted calls to lift the two-child benefit cap

Just this morning, Bloomberg is warning long-term bond yields are going up all over the world, including the UK.

The question now is where does the spine crumbling end?

Who knows now how much this government will recoil when there’s the next rebellion. Or when the unions up the pressure, as they surely will at some point before the next election.

Take just one example. Today, public sector pay awards have been flopping into our inboxes. GMB Union has begun balloting NHS and ambulance workers in England on this year’s 3.6% pay award.

How much will ministers be prepared to pay in the next 18 months to stop strikes breaking out?

We just don’t know. And more importantly, we don’t get a sense Ms Reeves does either.

After yesterday, levels of certainty about the course of government decision-making took a hit.

Will they end up being punished by the markets for this? Some believe they could. It seems we must return to watching the cost of government debt for the rest of this parliament.

Britain’s energy bills problem – and why firms are paid huge sums to stop producing power

2 days ago Share Save Justin Rowlatt Environment Editor Share Save

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It is 1am on 3 June. A near gale force wind is blasting into Scotland. Great weather for the Moray East and West offshore wind farms, you would have thought. The two farms are 13 miles off the north-east coast of Scotland and include some of the biggest wind turbines in the UK, at 257m high. With winds like that they should be operating at maximum capacity, generating what the developer, Ocean Winds, claims is enough power to meet the electricity needs of well over a million homes. Except they are not. That’s because if you thought that once an electricity generator – whether it be a wind farm or a gas-powered plant – was connected to the national grid it could seamlessly send its electricity wherever it was needed in the country, you’d be wrong. The electricity grid was built to deliver power generated by coal and gas plants near the country’s major cities and towns, and doesn’t always have sufficient capacity in the wires that carry electricity around the country to get the new renewable electricity generated way out in the wild seas and rural areas. And this has major consequences.

Getty Images Ocean Winds was paid to turn down the output of its wind farms in the Moray Firth

The way the system currently works means a company like Ocean Winds gets what are effectively compensation payments if the system can’t take the power its wind turbines are generating and it has to turn down its output. It means Ocean winds was paid £72,000 not to generate power from its wind farms in the Moray Firth during a half-hour period on 3 June because the system was overloaded – one of a number of occasions output was restricted that day. At the same time, 44 miles (70km) east of London, the Grain gas-fired power station on the Thames Estuary was paid £43,000 to provide more electricity. Payments like that happen virtually every day. Seagreen, Scotland’s largest wind farm, was paid £65 million last year to restrict its output 71% of the time, according to analysis by Octopus Energy. Balancing the grid in this way has already cost the country more than £500 million this year alone, the company’s analysis shows. The total could reach almost £8bn a year by 2030, warns the National Electricity System Operator (NESO), the body in charge of the electricity network. It’s pushing up all our energy bills and calling into question the government’s promise that net zero would end up delivering cheaper electricity. Now, the government is considering a radical solution: instead of one big, national electricity market, there’ll be a number of smaller regional markets, with the government gambling that this could make the system more efficient and deliver cheaper bills. But in reality, it’s not guaranteed that anyone will get cheaper bills. And even if some people do, many others elsewhere in the country could end up paying more.

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The proposals have sparked such bitter debate that one senior energy industry executive called it “the most vicious policy fight” he has ever known. He has, he says, “lost friends” over it. Meanwhile, political opponents who claim net zero is an expensive dead end are only too ready to pounce. It is reported that the Prime Minister has asked to review the details of what some newspapers are calling a “postcode pricing” plan. So is the government really ready to risk the most radical shake-up of the UK electricity market since privatisation 35 years ago? And what will it really mean for our bills?

Net zero under attack

The Energy Secretary, Ed Miliband, is certainly in a fix. His net zero policy is under attack like never before. The Tories have come out against it, green politicians say it isn’t delivering for ordinary people, and even Tony Blair has weighed in against it. Meanwhile Reform UK has identified the policy as a major Achilles heel for the Labour government. “The next election will be fought on two issues, immigration and net stupid zero,” says Reform’s deputy leader Richard Tice. “And we are going to win.” Poll after poll says cost of living is a much more important for most people, and people often specifically cite concerns about rising energy prices.

Getty Images Ed Miliband’s net zero policy is under attack like never before

Miliband sold his aggressive clean energy policies in part on cutting costs. He said that ensuring 95% of the country’s electricity comes from low-carbon sources by 2030 would slash the average electricity bill by £300. But the potential for renewables to deliver lower costs just isn’t coming through to consumers. Renewables now generate more than half the country’s electricity, but because of the limits to how much electricity can be moved around the system, even on windy days some gas generation is almost always needed to top the system up. And because gas tends to be more expensive, it sets the wholesale price.

Could ‘zonal’ pricing lower bills?

Supporters of the government’s plan argue that, as long as prices continue to be set at a national level, the hold gas has on the cost of electricity will be hard to break. Less so with regional – or, in the jargon, “zonal” – pricing. Think of Scotland, blessed with vast wind resources but just 5.5 million people. The argument goes that if prices were set locally, it wouldn’t be necessary to pay wind farms to be turned down because there wasn’t enough capacity in the cables to carry all the electricity into England. On a windy day like 3 June, they would have to sell that spare power to local people instead of into a national market. The theory is prices would fall dramatically – on some days Scottish customers might even get their electricity for free.

