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Labour to vote for Osborne's welfare cap next week

Party's decision could lead to backbench rebellion.

George Osborne's new cap on total welfare spending, which a parliamentary vote will be held on next week, is his least disguised trap for Labour yet. But at his post-Budget briefing to the lobby, Ed Balls made it clear that he won't be falling into it.  He said:

We'll vote yes on the welfare cap next week...Ed Miliband called for a welfare cap last year, in his speech in June, and we have agreed with the way in which the government has structured the welfare cap, what's in and what's out in the next parliament [Osborne's cap excludes the state pension and cyclical unemployment benefits]. We obviously have different views about the way in which we think social security policy should develop, we would rather they did more to reduce the housing benefit bill through building more affordable homes, we think there would be a wider spin-off within the welfare cap from our jobs guarantees, and also we'll abolish the bedroom tax.

In response to Conservative claims that Labour's pledge to scrap the bedroom tax is unfunded, Balls emphasised that "we've said as a backstop how we'd pay for that" (see my blog from the time of Ed Miliband's announcement for details) but noted that many housing analysts predict the measure will cost more than it saves. He ended his answer by confirming "we'll support the welfare cap next week" (Osborne has set the limit at £119bn for 2015-16 and will increase it in line with inflation from then on).

Since, as Balls said, Labour has already pledged to cap "structural welfare spending", and to reduce the benefits bill by building more homes and reducing long-term unemployment, this is not as surprising as it might appear. But the decision will sit uneasily with those MPs opposed to the principle of capping welfare (for fear that weaker-than-expected growth will force cuts to benefits for the vulnerable) and those who simply dislike the act of walking through the yes lobby with Osborne and his Tory cohorts. I would not be surprised if Miliband faces a significant backbench rebellion next week.

P.S. Balls also used his briefing to tell an amusing story about Eric Pickles, who fell asleep during the Budget. Miliband and himself motioned to Vince Cable to wake him, lest Osborne announce major cuts to local government spending, but there wasnt "enough oomph" in the Business Secretary's nudge to do so. It was only when David Cameron intervened that Pickles was finally roused.

Balls said: "Eric Pickles fell asleep for a quite an extended period of time. And Ed and I were worried because, you know, you never know whether there might have been some big cut in local government spending coming which he didn’t know about and so we just politely suggested to Vince Cable that he should wake him up. And Vince elbowed and elbowed and it didn’t seem to make any difference. So Vince was actually knocking away...although at one point after a third nudge from Vince Cable, Eric started to nod knowingly at the contents of the speech while still, with his eyes closed...Then I think, eventually, David Cameron intervened."

George Eaton is political editor of the New Statesman.

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Theresa May gambles that the EU will blink first

In her Brexit speech, the Prime Minister raised the stakes by declaring that "no deal for Britain is better than a bad deal for Britain". 

It was at Lancaster House in 1988 that Margaret Thatcher delivered a speech heralding British membership of the single market. Twenty eight years later, at the same venue, Theresa May confirmed the UK’s retreat.

As had been clear ever since her Brexit speech in October, May recognises that her primary objective of controlling immigration is incompatible with continued membership. Inside the single market, she noted, the UK would still have to accept free movement and the rulings of the European Court of Justice (ECJ). “It would to all intents and purposes mean not leaving the EU at all,” May surmised.

The Prime Minister also confirmed, as anticipated, that the UK would no longer remain a full member of the Customs Union. “We want to get out into the wider world, to trade and do business all around the globe,” May declared.

But she also recognises that a substantial proportion of this will continue to be with Europe (the destination for half of current UK exports). Her ambition, she declared, was “a new, comprehensive, bold and ambitious Free Trade Agreement”. May added that she wanted either “a completely new customs agreement” or associate membership of the Customs Union.

Though the Prime Minister has long ruled out free movement and the acceptance of ECJ jurisdiction, she has not pledged to end budget contributions. But in her speech she diminished this potential concession, warning that the days when the UK provided “vast” amounts were over.

Having signalled what she wanted to take from the EU, what did May have to give? She struck a notably more conciliatory tone, emphasising that it was “overwhelmingly and compellingly in Britain’s national interest that the EU should succeed”. The day after Donald Trump gleefully predicted the institution’s demise, her words were in marked contrast to those of the president-elect.

In an age of Isis and Russian revanchism, May also emphasised the UK’s “unique intelligence capabilities” which would help to keep “people in Europe safe from terrorism”. She added: “At a time when there is growing concern about European security, Britain’s servicemen and women, based in European countries including Estonia, Poland and Romania, will continue to do their duty. We are leaving the European Union, but we are not leaving Europe.”

The EU’s defining political objective is to ensure that others do not follow the UK out of the club. The rise of nationalists such as Marine Le Pen, Alternative für Deutschland and the Dutch Partij voor de Vrijheid (Party for Freedom) has made Europe less, rather than more, amenable to British demands. In this hazardous climate, the UK cannot be seen to enjoy a cost-free Brexit.

May’s wager is that the price will not be excessive. She warned that a “punitive deal that punishes Britain” would be “an act of calamitous self-harm”. But as Greece can testify, economic self-interest does not always trump politics.

Unlike David Cameron, however, who merely stated that he “ruled nothing out” during his EU renegotiation, May signalled that she was prepared to walk away. “No deal for Britain is better than a bad deal for Britain,” she declared. Such an outcome would prove economically calamitous for the UK, forcing it to accept punitively high tariffs. But in this face-off, May’s gamble is that Brussels will blink first.

George Eaton is political editor of the New Statesman.