DWP benefits U-turn leaves £4.8 billion hole in the budget

The Herald Scotland

02-07-2025

But they also removed a key plank of Sir Keir Starmer's welfare reform agenda, delaying changes to Pip until after a review of the benefit not due to conclude until autumn 2026.
Disability groups have shared their concerns
Many disability charities were unhappy with the result," despite some concessions.
James Watson-O'Neill, Chief Executive of the national disability charity Sense, said: "Today's vote in Parliament is deeply distressing. By choosing to advance this bill, MPs have voted for measures the government's data say will push 150,000 disabled people into poverty. This is not the right way to reform our welfare system — it's a move that has already caused significant fear and anxiety within the disabled people's community.
"We're incredibly grateful to all those who spoke out against the bill. Their efforts helped secure important government concessions, which mean some disabled people will retain the support they rely on. However, this creates a deeply unfair two-tier system — protecting some while leaving new claimants facing serious financial hardship. And the government's latest concession, to delay the tightening of the criteria for PIP, doesn't change the fact that it will eventually become harder for new claimants to access this vital benefit.
"Looking ahead, we urge the government to immediately reconsider their proposal to remove the health element of Universal Credit from young people until they turn 22. We also want to work constructively with them to expand the eligibility criteria for additional support for those who will never be able to work, to ensure no one is left behind."
PIP IS NOT AN OUT-OF-WORK
BENEFIT
PIP is an allowance that helps disabled people with the extra costs incurred by having a disability. You can claim it whether you work or not.
The media and government narrative about PIP is incorrect and must be challenged
KILL THE BILL!… pic.twitter.com/oOulXW1CWm — Atlanta 🦹🏻‍♀️ #DisabilityRebellion (@areyoflight) June 30, 2025
But Mark Rowland, Chief Executive of the Mental Health Foundation, shared these concerns: 'Tonight's concessions by the UK government are a victory for not just the millions of people across the country who are disabled, but for every single one of us who may find ourselves disabled one day. Removing Clause 5 is clearly the right decision given the lack of evidence these measures would encourage anyone with a mental health problem to return to work, and the very clear risk of pushing people into poverty, worsening their mental health. Despite this, this bill remains deeply flawed.
'We remain concerned by the measures in this bill which both reduce the amount paid to recipients of the health element of Universal Credit, and limits its eligibility to those over the age of 22. These measures are discriminatory, and will do little to support people back into the workplace. The UK government should drop the implementation of these measures too."
What will happen next?
Ahead of a crucial vote on cuts to disability benefits, our new evidence casts doubt on whether jobs are even available for disabled people facing cuts 📢
The analysis found that the parts of the country among the hardest hit by the cuts have fewer job opportunities 1/3 pic.twitter.com/4XAgKq3OoL — Joseph Rowntree Foundation (@jrf_uk) June 24, 2025
With no clarity on when the changes will be enacted or what they might entail, the Chancellor now faces a fiscal headache as a forecast £4.8 billion in welfare savings have been whittled away to nothing.
Economists at the Institute for Fiscal Studies (IFS) and Resolution Foundation think tanks warned that Tuesday's concessions meant Ms Reeves could now expect no 'net savings' by 2029/30 – a key year for meeting her fiscal targets.
IFS deputy director Helen Miller said the move had effectively halved the Chancellor's 'margin of error' against her main fiscal rule, once again raising the possibility of tax rises in the autumn.
On top of that, a stuttering economy and global instability could mean she has even less room for manoeuvre than expected.
I am going into the Commons Chamber to speak against & vote against the Government's appalling Bill to cut disability benefits. I urge all Labour MPs to do so. I was elected to protect disabled people not harm them. pic.twitter.com/Qc1TA0e90n — John McDonnell (@johnmcdonnellMP) July 1, 2025
Ms Miller said: 'Since departmental spending plans are now effectively locked in, and the Government has already had to row back on planned cuts to pensioner benefits and working-age benefits, tax rises would look increasingly likely.'
The Resolution Foundation's Ruth Curtice agreed that there would be no savings in 2029/30, but suggested changes to universal credit – almost the only part of the Government's proposals still standing – could save money in the longer term.
On Wednesday morning, the Conservatives accused Labour of making billions in unfunded spending commitments, including both the U-turns on welfare and the partial reinstatement of winter fuel payments.
In a letter to Ms Reeves, shadow chancellor Sir Mel Stride demanded to know where the money was coming from, asking: 'Will you raise tax or increase borrowing?'
Ministers have repeatedly insisted that Labour will not raise taxes on 'working people', specifically income tax, national insurance or VAT.
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But Ms Reeves also remains committed to her 'iron clad' fiscal rules, which require day-to-day spending to be covered by revenues – not borrowing – in 2029/30.
Meanwhile, Sir Keir himself will face a grilling from MPs on Wednesday as he attempts to repair relations with his backbenchers.
The weekly session of Prime Minister's Questions comes just a day after 49 of his own MPs voted against his welfare reforms – the biggest rebellion of his premiership so far – while several backbenchers described the Government's handling of the issue as 'chaotic' and 'a shambles'.