In a dramatic shift, Sir Keir Starmer has dramatically scaled back his controversial welfare reforms. The U-turn comes amid mounting pressure from rebel Labour MPs and looming fears of tax hikes to plug the financial shortfall.
- Personal Independence Payments (PIP): Existing recipients will now be protected. Only new claimants will face tougher reassessments.
- The revised plan could slice up to £2 billion from the original £5 billion savings target embedded in the Universal Credit and PIP bill.
- Sir Keir’s office has refused to rule out higher taxes as a consequence.
At least 126 Labour MPs have backed an amendment that would derail the welfare cuts altogether, raising the spectre of a Commons defeat next week.
Late Thursday evening, intense negotiations continued between rebels and ministers, with Starmer pressing for a compromise to avert disaster.
This marks a significant climbdown. The prime minister is banking on the costly concessions to pacify dissent within his party.
But economists warn of wider repercussions. If the reforms are diluted, Chancellor Rachel Reeves may lose vital fiscal space before the autumn Budget, pushing tax rises or spending cuts further down the line.
Asked whether watering down the reforms would necessitate tax increases, Downing Street replied that ministers are “wanting to get it right”. The Chancellor would assess any tax implications “in the round” at a later stage.
What the Concessions Include
- PIP safeguard: Instead of the planned 13-week phase-out for existing claimants, restrictions will apply only to new applicants, safeguarding around 370,000 people from reassessment losses.
- Additional measures: The PM will accelerate employment support schemes and initiate a consultation led by Welfare Secretary Liz Kendall on future disability benefit reforms.
Sir Keir reiterated the necessity of the reforms: benefits claimants are “failed every single day” by a “broken system”. Still, he acknowledged that changes must align with Labour’s “values of fairness”.
Tory Reaction & Wider Political Jostling
- Conservative leader Kemi Badenoch described the situation as the PM being in “the fight of his life”.
- Former Labour minister David Blunkett warned a defeat could trigger a confidence vote.
- On the government’s attendance, criticism grows about Sir Keir’s absences—he has voted less in the Commons in his first year than any predecessor since Tony Blair, while MPs have been hauled into Commons votes.
Labour MP Rachael Maskell demanded deeper reforms before support returns: “[Ministers would need to] … agree a consultation with disabled people… end cuts to PIP without first replacing this with a fairer system… and they would need to not cut Universal Credit…”
Another Labour MP warned the bill must be dropped in full: “I’m not going to support anything that will put disabled people into hardship… The government have just not been listening… We’re all working hard and this is how they treat us.”
The National Institute of Economic and Social Research cautioned that delaying reforms would force Chancellor Reeves into tax hikes or spending cuts to honour borrowing targets.
Economist Ben Caswell said: “More considered policy could help reduce political churn and the associated economic cost, particularly when consumer and business confidence is already low.”
The Tories’ Next Move
On Thursday, Ms Badenoch claimed the Conservatives would go further, slashing £9 billion from the welfare budget in contrast to Labour’s trimmed concessions.
Labour’s shadow chancellor, Mel Stride, accused Starmer of a “screeching U-turn” and “another completely unfunded spending commitment”.
- Commons showdown: The second reading is set for next week.
- Consultation launched: Disability benefit overhauls will be reviewed.
- Fiscal pressure grows: Chancellor Reeves must balance the books ahead of the autumn Budget.
The prime minister is hopeful this compromise will win over wavering MPs. But with rebels unimpressed and economic warnings growing louder, the path ahead looks rocky.
