After the celebration, the hangover. Rachel Reeves’ £300bn Spending Review gave Labour MPs plenty to cheer but reality soon intruded. GDP was revealed to have shrunk by 0.3 per cent in April (as Donald Trump’s tariffs and higher taxes depressed growth). Israel and Iran’s escalating conflict has only further darkened the global outlook. How, in this climate, will Reeves’ largesse be paid for?
Higher taxes are one answer (the Treasury is already compiling potential revenue raisers ahead of this autumn’s Budget); the other is more cuts. When Keir Starmer last month U-turned on winter fuel payments and indicated his intent to abolish the two-child benefit limit, some inside Labour questioned whether the government’s welfare bill would ever emerge. But the answer will become clear this week with legislation due to be published on Wednesday ahead of a vote next month.
No 10 maintains that there is not just a fiscal case but a moral case for the bill. “Winter fuel was a policy that was forced on us in a difficult situation at the start,” an aide told me. “Welfare reform is an argument that we want to make about how to protect the most vulnerable and how to help people into work.”
Starmer himself is moved to passion on this question, telling the cabinet earlier this year that there is “nothing progressive” about a system in which one in eight young people are not in employment, education or training, and one in ten working-age people are claiming at least one type of health or disability benefit (with spending projected to rise from £48.5bn in 2023-24 to £75.7bn in 2029-30).
But he faces the biggest revolt of his premiership to date. Forty-two Labour MPs have signed a public letter describing the £5bn cuts – which would see 370,000 current Personal Independence Payment (PIP) claimants and 430,000 future ones lose an average of £4,500 – as “impossible to support”. More than 100 have signed a private letter to the Chief Whip (“none of us are consistent rebels,” they emphasise), warning that they too are unable to endorse the proposals. Here is why a government with a Commons majority of 165 seats has been forced to contemplate the possibility of defeat (with Downing Street also primed for ministerial resignations).
The Work and Pensions Secretary Liz Kendall – who faces the defining test of her political career – has sought to contain the rebellion by offering an “olive branch” to critics. Those who no longer qualify for PIP would continue to receive payments for 13 weeks (rather than the standard four) and those with lifelong conditions or fewer than 12 months to live would automatically receive a higher rate of Universal Credit and be exempt from reassessments. By the end of the parliament, No 10 points out, there will still be an extra 750,000 people receiving PIP.
Yet most MPs remain unmoved. “The hang-tough position dressed up as concessions won’t wash,” one soft-left figure told me. “MPs know how this stuff works and can’t be fobbed off.” Many privately warn that only a change in the assessment criteria would persuade them to support the bill. At present individuals who need help dressing, washing and feeding themselves would no longer receive PIP.
What lies ahead is nothing less than a battle over Labour’s founding purpose. For some – as cabinet ministers often like to put it, “the clue is in the name” – this is the party of work, not welfare. Others riposte that Labour’s duty is precisely to support those unable to support themselves. Kendall’s task is to convince rebels that her bill does.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here
[See also: Impunity is fuelling Israel’s spiralling aggression]
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