The grid was built to deliver power generated by coal and gas plants near the country’s major cities and towns

Other areas with lots of renewable power – such as Yorkshire and the North East, as well as parts of Wales – would stand to benefit too. And, as solar investment increases in Lincolnshire and other parts of the east of England, they could also see prices tumble. All that cheap power could also transform the economics of industry. Supporters argue that it would attract energy-intensive businesses such as data centres, chemical companies and other manufacturing industries. In London and much of the south of England, the price of electricity would sometimes be higher than in the windy north. But supporters say some of the hundreds of millions of pounds the system would save could be used to make sure no one pays more than they do now. And those higher prices could also encourage investors to build new wind farms and solar plants closer to where the demand is. The argument is that would lower prices in the long run and bring another benefit – less electricity would need to be carried around the country, so we would need fewer new pylons, saving everyone money and meaning less clutter in the countryside.

Getty Images Reform UK chairman Richard Tice, seen here with party leader Nigel Farage, says the next general election will be fought on immigration and “net stupid zero”

“Zonal pricing would make the energy system as a whole dramatically more efficient, slashing this waste and cutting bills for every family and business in the country,” argues Greg Jackson, the CEO of Octopus Energy, one of the biggest energy suppliers in the UK. Research commissioned by the company estimates the savings could top £55 billion by 2050 – which it claims could knock £50 to £100 a year off the average bill. Octopus points out Sweden made the switch to regional pricing in just 18 months. The supporters of regional pricing include NESO, Citizens Advice and the head of the energy regulator, Ofgem. Last week a committee of the House of Lords recommended the country should switch to the system.

Energy firms push back

There are, however, many businesses involved in building and running renewable energy plants that oppose the move. “We’re making billions of pounds of investments in renewable power in the UK every year,” says Tom Glover, the UK chair of the giant German power company RWE. “I can’t go to my board and say let’s take a bet on billions of pounds of investment.” He’s worried changing the way energy is priced could undermine contracts and make revenues more uncertain. And he says it risks undermining the government’s big push to switch to green energy.

AFP via Getty Images Seagreen, Scotland’s largest wind farm, was paid £65 million last year to restrict its output 71% of the time, according to Octopus Energy

The main cost of wind and solar plants is in the build. It means the price of the energy they produce is very closely tied to the cost of building and, because developers borrow most of the money, that means the interest rates they are charged. And we are talking a lot of money. The government is expecting power companies to spend £40bn pounds a year over the next five years on renewable projects in the UK. Glover says even a very small change in interest rates could have dramatic effects on how much renewable infrastructure is built and how much the power from it costs. “Those additional costs could quickly overwhelm any of the benefits of regional pricing,” says Stephen Woodhouse, an economist with the consultancy firm AFRY, which has studied the impact of regional pricing for the power companies. That would come as already high interest rates have combined with rising prices for steel and other materials to push up the cost of renewables. Plans for a huge wind farm off the coast of Yorkshire were cancelled last month because the developer said it no longer made economic sense.

Getty Images

And there’s another consideration, he says. The National Grid, which owns the pylons, substations and cables that move electricity around the country, is already rolling out a huge investment programme – some £60bn over the next five years – to upgrade the system ready for the new world of clean power. That new infrastructure will mean more capacity to bring electricity from our windy northern coasts down south, and therefore also mean fewer savings from a regional pricing system in the future. There are other arguments too. Critics warn introducing regional pricing could take years, that energy-intensive businesses like British Steel can’t just up sticks and move, and that the system will be unfair because some customers will pay more than others. But according to Greg Jackson of Octopus, the power companies and their backers just want to protect their profits. “Unsurprisingly, it’s the companies that enjoy attractive returns from this absurd system who are lobbying hard to maintain the status quo,” he says.

Yet the power companies say Octopus has a vested interest too. It is the UK’s biggest energy supplier with some seven million customers, and owns a sophisticated billing system it licenses to other suppliers, so could gain from changes to the way electricity is priced, they claim. And the clock is ticking. Whether the government meets its clean power targets will depend on how many new wind farms and solar plants are built. The companies who will build them say they need certainty around the future of the electricity market, so a decision must be taken soon. It’s expected in the next couple of weeks. Over to you, Mr Miliband.

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Keir Starmer issues new statement on state pension triple lock

The Prime Minister challenged Conservative leader Kemi Badenoch over the policy

Starmer raised the issue of the triple lock during PMQs.

Keir Starmer issued a fresh update on the state pension triple lock during Prime Minister’s Questions on Wednesday.

The triple lock is Government policy and ensures pension payments increase each year in line with whatever is highest out of inflation, wage growth and 2.5%.

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It guarantees a rise for millions of pensioners each year worth hundreds of pounds.

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READ MORE: Pensioners who lost Winter Fuel Payments sent new £300 update

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But amid discussion over the future of the triple lock, the Prime Minister addressed the policy during PMQs.

