Rachel Reeves’s repeated policy U-turns have cost the public finances £8.2 billion, according to a new analysis that delivers the first full assessment of the government’s series of climbdowns.
The Resolution Foundation said policy uncertainty remains stubbornly high despite Labour’s repeated promises to “restore stability” to economic decision-making. Using figures from the Office for Budget Responsibility, the think tank calculated that reversals over the course of the current parliament have imposed a significant financial hit.
The £8.2 billion figure includes retreats on personal independence payments, universal credit reforms, the winter fuel allowance and the two-child benefit cap. However, it does not account for more recent reversals, including changes to business rates relief for pubs and inheritance tax rules for farmers, which are expected to cost an additional £300 million and £130 million respectively.
Nor does the estimate include the impact of abandoned proposals on jury trials or the government’s U-turn on mandatory digital ID cards.
According to the Resolution Foundation, UK policy uncertainty is now at its highest level since records began in 1997. The report said: “Elevated UK-specific policy uncertainty is almost certainly linked to the scale and frequency of fiscal interventions during this parliament.”
Greg Thwaites, the think tank’s research director, said that while the government’s growth strategy contained positive elements, it had been repeatedly undermined by indecision. “There’s lots to welcome in the government’s economic growth strategy,” he said. “But it has spent much of the past 18 months undermining that strategy with policy U-turns, kite-flying tax ideas and timidity in areas like trade where it needs to be bold.”
Last week it emerged that Sir Keir Starmer had dropped plans to introduce mandatory digital ID for workers, marking the 13th major U-turn of his premiership. The scheme had been intended to make digital identification compulsory for right-to-work checks as part of a crackdown on illegal migration.
Meanwhile, the chancellor is drawing up emergency measures to support around 5,000 pubs that have seen their business rates double, following strong criticism from the hospitality sector. An announcement is expected as early as this week.
Reeves is also under mounting pressure to extend support to hotels, restaurants and other hospitality businesses hit by sharp tax rises. On Sunday, the Federation of Small Businesses urged her to make a “decisive intervention now”, warning that high-street businesses face an average business rates increase of 52 per cent over the next three years.
Tina McKenzie, the FSB’s policy chair, said cafés, shops and hairdressers were at risk unless urgent action was taken. “The tax timebomb that’s currently ticking will see three years of soaring bills, threatening our high streets and the jobs and services they provide,” she said. “Without business rates relief, the burden will simply become too much for some, who will be forced to shrink or close altogether.”
The Resolution Foundation report also highlighted deeper structural weaknesses in the UK economy. It found that GDP per head is now level with Italy’s, having been 8 per cent higher before the pandemic. While the UK had narrowed the gap with countries such as Australia, Canada, France and Germany to just 5 per cent in 2005, it is now around 15 per cent behind its former peers.
Despite this, the think tank said the economy could be “on the brink of a turnaround”, arguing that ministers should strengthen rather than dilute their growth plans.
Thwaites said the government should accelerate housebuilding in major cities, improve job support for younger and older workers, and confront the economic damage caused by Brexit. “With signs that productivity may be turning a corner, the government must capitalise by ramping up its plans,” he said.
The Treasury was approached for comment.
