Moody blues: Tories forced to abandon controversial welfare cuts as Iain Duncan Smith lashes out

Billy Bambrough
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David Cameron will aim to draw a line under a blistering row prompted by the resignation of Duncan Smith (Source: Getty)

The government will perform a screeching U-turn today as ministers scramble to repair the damage caused by controversial plans to cut disability payments.

Prime Minister David Cameron will aim to draw a line under a blistering row prompted by the resignation of former party leader Iain Duncan Smith, who stepped down as welfare secretary at the end of last week.

Stephen Crabb, who has replaced Duncan Smith at the Department for Work and Pensions, is expected to abandon the proposed changes to personal independence payments signalled in last week’s Budget.

Speaking yesterday, Duncan Smith claimed he had turned against the government’s “arbitrary” cap on welfare, saying “this is not the way to do government”. The former Tory leader and Brexit campaigner said that a sense of unfairness “is damaging to the government, it’s damaging to the party and it’s damaging to the public".

Read more: Iain Duncan Smith defends resignation branding welfare cap "deeply unfair"

Meanwhile, in a fresh blow to chancellor George Osborne, firms are gearing up to go to war with the government over his controversial sugar tax, and are considering fighting the new levy in the courts.

The likes of Coca Cola, AG Barr and Britvic have told trade body the British Soft Drinks Association to pursue “all options” as they pour over the details of the tax, which the chancellor claimed would raise £520m a year in last week's Budget.

Gavin Partington, director general of the British Soft Drinks Association, said: "At this stage, all options are on the table. We need clarification about how this tax is going to work, exactly what's excluded and what's not. Nothing can be ruled out at this stage."

The BSDA also pointed to an Office for Budget Responsibility report, released in conjunction with the Budget, that indicates the sugar tax will in fact cost £1bn over the next two years rather than raise revenue for government coffers.

Read more: The sugar tax would be laughable if it weren't so pathetic

According to the OBR, the increase to the retail price index means the government will pay out an extra £1bn in interest on gilts linked to the index over its first two years. The tax, which will add 24p a litre to products with the highest sugar content, is set to be brought in from 2018.

Shares in the UK’s biggest soft drink makers tumbled last week following the announcement on Wednesday.

The news comes just days after influential think tanks the Institute for Fiscal Studies and the Institute of Economic Affairs blasted the proposal. A legal row would be a further blow to the proposed levy, which has also seen Tory MP and former Britvic employee Will Quince brand it as "bizarre".

Similar taxes have been successfully challenged in Finland and Denmark, where Scandinavian companies campaigned for the repeal of so-called fat taxes.

Osborne also faces fresh criticism of his deficit reduction target, with economists continuing to question the viability of his plan to achieve a budget surplus by 2020.

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