Keir Starmer has been challenged over the government’s welfare cuts and the employer tax rises coming next month following the October budget. The tough questions about Labour’s economic decisions come a week before the chancellor delivers her spring statement.
Wednesday 19 March 2025 17:35, UK
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The Lib Dem leader is demanding that the government does more to call out Donald Trump, labelling him an “unreliable ally”.
Speaking to our deputy political editor Sam Coates, Sir Ed Davey said it is “bizarre” that his is “the only party in British politics calling Donald Trump out”, arguing that across Europe, leaders are making their positions clear.
“I have a little bit of sympathy with the government,” he added. “They’re trying to tread a very fine line in order to try to persuade Trump to change his views.
“But I’ve come to the conclusion that he’s an unreliable ally. And I’m very sorry, I’m very disappointed that the Conservatives and Reform are not calling Trump out. He should be called out.”
Sam put to him that the government appears to be listening to the Tories and Reform UK on defence policy, for example.
Davey rejected that assertion, saying his party agrees on the need to increase defence spending, and wants to reach 3% as quickly as possible.
But he did acknowledge that his party is not being listened to when it comes to international aid, which the government is cutting in order to fund the boost in defence spending.
“Overseas aid makes us more secure,” Davey argued. “It has soft power which enables us to keep our coalition together.
“I am really very worried that if we pull away from that, as the United States is doing, the vacuum will be filled by Russia and China, and that makes us less secure.”
Sir Ed Davey has told Sky News his party opposes the government’s changes to welfare because “they’re going to hit people who are genuinely disabled and can’t work”.
Speaking to our deputy political editor Sam Coates, the Liberal Democrat leader said there are elements of the proposals they could support, such as giving people the right to try work without losing their disability benefits.
But on the overall changes the government is making to disability benefits and universal credit, it has not published any impact assessments or analysis of where the supposed £5bn in savings will come from.
“What they’re doing is with the uncertainty and lack of clarity – they’re creating fear,” Davey said. “And that fear is hurting people.”
He said disabled people and carers are “worried”, and “it keeps them up at night”.
Sir Ed Davey is demanding the government holds an emergency budget, saying the economy is “flatlining”.
Speaking to our deputy political editor Sam Coates, the Liberal Democrat leader said business is “really worried about the economy”, and the government’s not taking the necessary measures “to reboot”.
“They’re going ahead with the job tax, which we’ve criticised since the budget,” he said.
“They’re not going fast with removing the barriers to trade and getting a good, decent trade deal with our European colleagues, even though we’re getting the tariffs from President Trump.
“So, I absolutely think we need an emergency growth budget to do those sorts of things.”
Public finances facing ‘real problem’
Sam pointed out there are no other voices calling for such emergency measures, and the economy is nowhere near the place it was under the Truss government, for example, so puts to him that it’s irresponsible to suggest that this is an emergency situation.
Davey disagreed, saying while there was an “absolute disaster” under the Conservatives that “completely wrecked the economy”, there is no growth under the Labour government which is “creating a real problem for the public finances”.
He argued in order to fund public services over the coming years, then “we need to grow our economy”, and he claimed his party is the only one “putting forward positive ideas” to achieve that.
Davey: Tax big tech and gambling firms
The first step, Davey said, is to scrap the impending employers’ national insurance hike that is “having a really bad impact on small businesses, on growth prospects, and indeed on the health and social care sector”.
He called for the big banks to pay more in tax, and for the government to reverse the Tories’ 2016 tax cuts.
He also said the “big profits” of social media giants should be taxed at 10%, and online gambling firms should also pay more.
“I think it would be fair to ask those particular sectors who are doing incredibly well to pay more, and that would mean that small businesses wouldn’t pay this job tax,” Davey said.
By Alix Culbertson, political reporter
Chancellor Rachel Reeves will update the country on her plans for the economy during the spring statement on 26 March.
Having only committed to holding one budget a year (in the autumn), this was meant to be a low-key affair.
But a turbulent economic climate since October means the £9.9bn gap in her fiscal headroom (the amount she could increase spending or cut taxes without breaking her fiscal rules) has been wiped out.
Some big cuts have already been announced – and there may be more to come.
By Becky Johnson, social affairs correspondent
On a hilltop above Ashfield, a sculpture of a miner watches over the local towns.
In a part of Nottinghamshire with a proud mining heritage, almost a third of working-age people are now economically inactive.
It’s places like this where they’re bracing for the impact of welfare reform.
A group of young people meet here in a local park, before the government unveiled its benefit crackdown designed to save £5bn. They’re among the UK’s almost a million so-called NEETS – people aged 16-24 not in employment, education or training.
Holly, 17, had to drop out of college for having too much time off and explained she has a long-term condition that makes her sick, as well as autism and ADHD.
“I’m still living with my parents but I’m also on PIP,” she says.
She’s concerned that the government is tightening eligibility for PIP – personal independence payments – as part of cuts to sickness and disability benefits.
In the wake of a wide-ranging package of reforms on benefits, Labour has claimed that it did not mislead voters ahead of the general election.
Stephen Timms, the work and pensions minister, told Sky News that Labour had outlined how it “wanted to bring forward a plan to fix a broken system” in the document, which details potential policy.