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He reiterated his Labour Government was committed to the triple lock – ensuring the annual rise – but questioned whether the Conservatives still believed it in.

Starmer referred to previous remarks from senior Tories suggesting the triple lock could be “unsustainable” and potentially means-tested in future.

The PM said: “Because we’ve stabilised the economy, we on this side (of the house) are committed to the triple lock and that increased pensions by over £400 this April.

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“On their side they say the triple lock is unsustainable. I think her (Kemi Badenoch) position is she wants to means-test it.”

The Conservative leader did not address the PM’s claims during a testy exchange over Winter Fuel Payments and the two-child benefit cap.

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The Government has announced a U-turn on Winter Fuel Payment cuts this year, but has yet to set out any detail about who will now qualify.

The winter allowance is worth up to £300 and hundreds of thousands of low-income pensioners missed out on it last year.

The scale of the backlash has prompted spooked ministers to think again.

Winter fuel payment ‘could be restored to all but richest pensioners’

Keir Starmer promised to ensure ‘more pensioners are eligible for the winter fuel payment after bowing to intense pressure to abandon the decision to strip it from millions of OAPs

The Winter Fuel Payment was stripped from millions of pensioners (Image: Getty )

The winter fuel payment could be restored to all but the wealthiest pensioners under plans said to be being considered by Downing Street.

Keir Starmer promised this week to ensure “more pensioners are eligible” for the payment after bowing to intense pressure to change course.

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The Government’s decision last year to means-test the £300 payment – stripping it from more than 10 million OAPs – has proved hugely unpopular with voters.

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The Prime Minister said further details would be announced at the Budget in the autumn but did not spell out how many people would be impacted or when it could come into force.

The Mirror understands that the decision to change course was only made on Tuesday – a day before Mr Starmer announced it at PMQs.

Keir Starmer announced a U-turn this week on the decision to cut the winter fuel allowance for most pensioners (Image: AP )

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No10 has indicated that a full U-turn on the cut is unlikely. But officials are reportedly examining the option of restoring the allowance to all but the wealthiest pensioners.

One plan on the table is restoring it completely and then clawing it back from the richest OAPs through the tax system, according to the Sunday Times.

Tory Chancellor George Osborne used a similar method when he slashed eligibility for child benefit for the wealthiest families under the Coalition Government. However a decision is not likely to be made until autumn on how to widen eligibility for the payment.

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The PM’s decision to change course on the winter fuel cut has triggered speculation about the future of other unpopular policies.

The Government has delayed its long-awaited child poverty strategy until the autumn amid pressure from Labour MPs to axe the Tory two-child benefit limit.

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Education Secretary Bridget Phillipson, who is leading the taskforce alongside DWP Secretary Liz Kendall, has previously said the strategy would look at the two-child benefit limit.

Insiders said the decision to push back the blueprint was to align it with the Budget in October.

Tonight, reports suggested the PM has ordered the Treasury to look at how it could pay for scrapping the cap, which could cost around £3.5billion a year.

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The PM has made it clear privately that he wants to act as part of his commitment to drive down child poverty, according to the Observer. But a decision won’t be made until the child poverty taskforce reports later this year.

The policy restricts parents from claiming Universal Credit or Child Tax Credits for any children beyond their first two.

Experts say that scrapping the two-child limit would be the most effective way to lift hundreds of thousands of kids out of poverty.

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UK sanctions a major step against Israel – but critics will wonder why Netanyahu is spared

By Dominic Waghorn, international affairs editor

This is a major step from Britain and a number of other countries against Israel and one that puts them at odds with Washington.

It adds to the growing ostracisation of Israel over its war in Gaza and conduct on the occupied West Bank.

Bezalel Smotrich is Israel’s far right finance minister, a Jewish settler and someone who has denied the existence of Palestinians as a people.

He has most recently said “not a grain of wheat” should be allowed to enter Gaza, saying it will be “entirely destroyed” and its people should be encouraged to leave in great numbers to go to other countries.

Itamar Ben Gvir is the country’s far right national security minister was once convicted of being a member of a Jewish terrorist organisation and advocated the expulsion of Palestinians from their lands.

Their critics will say their sanctioning has been a long time coming, is largely symbolic and will achieve little.

The British government singles out Israel’s conduct in the West Bank as grounds for its action against the two men.

Extremist Jewish settlers have run rampant across the occupied territories under Benjamin Netanyahu’s government, with 1,900 recorded acts of violence against Palestinians since January last year.

The Netanyahu government has approved a record number of new Jewish settlements in the West Bank. Under international law all settlements on occupied land are illegal.

The International Criminal Court has issued arrest warrants for Netanyahu and other senior figures over alleged war crimes. A number of countries and observers have deemed its conduct in Gaza as genocidal.

Israel described today’s sanctions as unacceptable and outrageous, but critics will wonder why the Israeli prime minster is not sanctioned himself for keeping two such deeply controversial figures in his government.

There is, though, a good reason for keeping them. Without them, his fragile coalition would almost certainly fall from power.

The price for that, though, is only increasing.