It was the kind of parliamentary debacle normally seen at the tail end of a government rather than one year in. Way back in the distant past, before the first set of concessions had been offered to the 126 MPs who signed the wrecking amendment (Thursday), Ed Balls used his double act with George Osborne to offer some advice for the government: “pull the bill and regroup”. Trying to rush through a last-minute compromise to appease the rebels, he argued, was risky. “The danger is you don’t go far enough… it ends up being unprincipled and messy.” Instead, it would be better for the government to accept that it didn’t set out the moral case clearly enough and invest in getting it right, coming back with a set of new proposals in autumn after “a period of principled consultation”. “You actually get yourself back on the front foot with the purpose of this legislation and why you’re trying to do it,” Balls explained.
The point is not that the former Treasury Secretary’s advice is uniquely insightful – many commentators and ex-politicos were saying the same thing last week. The point is that Downing Street failed to heed it. Its panic at needing to save a couple of billion after Rachel Reeves found she had a hole in her figures in the spring statement blinded it to what everyone in Westminster was warning: that welfare reform is complicated and emotive and needs time to get right. It was so focused on the aim of saving what is actually a relatively small amount in terms of both the overall public spending budget and the disability bill itself (forecast to rise by £30bn from its 2019/20 level to 2029/30, as David Gauke points out) that it missed first the bigger picture, then the strength of anger among Labour MPs, then the risks of piecemeal compromise. The result was Tuesday night.
You can argue that the original legislation was a mess, and that there are ways of reducing the welfare bill without putting the most vulnerable disabled people at risk – such as investing in a process that better assesses people’s capabilities, alongside ensuring the right healthcare support is available (it is, one former Labour MP told me, a sign of chronic dysfunction that individuals with mental health conditions are claiming Pip to fund private counselling they can’t access on the NHS). You can also argue, as a Labour MP with personal experience of the benefits system did, that the legislation tried to do exactly this and was misrepresented to the point that disabled people were terrified of changes that would not actually affect them.
That argument is now pretty much moot. The questions are no longer around how to deal with the rising number of people falling out of the workforce on health grounds, but on how – or, indeed, if – a government that has just lost an argument with its backbenchers so spectacularly can regain its authority. Other fights are coming: on the two-child benefit cap when the commission on child poverty returns its findings in autumn, on reform of SEND provision, on further pay settlements for NHS workers and other unions. And that’s assuming the OBR doesn’t downgrade growth again and slash the Chancellor’s headroom further. The crisis is only just starting.
What can be done? Twice now – on the Pip cuts and the Winter Fuel Allowance – Downing Street has expended the kind of political capital you’d expect it to save for when it really needs it trying to make modest savings, and been left with nothing in return. Having a big fight over something small (in cash terms) has proved a disaster. So how about having a big fight over something big instead?
This is our New Statesman cover story this week, in which Will Dunn urges Rachel Reeves to “Just raise tax”. It may seem like counterintuitive advice for a government that has clung to its misguided election promise to keep the three biggest tax levers untouched (income tax, national insurance and VAT), but as Will lays out, Starmer and his team don’t have much of a choice: “You can try to make compromises that will allow you to muddle through, until you face disaster at the next election. Or you can try to make history.” (He also has some big ideas about how to simplify the tax system in a way that improves things for both working people and the economy, which I won’t spoil here – go and read the whole thing.)
No one is saying this would be easy or popular. Already Kemi Badenoch has been blasting the idea. But “easy” and “popular” are not words that describe the government’s agenda so far. Tunnel vision has driven them into crisis – as Ed Balls put it, they need a way to get back on the front foot. Whether Starmer and Reeves could make a reset of this nature work is highly uncertain. It would be a huge risk. But what’s clear from last night is that the “tinker around the edges and hope you get lucky” approach comes with risks too.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here
[See also: The troubled welfare bill has passed – but at what cost?]
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