While rebel Labour MPs are celebrating the outcome of last night’s vote, the news means chancellor Rachel Reeves has to find £2.5bn of savings at her autumn budget.
Yesterday evening Labour MPs gathered in the House of Commons to vote on whether the welfare bill should progress. Up until this point, the chaos that has come from the legislation has dominated headlines and created a divided front between the Labour party.
To give context, Keir Starmer initially proposed plans to tighten restrictions on who will be able to access benefit payments, specifically personal independence payments (PIP) and universal credit. The prime minister said the decision would help get more people in Britian working and save our economy £5.5bn.
But while Starmer believed these plans to be sufficient, the majority of his party disagreed. Over the last seven days more than 120 backbench Labour MPs have rebelled against the legislation, which created the biggest controversy of the prime minister’s premiership. However, yesterday Starmer pledged to shelve plans for deep cuts to PIP, which helped pass the legislation onto its next steps.
Under the original plans, PIP claimants would need to score four points in a daily living activity to qualify for the benefit. Now, ministers will only make changes to the disability payment after Stephen Timms, the welfare minister, has conducted an assessment into the whole system. It is believed the findings will be reported in autumn 2026.
Against this backdrop, MPs who were opposing the first draft of the legislation said they were concerned that the government’s own poverty research showed 150,000 of the most vulnerable people would end up in relative poverty as a result of changes to PIP.
As a result of the climbdown, the welfare bill passed its second reading yesterday (Tuesday 1st July) by 335 votes to 260 – a majority of 75. Though 49 MPs voted against the second reading, more than three times greater than the previous biggest rebellion which came from the planning and infrastructure bill in June.
Addressing his party, Keir Starmer said: ‘We will learn from our mistakes, but we will not turn on each other. We will not resile from our record of achievements and we will not turn on our staff – including our chief of staff, without whom none of us would be sitting around this cabinet table.’
On the subject of Labour’s chief staff, the changes to the bill have created a huge headache for chancellor Rachel Reeves. The removal of an entire clause of the legislation means she will have to find another £5bn in savings at her next budget, as well as £1.25bn to cover the cost of the winter fuel payment U-turn.
Commenting on the news, Ruth Curtice, chief executive of the Resolution Foundation, said: ‘The government originally hoped to save £4.8bn from its welfare reforms in the crucial year of 2029/30. The upshot of all the concessions this week is it will now not make any net savings in that year.
‘The changes to universal credit are nonetheless important for recipients and their work incentives and are expected to save money in the longer term.’
Photo by Marcin Nowak via UnSplash
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