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Sir Keir Starmer gutted his controversial welfare invoice on Tuesday as he tried to fend off a full-scale Labour insurrection in chaotic Home of Commons scenes, leaving a multibillion gap in UK public funds.
Amid fears of imminent defeat, Starmer authorised a last-minute climbdown. Specialists mentioned that internet financial savings from the ultimate model of the invoice, initially supposed to avoid wasting £5bn, might be near nothing.
The adjustments stripped out a clause that had been supposed to generate welfare financial savings by tightening eligibility standards for private independence funds (Pip), the principle incapacity profit.
Labour MPs have been astonished by the transfer, which leaves Chancellor Rachel Reeves going through the prospect of elevating taxes to cowl the £5bn she had anticipated to avoid wasting from the welfare invoice.
Kemi Badenoch, Conservative chief, mentioned on X: “That is an utter capitulation. Labour’s welfare invoice is now a TOTAL waste of time. It successfully saves £0, helps nobody into work, and does NOT management spending.”
Sir Stephen Timms, disabilities minister, mentioned any adjustments to the factors would await the conclusion of the Pip evaluate he’s main, in collaboration with incapacity teams.
Authorities insiders admitted they not knew how a lot the invoice, which now primarily covers common credit score, would save. “It has all moved so shortly,” mentioned one.
Many Labour MPs agreed with Badenoch that the invoice had been rendered largely pointless. “It’s fully neutered,” mentioned one.
Work and pensions secretary Liz Kendall agreed the last-minute climbdown after a day of negotiations with Labour rebels, talks that additionally concerned Starmer and Reeves.
“What you’re netting out at is principally no financial savings — it is going to be simply above zero,” mentioned Louise Murphy, a senior economist on the Decision Basis, in regards to the determination to scrap all tracts of the invoice regarding incapacity profit reform.
Murphy mentioned that after all the Pip reforms had been eliminated, the bundle was prone to price the Treasury round £500mn in 2029-30.
An individual near the discussions mentioned the ultimate change — to scrap all parts of the Pip reform — wouldn’t have occurred if ministers have been assured they’d win the vote on Tuesday.
“There was an acknowledgment throughout authorities that we moved too shortly and we have to be taught classes from that,” they mentioned.
Late on Tuesday, round an hour earlier than a key vote, the federal government introduced that it could be eradicating Clause 5 of the welfare invoice — the whole part regarding adjustments to the Pip eligibility standards.
There had been indicators of rising unease earlier within the day as members debated the invoice.
The reforms had been supposed to tighten Pip standards however a concession by Stamer final week meant that the adjustments wouldn’t have an effect on present beneficiaries. Now they’ve been eliminated totally from the invoice.
Allies of Starmer admitted that main reforms to incapacity advantages had been kicked into the lengthy grass, pending the conclusion of Timms’ evaluate.
One mentioned: “We settle for the need of the Home and can take a look at it once more post-review. The vacation spot — a system that helps essentially the most weak and doesn’t entice individuals — stays. It’s been lower than easy, however change isn’t straightforward.”