Michael Simmons

Keir Starmer has ruled out a U-turn on the government’s decision to cut the winter fuel payment, with the Prime Minister’s spokesman insisting there ‘will not be a change to the government's policy’. This came after a report in the Guardian suggesting No.10 was considering softening the £1.4 billion cut, possibly by raising the threshold that defines who qualifies as poor enough to receive it. We can’t keep living in a state totally consumed by propping up its welfare system That a U-turn was even floated reflects two pressures: disquiet among Labour’s backbenchers, and the electoral warning shot fired by Reform UK in last Thursday’s local elections and by-election.

Britain’s welfare crisis may have slipped from the front pages following Liz Kendall’s £4.8 billion worth of cuts announced ahead of the Spring Statement, but the problems haven’t gone away. Figures quietly released by the Department for Work and Pensions (DWP) this week show that, despite Labour’s planned ‘reforms’ to the benefits system, nearly a million more people will end up on incapacity benefits by the end of the decade, at an additional cost of £9 billion. Kendall’s reforms have only chipped away a few pebbles from Everest Last autumn, the DWP’s own forecasts projected welfare spending on disabled and sick Britons passing £120 billion by 2030.

The Chancellor will meet America’s top economic official, Treasury secretary Scott Bessent, today as she concludes her trip to the International Monetary Fund’s Spring Meetings in Washington. As discussed on Coffee House this week, Rachel Reeves will use her meeting to attempt to make an Anglo-American trade deal a realistic possibility.  Yesterday, the Chancellor put in a surprise appearance on one of Donald Trump’s favourite news channels, Newsmax, and said she understood that both her government and the Trump administration were elected by voters who felt globalisation had not worked for working people. The tone of her interview was very much aimed at the President and his team.

Britain borrowed nearly £152 billion in the financial year to March – almost £21 billion more than at the same point in the last financial year, according to the Office for National Statistics (ONS). The latest public finance figures reveal that borrowing in March was the third highest since records began in 1993. Crucially, it’s also nearly £15 billion more than what the Office for Budget Responsibility (OBR) had expected for this point in the financial year. The £9.9 billion headroom Rachel Reeves left herself at the Spring Statement already looks to be in serious doubt. The current budget deficit, which is borrowing to fund day-to-day spending and the metric used to judge the Chancellor’s ‘ironclad’ fiscal rule, was nearly £75 billion.

The waves from Donald Trump’s tariff upheaval continue to ripple through the global economy. The International Monetary Fund (IMF) has downgraded its forecasts for global growth to 2.8 per cent for this year and 3 per cent for 2026, down from previous estimates of 3.3 per cent for each year. The UK isn’t immune: the IMF expects British growth to come in at 1.1 per cent this year and 1.4 per cent next year. US growth, meanwhile, falls to 1.8 per cent followed by 1.7 per cent. These cuts were widely expected, but they sharpen the focus on the costs of the current trade tensions. The downward pressure on demand is likely to reduce inflation risks that the Bank of England had worried were becoming sticky.

Price rises have unexpectedly eased. The Consumer Price Index rose by just 2.6 per cent in March, down from 2.8 per cent the month before and slightly lower than analysts’ expectations of 2.7 per cent. The figures, just published by the Office for National Statistics, show that the slowdown was driven by falling fuel costs and flat food prices compared to a year ago. Most of the fall was due to lower prices at the pumps, with both petrol and diesel down by 1.6p last month. Meanwhile, prices in some sectors continued to rise – most notably in education, where costs jumped by 7.5 per cent year-on-year, largely due to the introduction of VAT on private school fees.

Much to the concern of the Bank of England, British workers are continuing to bank inflation-busting pay rises. Figures just released by the Office for National Statistics (ONS) show that over the three months to February, the average worker received a pay increase of 5.6 per cent. Remove inflation and that works out as a 2.8 per cent real-terms rise.  The persistence of strong pay growth is likely to alarm the nine members of the Bank of England’s Monetary Policy Committee. They have repeatedly warned that they consider sustained wage increases to be a key sign of entrenched inflation. The committee has previously said it wants to see pay growth slow before resuming interest rate cuts.

China has retaliated against Donald Trump by raising duties on all American imports to 125 per cent from 84 per cent, declaring that it has no interest in responding further to what it calls a ‘joke’ policy. The higher rate will come into force from tomorrow. The announcement comes after the White House’s clarification that tariffs on Chinese exports have climbed to 145 per cent this year – a move China’s commerce ministry described as ‘economically meaningless’ and a tool for ‘bullying and coercion’. The world’s two largest economies exchange goods worth around $700 billion annually. Beijing has made it clear that it considers American goods effectively unmarketable within its borders.

This afternoon, Keir Starmer recommitted to not raising income tax, VAT or employee National Insurance for the duration of this parliament. At the same time, he reiterated his support for Rachel Reeves’s ‘ironclad’ fiscal rules. Are both possible? Answering a question from GB News’s Chris Hope at a visit to the Jaguar Land Rover factory in the West Midlands the Prime Minister said: ‘We made that commitment in the manifesto and we were absolutely clear about it going into the Budget and the Spring Statement, and that is a commitment we’ve made and a commitment we will keep.

This week, Donald Trump steered the global economy away from the free trade era that has underpinned growth for decades. Within hours of his announcement of tariffs on what looked like a bookmakers board from Aintree, China had responded with its own: a 34 per cent tax on all US imports starting next Thursday. The markets were horrified. US stocks suffered their worst week since 2020, with the S&P 500 shedding over $5 trillion in value. Over the course of the week, the index fell just over nine per cent. For context: at this point after their election wins, the S&P was up 9 per cent for Obama’s second term, 10 per cent for Trump’s first, and 19 per cent under Biden. Under Trump 2.0, it’s now down 7 per cent. The fear of contagion is spreading.

Across the world, markets are plunging as they respond to the global tariffs Donald Trump unleashed from the White House rose garden last night – with the president’s top economist describing the falls as ‘short-term bumps’. The pound passed $1.30 for the first time in six months while stocks in Tokyo fell 4 per cent. On opening, the FTSE 100 fell nearly 2 per cent, despite the slightly more favourable 10 per cent levy we face compared to the 20 per cent Trump hit Europe with. How bad could these ‘bumps’ get for the US though? Trump returned to office promising tax cuts. But however he may spin his new protectionist tariffs, many are clear that in fact they are huge tax rises.

In just a few hours, Donald Trump is set to take his tariff war global. At 9 p.m. UK time (4 p.m. in Washington), the American President will unveil a sweeping set of trade tariffs, on what he’s dubbed ‘Liberation Day’. What exactly Trump plans to announce remains unclear, but reports suggest everything from global reciprocal tariffs to the enforcement of the 25 per cent duties originally aimed at Mexico and Canada could be on the table. As Katy Balls noted in today’s Lunchtime Espresso, any hopes in Whitehall of securing a UK exemption have all but evaporated. The focus has now shifted from lobbying to damage control, as the economic fallout begins to bite.