Sir Keir Starmer is expected to announce major concessions on his controversial welfare cuts as concerns grow the government will need to raise taxes in order to pay for the dramatic climbdown.
After a day of crisis talks with rebel Labour MPs, The Independent understands the prime minister has agreed to water down his package of reforms, including protecting Personal Independence Payments (PIP) payments for all existing claimants, meaning only new claimants would be subject to tougher rules.
The concessions could shave up to £2bn off the £5bn worth of planned savings from the bill, and follow Downing Street refusal to rule out tax rises for any changes.
More than 120 Labour MPs had signed an amendment that would effectively have killed the welfare cuts off, piling pressure on the prime minister to back down amid fears of a damaging Commons defeat at the second reading of the bill at committee stage next week.
It marks a major U-turn for the prime minister, who will now hope the costly concessions will starve off the rebellion within his party.
However, the government could now face a new headache after top economists warned that failing to pass the reforms would wipe out Rachel Reeves’s financial headroom ahead of her Budget this autumn, meaning a tax rise or cuts to spending elsewhere would be needed to plug the gap.
Asked whether the government accepts it would be forced to hike taxes if it water down the legislation earlier on Thursday, the prime minister’s official spokesperson said ministers wanted to get the changes “right”, adding that the chancellor would take tax decisions “in the round in the future”.
The Independent understands that the concessions focus mostly on the changes to eligibility for PIP, the main disability benefit currently claimed by 3.7m people. The planned reform was expected to hit around 800,000 people.
Existing claimants were to be given a 13-week phase-out period of financial support, a move which had been seen as a bid to head off opposition by softening the impact of the changes, before this week’s revolt erupted.
But it appears Sir Keir has gone further, and is now offering to apply the rules to only new claimants.
The Guardian reports that the prime minister also agreed to expand and bring forward a package of employment support measures, while welfare secretary Liz Kendall pledged to launch a consultation on the disability benefit cuts, that could bring further change to the bill.
Sir Keir had insisted on the need for the reforms on Thursday, warning benefits claimants were “failed every single day” by a “broken system” but admitted Labour MPs want to see “reform implemented with Labour values of fairness”.
Tory leader Kemi Badenoch said Sir Keir was in the “fight of his life”, after the former Labour cabinet minister David Blunkett warned that if his welfare plans were rejected, Sir Keir would face a confidence vote.
The rebellion comes at a time when Labour MPs are growing increasingly critical of the prime minister’s attendance in the Commons, with him having voted less in his first year so far than any of his predecessors up to Sir Tony Blair – while forcing his backbenchers into the Commons to take part in tough votes.
Labour MP Rachael Maskell, formerly a member of the Commons health and social care committee, told The Independent the government would have to agree to a multitude of changes if they were to win back support.
She said: “[Ministers would need to] … agree a consultation with disabled people, they would need to end cuts to PIP without first replacing this with a fairer system and they would need to not cut Universal Credit, as this still leaves disabled people worse off, as they have significantly higher living costs. Scope [charity] has evaluated this to be over £1,000 a month.”
Another Labour MP said the only solution the government could offer was to pull the bill in its entirety and warned that MPs were unlikely to accept much less.
“I’m not going to support anything that will put disabled people into hardship,” they said. “The government have just not been listening. It didn’t need to get this far and the fact that it has is just pretty tin-eared to be honest.
“No 10 sees MPs as irritants and fodder. The disrespect that comes out of there… We’re all working hard and this is how they treat us. It goes back to the point about how arrogant and out of touch they are.”
Meanwhile, the National Institute of Economic and Social Research (NIESR) think tank warned that without passing the reforms, chancellor Rachel Reeves would be forced to raise taxes or cut other spending to meet her self-imposed borrowing rules.
Senior 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.”
But during a speech on Thursday Ms Badenoch suggested the Tories would go even further than Labour, promising to slash £9bn off the welfare bill.
Reacting to concessions understood to have been offered by Sir Keir on the bill, shadow chancellor Mel Stride said: “This is the latest in a growing list of screeching u-turns from this weak Labour Government.
“Under pressure from his own MPs Starmer has made another completely unfunded spending commitment.”
Downing Street has been contacted for comment.
