Starmer Drops Flagship Welfare Reforms to Avoid Defeat

UK Political Landscape - Keir Starmer faced a difficult choice regarding a welfare reform bill, potentially losing a key vote or making a U-turn [1][2] - Labour MPs criticized the bill's restrictions on benefit payments to some disabled people as "Dickensian" [3] - Starmer's U-turn on the welfare reform bill has political and economic costs, potentially negating the reform's savings [3] - The government is billions of pounds in the red, increasing pressure on the Chancellor [4] UK Economic Outlook - The Office for Budget Responsibility (OBR) admitted to being too optimistic in its medium-term growth outlook [5] - Downgraded growth forecasts in the autumn budget could leave Rachel Reeves with even less headroom against fiscal rules [6] - Raising taxes could further hinder UK economic growth, creating a difficult situation for the Chancellor [7] Fiscal Policy Implications - Chancellor Rachel Reeves may need to raise taxes or bend fiscal rules due to the U-turn on welfare reform and revised growth forecasts [4] - Raising taxes could lead to less growth, creating a "doom loop" for the UK economy [7] - The situation leaves significant pressure on trade deals to boost growth, as Starmer has limited options [7]