Keir Starmer has been forced to abandon the central plank of his welfare bill to get it past its first Commons hurdle, with a dramatic climbdown that meant he had to drop disability benefit cuts to avert a major Labour rebellion.
After a week of chaos that has left the prime minister’s political authority badly damaged, Labour MPs were finally won over by a commitment to shelve plans for deep cuts to personal independence payments (Pip).
But while the controversial bill passed its second reading, the saga has exposed tensions between No 10 and Labour backbenchers and created a huge headache for Rachel Reeves, the chancellor, who will now have to find a further £2.5bn of savings at her autumn budget.
It also raised serious questions about the government’s handling of the welfare reform bill, with fingers being pointed at the Downing Street political operation, Labour whips and the prime minister himself for the bruising affair.
A total of 49 Labour MPs voted against the second reading, more than three times greater than the previous biggest rebellion of 16, which was on an amendment to the planning and infrastructure bill last month. The universal credit and personal independence payment bill passed it second reading on Tuesday by 335 votes to 260, a majority of 75.
MPs were particularly concerned that the government’s own poverty analysis showed that, even after a series of concessions, 150,000 of the most vulnerable people would end up in relative poverty as a result. Officials said the modelling did not take into account the changes being made to the NHS and back-to-work schemes.
The bulk of the rebels were from the left of the party, and none of them were the select committee chairs who spearheaded the rebellion last week, but it was a sizeable rebellion given the scale of concessions already made.
Angela Rayner, the deputy prime minister, and government whips warned Downing Street on Tuesday that further movement was needed after meetings with Labour MPs already unhappy over the substance of the bill and Starmer’s approach after he dismissed criticism as “noises off”.
As a result, the government confirmed the changes to disability payments will only take place after Stephen Timms, the welfare minister, has reported the findings of his review into the system, due to conclude in autumn 2026. Originally, the Pip changes were due to come in from November 2026.
Government insiders suggested that resignations could follow the chaotic scenes, although at a cabinet meeting before the vote Starmer defended his chief of staff, Morgan McSweeney, who has been credited for winning Labour’s 165 working majority, but faced some internal criticism over the row.
“We will learn from our mistakes, but we will not turn on each other,” Starmer told his ministers. “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.”
The process left Liz Kendall, the work and pensions secretary, badly humiliated with the U-turn coming just hours after she had told the Commons the new Pip four-point threshold would apply from November 2026 and emphasised the need for the Timms review to take its time.
Asked if her position was untenable after the series of concessions left the bill a hollowed-out version of the original proposals, Kendall insisted that despite what she called “a bumpy time” with the vote, the broader policy was on track.
“I think listening is actually a strength in politics, as indeed it is in life, and I’ll continue to listen to colleagues,” she said. “What was very interesting was how much support there was for the principle of reforming the welfare state.”
She insisted the Labour party was “100%” behind the Starmer, but added: “There are definitely lessons to learn from this process. I certainly will do that, and I’m sure my colleagues will too, but we have agreed on the principles of reform here.”
The removal of an entire clause of the bill means there will be no immediate changes to Pip, the most contentious part of the changes, and where ministers hoped to make the bulk of savings. The Timms review will be “co-produced” with disabled people, leaving open the possibility that they will never happen.
However, plans to increase the standard rate of universal credit, to incentivise more people back into work and extra protections for the most severely ill and disabled will go ahead. Separate plans for back-to-work schemes will also proceed.
Last week, 126 Labour MPs, led by the Treasury select committee chair, Meg Hillier, signed an amendment designed to blow up the bill. Ministers said that no current claimant would be affected by the changes to UC and Pip. Rebels were also promised the Timms review of the criteria would heavily involve disability groups.
But the terms of reference of the review made clear that there would still be a higher bar for obtaining Pip – new claimants would need a high score of four in at least one of the daily living categories for assessment to qualify.
Substantial numbers of the rebels fell into line after the government’s initial concessions, however 42 Labour MPs backed a separate wrecking amendment, which did not pass, tabled by the backbencher Rachael Maskell.
The chancellor will now have to find another £5bn in savings at her budget as a direct result of all the concessions on the welfare bill, as well as £1.25bn to cover the cost of the winter fuel U-turn, all raising the likelihood of her being forced to put up taxes.
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 29-30. 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.”
Kemi Badenoch, the Tory leader, posted on social media: “This is an utter capitulation. Labour’s welfare bill is now a TOTAL waste of time. It effectively saves £0, helps no one into work, and does NOT control spending. It’s pointless. They should bin it, do their homework, and come back with something serious.”