The party is facing accusations that it “rushed” through these welfare reforms in a bid to plug a “black hole” in public finances, but Work and Pensions Secretary Liz Kendall has insisted this is not the case.
Here, Sky News details exactly what Labour did say about welfare in its manifesto.
‘Too many people are out of work’
The document detailed how “long waits for treatment of health conditions, particularly mental health, are contributing to the rise in economic inactivity”.
Labour pledged to “reform employment support so it drives growth and opportunity”.
National jobs and careers service
One major pledge in this realm was merging Jobcentre Plus and the National Careers Service to provide a national jobs and careers service.
The Department for Work and Pensions set out plans for this in the early days of the Labour government.
Tackle the backlog of access to work claims
Additionally, Labour said in its manifesto that it would “tackle the backlog of access to work claims and give disabled people the confidence to start working without the fear of an immediate benefit reassessment if it does not work out”.
The manifesto said the work capability assessment is “not working” and “needs to be reformed or replaced”.
Kendall confirmed on Tuesday that work capability assessments will be entirely scrapped in 2028.
Labour also mentioned a “proper plan to support disabled people to work” in its manifesto.
As a reminder, this is what Labour announced on welfare:
One of the most controversial parts of the government’s budget in October was the decision to hike employers’ national insurance from 13.8% to 15% (with some relief for small businesses).
The House of Lords passed a series of amendments to the legislation required to implement that hike, and the House of Commons is this afternoon having its say on those.
The first amendment sought to exempt health and social care providers from the rise, and was tabled by the Liberal Democrats.
MPs voted to reject it by 307 votes to 182 – with the Tories, Lib Dems, SNP, and smaller parties unable to sway Labour MPs to their position.
The second amendment would have exempted charities with an annual revenue of less than £1 million from the hike.
But it was also rejected by Labour MPs, with 310 voting to reject it. 183 opposition MPs voted in favour of it.
The third amendment sought to exempt employers providing transport for children with special educational needs and disabilities from the rise.
But predictably, Labour’s huge majority meant the amendment was rejected by 314 votes to 187.
The fourth amendment was specific to Northern Ireland, seeking to exempt medical services from the rise – and it was also rejected by 313 votes to 190.
Amendments five, six, and seven were opposed by both the government and the opposition, so they were rejected without a formal division (vote).
Peers passed a total of 21 amendments to the legislation for the national insurance rises, and the Commons debate is scheduled to last up to two hours, so there is a way to go in the Commons this afternoon…
The Labour government has unveiled a raft of plans for changes to the UK’s welfare system, which it says will save the UK a total of £5bn.
Work and Pensions Secretary Liz Kendall detailed the government’s planned reforms to the welfare and benefits system in the House of Commons.
She made clear Labour’s motivation, pointing to the sheer cost of long-term sickness and disability benefits for working-age people, which has risen by £20bn since the pandemic and is forecast to hit £70bn over the next five years.
Below, our political reporters Faith Ridler and Alexandra Rogers look at all the changes Labour plan to make to the welfare system.
By Tim Baker, political reporter, in the gallery at PMQs
Many have made the argument that the Labour government announcing it was cutting benefits is a sign the world has turned upside down.
And maybe this was further proven at PMQs, when it was the question at the end – rather than the ones at the beginning – that was most important.
Diane Abbott, the veteran Labour MP (despite Keir Starmer’s alleged best efforts) asked about the cuts to benefits to a deathly silence in the Commons chamber.
While Starmer batted away the question with a mixture of praise for Abbott and justification for the cuts, his ex-colleague in the Corbyn shadow cabinet was shaking her head – and she wasn’t the only one.
Members of Labour scattered across the government side of the chamber could also be seen shaking their heads side-to-side in displeasure with the party’s new direction.
This seems like the moment, perhaps, where the sheen of a still newish Labour government wears off completely.
Familiar zingers fall a little flatter
With more than 400 MPs, the support for Starmer always seems raucous in parliament – but were the cheers as the PM entered the chamber a bit more muted today?
Did his pre-prepared zingers to Kemi Badenoch not quite get the same full-throated roar of backing as before?
MP for MP, the Tories seemed to be making more of a cacophony backing their leader than the government.
Don’t get it wrong – the PM still elicited huge cheers when attacking the Conservatives for the record in government, the 14 years of something and a £22bn whatever.
More muted support
But when he was questioned from across the chamber by backbench MPs on the cuts announced yesterday, it all seemed to clam up.
Perhaps this was best summed up the Green Party’s Carla Denyer asking why Labour were not raising taxes on the rich instead of cutting benefits.
Starmer responded by accusing Denyer of wanting to ape Liz Truss’s spending plans – to a muted reply of “hear, hear” jeers from loyal and pay rolled ministers placed around the PM for the benefit of the cameras.
Catch up on PMQs as it happened with commentary from our deputy political editor Sam Coates:
By Faith Ridler, political reporter
Chancellor Rachel Reeves is poised to deliver an update on the health of the British economy later this month.
The spring statement is not a formal budget – as Labour pledged to only deliver one per year – but rather an update on the economy and any progress since her fiscal statement last October.
While it’s not billed as a major economic event, Rachel Reeves has a big gap to plug in the public finances and speculation has grown she may have to break her self-imposed borrowing rules.
Here, Sky News explains everything you need to know.
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