Nigel Farage, Reform UK leader, will next week inflame Labour tensions over public spending by committing to scrapping the two-child benefit cap and reinstating winter fuel payments in full at a cost of up to £5bn.
Sir Keir Starmer, prime minister, has been edging towards both policies under huge pressure from Labour MPs, but chancellor Rachel Reeves has insisted that big decisions must be taken in the round at a fiscal event.
Farage, whose party is leading national opinion polls with ratings of more than 30 per cent, is under no such constraints and will next week pose as the champion of “working people”.
“The prime minister is out of touch with working people,” Farage will say in his first big speech since his rightwing populist party’s triumph in this month’s English local elections.
“It’s going to be those very same working people that will vote Reform at the next election and kick Labour out of government.”
Starmer earlier this week announced a U-turn on winter fuel payments, which his government scrapped last July for all but the poorest pensioners. About 10mn older people in England and Wales lost either £200 or £300 a year, as Reeves sought to save £1.5bn.
But Starmer has not yet said how or when he will deliver on his policy of getting help to more pensioners and Angela Rayner, deputy prime minister, said on Sunday she could not “guarantee” that the change would be made before this winter.
Downing Street is looking at the idea of reinstating the payment as a universal pensioner benefit, while using the tax system to claw back the money from better off pensioners when they fill in a tax return, officials have told the Financial Times.
Starmer has also told ministers that he wants to end the two-child benefit cap, which blocks parents from claiming subsidies for more than two children and was introduced by the last Conservative government.
Lifting the cap would reduce relative poverty across the UK but cost the Treasury £3.5bn by the end of the decade, leaving Reeves with a fiscal hole of up to £5bn in total.
The chancellor is already facing big fiscal problems: borrowing costs are rising and economists believe the Office for Budget Responsibility could downgrade what are widely regarded as optimistic forecasts about Britain’s future productivity growth.
Government officials said they expected Starmer to announce some measures to tackle child poverty in the coming weeks, as a downpayment on more ambitious reforms and as part of an attempt to win over Labour MPs threatening to vote against £5bn of planned welfare cuts.
But Rayner said on Sunday that any scrapping of the two-child cap would have to be taken alongside other big fiscal decisions, including the winter fuel payment plan. Reeves has said she intends to hold only one major fiscal event each year, in the autumn.
The deputy prime minister has urged Reeves to partly solve her fiscal problem by raising taxes, mainly on the better off, by up to £4bn. Rayner’s advice was disclosed earlier this week in a leak.
But Rayner insisted that she and her team were not responsible for the leak to the Telegraph newspaper, which was widely seen as an attempt to burnish her credentials with left-leaning Labour MPs as a future leader.
“We aren’t looking over each other’s shoulders seeing who can vie for the next leadership,” Rayner told the BBC’s Laura Kuenssberg. “I don’t want to run for the leadership of the Labour party. I rule it out.”
Rayner said any move on the two-child benefit cap would depend on the state of the economy, insisting the cabinet was “100 per cent” behind Reeves as she confronted growing fiscal pressures.
The fact that Rayner wrote a memo on tax to Reeves ahead of the spring statement in March caused consternation among some colleagues: “You don’t put something like that in writing unless you want it to leak,” said one.
Meanwhile, Kemi Badenoch, Conservative leader, defended the principle of the winter fuel payment, but said: “I don’t think millionaires should get it.”
Badenoch, under pressure to raise her game after her party slumped to fourth place in opinion polls behind Reform, Labour and the Liberal Democrats, admitted to the BBC: “We don’t have much time. We do have to move quickly.”
