Sir Keir Starmer has caved to a Labour rebellion and offered major concessions to his backbenchers on his planned benefit cuts.
In a screeching £1.5bn U-turn, people currently receiving personal independence payment (PIP) will be protected in a move the prime minister hopes will spare him a humiliating defeat on Tuesday.
Adjustments to Universal Credit will also see existing claimants’ incomes protected, work and pensions secretary Liz Kendall confirmed in a letter overnight.
The U-turn followed crisis talks with backbenchers, with some 126 Labour MPs within the party having signed an amendment that would have killed the flagship welfare bill. It cuts £1.5bn from the £5bn the government had hoped to save through the changes, and blows a hole in Labour’s spending plans that economists warn will need to be filled with either tax hikes or spending cuts elsewhere.
Speaking after the U-turn was announced, care minister Stephen Kinnock refused to say how the £1.5bn shortfall would be made up, pointing to the chancellor’s Budget this autumn. And, in a blow to Sir Keir, think tank the Resolution Foundation said the change would cost as much as £4.5bn, meaning the scale of any spending cuts or tax hikes to plug the gap would have to be far larger than thought.
Mr Kinnock said he was “really pleased with the way that the dialogue happened” and that the changes were a “step in the right direction”. And he went as far as accusing critics of the original welfare proposals of spreading “misinformation”, claiming that Labour had always planned to “protect the most vulnerable in society”.
Sir Keir’s Universal Credit and Personal Independence Payment Bill has its second reading on Tuesday, the first opportunity for MPs to support or reject it. The major concessions announced overnight should be enough to win back the support of tens of rebels and get the measures over the line.
A Downing Street spokesperson said: “We have listened to MPs who support the principle of reform but are worried about the pace of change for those already supported by the system.
“This package will preserve the social security system for those who need it by putting it on a sustainable footing, provide dignity for those unable to work, supports those who can and reduce anxiety for those currently in the system.
“Our reforms are underpinned by Labour values and our determination to deliver the change the country voted for last year.”
The government’s original package restricted eligibility for PIP, the main disability payment in England, and limited the sickness-related element of Universal Credit.
Existing claimants were to be given a 13-week phase-out period of financial support in an earlier move that was seen as a bid to head off opposition by aiming to soften the impact of the changes.
In her letter, the work and pensions secretary said: “We recognise the proposed changes have been a source of uncertainty and anxiety.
“We will ensure that all of those currently receiving PIP will stay within the current system. The new eligibility requirements will be implemented from November 2026 for new claims only.
“Secondly, we will adjust the pathway of Universal Credit payment rates to make sure all existing recipients of the UC health element – and any new claimant meeting the severe conditions criteria – have their incomes fully protected in real terms.”
She said a ministerial review would ensure the benefit is “fair and fit for the future” and will be a “coproduction” with disabled people, organisations which represent them and MPs.
“These important reforms are rooted in Labour values, and we want to get them right,” she said.
The change in PIP payments would protect some 370,000 existing claimants who were expected to lose out following reassessment.
The Resolution Foundation think tank said the welfare Bill changes were "important", especially for existing recipients worried about losing their benefits.
Chief executive Ruth Curtice told BBC Radio 4’s Today programme: "In terms of a compromise this is a really important change for those existing recipients who were worried about losing their benefits, clearly particularly for those Pip recipients who were set to lose thousands of pounds; the fact that they will no longer worry about losing that money is a really big change.
"It's a compromise that in the end takes the system to the one the Government wanted as more and more new recipients apply and the existing recipients roll off so it's a compromise that does significantly delay the new system coming in and avoids those particularly high income shocks for Pip recipients but sort of gets to where the Government wanted to get to in the end."
But she warned that the changes could create a two-tier system.
Ms Curtice said: "It's certainly the case you will have two recipients with the same scores on Pip assessments, one will be eligible and one won't under this system for a period of years.”
If the legislation clears its first hurdle on Tuesday, it will then face a few hours’ examination by all MPs the following week – rather than days or weeks in front of a committee tasked with looking at the bill.
The so-called “reasoned amendment” tabled by Treasury select committee chair Dame Meg Hillier had argued that disabled people have not been properly consulted and further scrutiny of the changes is needed.
She said: “This is a good deal. It is massive changes to ensure the most vulnerable people are protected… and, crucially, involving disabled people themselves in the design of future benefit changes.”
While the concessions look set to reassure some of those who had been leading the rebellion, other MPs remained opposed before the announcement.
Speaking before the U-turn, Rachel Maskell said: “As the government is seeking to reform the system, they should protect all disabled people until they have completed their co-produced consultation and co-produced implementation.
“I cannot vote for something that will have such a significant impact … as disabled people are not involved, it is just a backroom deal.”
One MP said that ministers would need to “go back to the drawing board” to make the bill acceptable.
Another said they expected the legislation would get through second reading if the government conceded the key sticking points relating to existing PIP claimants, the health element of Universal Credit and a policy consultation.
“It would need to be in the bill, not just a commitment,” they said.
Speaking in the Commons on Wednesday, Sir Keir told MPs he wanted the reforms to reflect “Labour values of fairness” and that discussions about the changes would continue over the coming days.
He insisted there was “consensus across the House on the urgent need for reform” of the “broken” welfare system.
“I know colleagues across the House are eager to start fixing that, and so am I, and that all colleagues want to get this right, and so do I,” he said.
“We want to see reform implemented with Labour values of fairness. That conversation will continue in the coming days, so we can begin making change together on Tuesday.”
There was a mixed reaction among charities to the prospect of concessions. Learning disability charity Mencap said the news would be a “huge relief to thousands of people living in fear of what the future holds”.
“It is the right thing to do and sends a clear message – cutting disability benefits is not a fair way to mend the black hole in the public purse,” director of strategy Jackie O’Sullivan said.
But the MS Society urged rebels to hold firm and block the bill, insisting any government offer to water down the reforms would amount to “kicking the can down the road and delaying an inevitable disaster”.
Head of campaigns at the charity, Charlotte Gill, said: “We urge MPs not to be swayed by these last-ditch attempts to force through a harmful bill with supposed concessions.
“The only way to avoid a catastrophe today and in the future is to stop the cuts altogether by halting the bill in its tracks.”
The Tories described concessions as “the latest in a growing list of screeching U-turns” from the government.
Shadow chancellor Mel Stride said: “Under pressure from his own MPs, Starmer has made another completely unfunded spending commitment.
“Labour’s welfare chaos will cost hardworking taxpayers. We can’t afford Labour.”
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