Wednesday briefing: ​​Has Starmer's welfare reform bill victory left a fractured Labour party in its wake?

The Guardian

02-07-2025

Good morning. To his loveless landslide, Keir Starmer can now add a vapid victory. Last night, the government's flagship welfare reform bill passed its second reading in the House of Commons by 335 votes to 260 – a majority of 75. But after last-minute concessions from the government to secure the bill's passage, a set of measures whose intended savings had already fallen from £5bn to £2.5bn a year, now looks like recouping much closer to nothing.
The central climbdown, where plans for deep cuts to the personal independence payment (Pip) in the future were shelved, has been celebrated by disabled people and the charities who represent them. They had feared that the support they rely on was about to be ripped away. But it is also a measure of how disastrous the whole process has been for Starmer.
Ministers will defend the changes as an important first step this morning – but given the scale of the initial proposals and the insistence that they were essential to save the welfare state for future generations, the last-minute excision of the measures at the very heart of the undertaking looks extraordinary. To get to such a negligible result has come at the cost of significant damage to Starmer's parliamentary authority, and his reputation for competence.
So where did No 10 go wrong? And how important will the diluted version of the bill now prove to be? For today's newsletter, I spoke to the Guardian's political editor, Pippa Crerar, about the biggest rebellion the government has faced so far. Here are the headlines.
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Downing Street's victory appears to have come at the cost of almost everything it claimed to be working for – and if officials understood they had a fight on their hands over the welfare reforms when they were first tabled in March, they would now concede that they completely misjudged the scale.
Over the last 10 days, the internal Labour fight over the measures set out in the bill has put more than 120 MPs on record as prepared to rebel; extracted meaningful concessions that drastically reduce its fiscal impact; and ultimately resulted in a package reduced to the bare bones. To the government's critics on the left and among disabled people, it is a much better piece of legislation as a result. But it is also a kind of zombie bill: looks like the real thing at a distance, but dead behind the eyes when you examine it closely.
Quite apart from the policy ramifications, Pippa Crerar said, the political damage – and the sense that a big enough rebellion limits No 10's disciplinary options – will be lasting. 'The whips were warning for a long time that MPs were upset enough to rebel, but that appears to have been dismissed in Downing Street,' Pippa said. 'Now some of them have a taste for it. And it's fair to say that this bill has been hollowed out.'
What happened in the vote?
At the beginning of the day, it looked like Downing Street was on course to prevail, albeit by a much slimmer margin than it might once have hoped. But the concessions that came later appeared to indicate Keir Starmer became extremely nervous the government would lose. Kiran Stacey and Jessica Elgot have an excellent account of how things changed in the meantime.
'There were a lot of people saying they were going to wait to see what Liz Kendall said at the dispatch box, or that they would be talking to colleagues about their strategy,' Pippa said. Only a couple of hours before the reversal, Kendall was telling MPs that the changes to the Pip system would go ahead as planned. 'This is a humiliation for her,' Pippa added. 'The U-turn was basically stitched up behind her back, and she wasn't aware of it until the last minute. I wouldn't be surprised if she was privately extremely angry.'
In the end, 49 Labour MPs still voted against the government, three times the previous largest rebellion. 'I watched much of the Commons debate, and it was clear that MPs were still deeply unhappy,' Pippa said. 'Angela Rayner was leading the discussions with the committee chairs who led the previous rebellion, and they told her they felt MPs were in no mood to accept the offer as it was. Whether, when push came to shove, they would have voted against the government was something Keir Starmer clearly didn't want to test.'
How have the concessions changed the bill's impact on disabled people?
In response to the threat of rebellion, the government laid out changes to the proposed reforms to the benefit system that will have a significant impact. Here are the most important ones – and here's a useful guide by Kiran Stacey, published before the last-minute additions, if you want more detail.
Existing claimants of the personal independence payment (Pip) – the main working-age benefit for people with disabilities, whether they are working or not – will continue to receive the same amount.
But, crucially, the government bowed to rebel demands that any changes for future new claimants will not be made before the findings of a review of the Pip assessment criteria conducted by welfare minister Stephen Timms. The process is meant to be 'co-produced' by disabled people and the organisations that represent them. That means it is highly unlikely to propose the kinds of cuts that the government had envisioned. Timms said yesterday that the review is 'not intended to save money'.
