| Here at the Readout, we began the week watching from behind our hands as the government seemed to be caving in to its first rebellion over the two-child benefit cap. Indeed, the prime minister's team spent Monday preparing the public for an imminent U-turn, with no less than Starmer himself hinting it would be reconsidered. And yet, the government has shown no such wobble. In fact, they took the opposite approach and have now suspended the whip from seven MPs for six months for defying the leadership on the issue. Relenting this early on would have given Labour backbenchers a taste for rebellion — instead they've had a taste of punishment. Here's Bloomberg's Joe Mayes, who has spoken to key government officials involved: "The battle over the two-child cap was like a virility test for the new administration, arguing it couldn't be seen to lose its first fight with the left-wing of the Labour party...The swift suspensions are also a sign of Starmer wanting to instill strict party discipline on voting, even with the cushion of having won power with a working majority of 180."  Keir Starmer before his first Prime Minister's Questions today. Photographer: Betty Laura Zapata/Bloomberg Quite. Elsewhere, Labour is boxing smarter. Yesterday, fellow Readout author Ailbhe Rea reported ministers are meeting with environmental groups to figure out how to fulfill one symbolic pledge of the government without making a Horlicks of another: building 1.5 million homes, but not wrecking the countryside while they do so. One major stumbling block for housebuilding is the nutrient neutrality rules: EU-era legislation that requires developers to mitigate river pollution caused by building. Back under the last government, the Labour opposition blocked this change to allow more housebuilding — but now they're in power, they're reconsidering how to "unlock housing" while "improving outcomes for nature." People involved in the matter say the fix is likely to be as follows: "The new government will not scrap the environmental rules altogether, but will pursue an approach that allows pollution mitigation to take place alongside development." The gist of this appears to be similar to another policy lever used by the last government — a National Strategic Mitigation Pot, where developers put in cash to pay for nature efforts elsewhere. And of course, environmentalists will be reminded of Labour's plan to totally decarbonize the grid by 2030, meaning that ultimately their agendas are aligned. Business appears happier with the new government. This survey of companies shows the election result produced a surge in confidence, hiring and also new orders. Will the increase in hiring bode ill for hopes of inflation — and interest rates — going down? We'll find out what the Bank of England thinks next week. Want this in your inbox each weekday? You can sign up here. | 
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