Starmer says ‘we’ve got the right balance’ on benefits u-turn amid fears of tax hike
Keir Starmer has sparked fears of tax rises are expected in the Autumn Budget after making changes to his welfare bill.
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Keir Starmer’s U-turn on his welfare bill has reportedly left the government with a choice between raising taxes in the Autumn Budget or cutting spending elsewhere.
The Prime Minister made a slew of concessions overnight after attempts to phone around rebel MPs failed, with the PM facing the very real prospect of a rebellion.
It comes as more than 120 Labour MPs opposing his government's welfare reforms, as they readied themselves to vote against the Universal Credit and Personal Independence Payment (PIP) Bill.
Sir Keir said that the concessions strike “the right balance”, but think tanks have warned that the changes announced in the early hours of Friday morning have made Rachel Reeves’s “already difficult Budget balancing act that much harder”.
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He added the decision means "we can now get on with the job", as some fear that the welfare cuts U-turn, combined with the U-turn on winter fuel payments, means he will have to find £5bn elsewhere.
The Resolution Foundation said the prime minister’s decision to protect existing claimants of disability benefits and health benefits will be far more expensive than expected.
Downing Street declined to rule out the possibility of increases in the autumn, telling reporters on Friday that “tax decisions are set out at fiscal events”.
As well as a financial headache looming, the prime minister is also continuing to battle a revolt over the planned cuts, with reports rebel MPs will attempt to put down a new amendment on Monday to delay the bill.
Despite Downing Street now being confident the watered-down reforms will pass, left-winger Diane Abbott said reports of the rebellion’s death “are greatly exaggerated”.
Associate director Tom Waters said: “These changes more than halve the saving of the package of reforms as a whole, making the Chancellor’s already difficult Budget balancing act that much harder.”
Ruth Curtice, chief executive at the Resolution Foundation, said that “the concessions aren’t cheap, costing as much as £3 billion and more than halving the medium-term savings from the overall set of reforms announced just three months ago”.
She added: “This adds to the already mounting pressure to deliver fresh consolidation in the Budget this autumn.”
The Resolution Foundation noted that extending a freeze in personal tax threshold by one year would save “£4 billion a year”.
Asked about how the climbdown would be funded, Downing Street said: “There’ll be no permanent increase in borrowing, as is standard.
"We’ll set out how this will be funded at the budget, alongside a full economic and fiscal forecast in the autumn, in the usual way.”
Some 126 Labour backbenchers had signed an amendment that would have halted the Universal Credit and Personal Independence Payment Bill in its tracks when it faces its first Commons hurdle on July 1.
The list of Labour MPs putting their name to the amendment had been growing throughout the week, as Downing Street said that they would be pressing on with next week’s vote.
After the late-night U-turn, Sir Keir said that “the most important thing is that we can make the reform we need”.
“We talked to colleagues, who’ve made powerful representations, as a result of which we’ve got a package which I think will work, we can get it right,” he added.
While leading rebels believe the concessions are likely to be enough to win over a majority, some remain opposed to the plans in their current form.
Dr Simon Opher, who represents Stroud, said in a statement that he is glad the Government “are listening”, but that the changes “do not tackle the eligibility issues that are at the heart of many of the problems with Pip”.
“The Bill should be scrapped and we should start again and put the needs of disabled people at the centre of the process,” he said.
It is also understood that talks are under way over rebel attempts to lay another amendment next week as they seek to delay the plans, as reported by The Guardian.
The fallout also threatens to cause lasting damage, with some backbenchers having called for a reset of relations between Number 10 and the parliamentary party.
Speaking to the PA news agency, a number of Labour backbenchers expressed deeper frustration with how Downing Street has handled its backbenchers since last year’s election.
The Government’s original package had restricted eligibility for Pip, the main disability payment in England, as well as cutting the health-related element of universal credit.
Existing recipients 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.
Now, the changes to Pip will be implemented in November 2026 and apply to new claimants only, while all existing recipients of the health element of universal credit will have their incomes protected in real terms.
The concessions on Pip alone protect some 370,000 people currently receiving the allowance who were set to lose out following reassessment.