'That was the only concession left that could guarantee the vote would go through,' Pippa said. 'It leaves open the possibility that the biggest changes envisioned by the original bill will never actually happen.'
Plans to freeze the health-related component of universal credit, the main benefit for people out of work, were reversed for existing claimants, and the amount will now rise in line with inflation. What remains of the UC changes for future claimants is effectively the only major part of the original bill that survives.
A £1bn investment in schemes to help disabled and long-term sick people back into work has been brought forward from the end of the parliament to this year.
Until the additional last-minute changes on future Pip payments, the government plans were still expected to push 150,000 more people into relative poverty, modelling by the Department for Work and Pensions said – down from the 250,000 thus affected by the original scheme. A new calculation will now be needed, but the number is likely to be far smaller.
How does the final bill's fiscal impact compare with the original plan?
The initial plan would have reduced the annual increase in welfare spending by about £5bn; with the changes made to secure backbench support before yesterday, the figure was about £2.5bn. The Resolution Foundation says that with yesterday's changes, and given any theoretical savings following the Timms review can not yet be costed, it now amounts to a slight increase in spending by the end of the decade.
Rachel Reeves is therefore left with a large hole to fill in her autumn budget – together with the reversal on some of the cuts to winter fuel payments, a total of at least £6bn.
'Growth is slow, she's ruled out borrowing more, and she doesn't want to be seen as an austerity chancellor,' Pippa said. 'And I think she would rather walk than break her fiscal rules. All of that points towards tax rises – it's hard to find anyone in the Treasury who will rule that out.'
Reeves is 'more politically astute than she gets credit for,' Pippa added. 'People in the Treasury recognised last week that something would have to be offered to get the bill through. But there is frustration that Keir Starmer makes a decision, and Reeves then has to make it work. And beyond the current debate, there was a suggestion that they intended to come back later this year for more from the welfare budget.' That clearly now looks politically impossible.
What happens next?
Getting the bill through will be described as a victory by the government – but Starmer's tone to cabinet yesterday told a different story: 'We will learn from our mistakes, but we will not turn on each other.' Even now, the bill's eventual ascent to the status of law is not guaranteed: it still has to go through the committee and report stages, presenting further opportunities for scrutiny, amendment, and painful political confrontation, before coming back to the House of Commons a final time.
The best hope for the government now, Pippa said, is that 'the Timms review, alongside disability groups, can come up with reforms that are acceptable to Labour MPs but also make meaningful reforms to the welfare system – I've not met a single MP who doesn't recognise that some degree of reform is needed.'
But even in that optimistic view, the truth is that the extent of the disquiet – particularly when No 10 has imposed stern disciplinary measures on rebels in the past – may suggest a broader problem. 'The relationship between the parliamentary Labour party and Downing Street has been damaged,' Pippa said. 'There is a lot of work to do to rebuild those bridges.'
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If Starmer wants to avoid similar crises in the future, he may ask who is at fault for this one. Some critics have pointed to Morgan McSweeney, the all-powerful Downing Street chief of staff, who has insisted that MPs are out of touch with the mood of the country on this issue. But while criticisms of McSweeney appear increasingly urgent, Starmer defended him in cabinet yesterday. 'You can't blame it all on one man,' Pippa said. 'He is a lightning rod, but there is a whole operation around him. Ultimately, as ever, the buck stops with the prime minister himself.'
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Keir Starmer's dramatic climbdown on the centrepiece of his welfare bill dominates headlines. The Guardian splashes on 'Welfare bill passes as bruised PM backtracks to avert Labour revolt.' the Mirror goes with 'Welfare Bill fiasco: No winners,' while for the Telegraph it's 'Starmer's benefits bill turns to farce,' and the Express has 'Now it's 'utter capitulation' over PM's welfare bill.' The i Paper leads with 'Labour rebels force Starmer to retreat on benefits cuts again – amid chaos in the Commons' and the FT has 'Starmer guts welfare reform to avert defeat in Commons.'
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A humiliating day for Keir Starmer in parliament
Helen Pidd talks to Kiran Stacey and a host of Labour MPs on a day of high drama in Westminster, as parliament votes on the government's proposed disability cuts.
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