Anxiety over welfare cuts rises among Labour MPs

BBC News

26-03-2025

There has been some unease in Labour's ranks over the planned savings in the welfare budget.The government's newly published assessment of the impact of the changes has increased that anxiety.The contents – with its estimates of increased poverty levels - show that talk of difficult decisions is not mere ministerial sloganeering.While polls suggest tackling the benefits bill is popular, voters and Labour MPs tend to be more squeamish when cuts affect disabled people.The scale of those cuts has led some Labour MPs publicly to declare for the first time today that they won't vote for the welfare changes – though any rebellion is ultimately likely to be unsuccessful.
Perhaps of greater concern to Chancellor Rachel Reeves is that MPs on her own side are openly challenging her approach, and putting forward alternatives.Those around the chancellor had believed that any argument over her iron-clad fiscal rules on debt and borrowing had been won well before polling day.Many of the new MPs were regarded as leadership loyalists, and it was assumed that they bought the argument that Labour had to kill off any impression that it would tax too highly and spend too much.It was also assumed they were aware that any major change to rules on borrowing and debt would invite unflattering comparisons with the short-lived regime of former prime minister Liz Truss.But some Labour MPs are finding an increasing number of difficult decisions are, well – increasingly difficult.
Key points from the Spring Statement at a glanceThree ways the changes could affect you and your moneyWho is affected by the Pip and universal credit changes?Watch: Henry Zeffman on what you need to know...in 58 seconds
In the Commons on Wednesday, the Labour chair of the cross-party work and pensions committee, Debbie Abrahams, supported moves to get people back into work.But she suggested that some of the changes to benefit levels would undermine rather than bolster elusive growth.She asked bluntly: "How will making people sicker and poorer help in driving our economy up?"And left-wing MPs are publicly promoting alternatives. Bradford MP Imran Hussain called for a wealth tax and former frontbencher Andy McDonald demanded a hike in capital gains tax.Big Labour-supporting unions such as Unite take a similar view.Privately an MP regarded as being on the right of the party is advocating a temporary tax on wealth until the economy picks up.And a prominent Labour backbencher – who chaired a cross-party committee – had a range of possible options for bringing in more revenue.They included a council tax revaluation; less pensions tax relief for the better off; a land tax; a new tax on property owners and not tenants.That backbench MP was none other than Rachel Reeves herself – in The Everyday Economy, a pamphlet she penned in 2018.
Think tanks - such as the centrist Social Market Foundation – have also pushed alternative options such as cancelling the Lower Thames Crossing, taxing empty property, and taking another look at the triple lock, which can lead to inflation-busting increases in state pensions.But as well as ignoring her younger self, the current debate the chancellor would really like to extinguish is whether to change - or bypass - her fiscal rules.These can lead to a spending squeeze in order to convince the Office for Budget Responsibility she's on course to have debt falling and day-to-day spending in balance by the end of the Parliament.What ignited - or at least re-ignited - the debate was the decision of the German parliament to exempt defence and infrastructure investment from their equivalent rules.
So it's no longer just those on Labour's left who are calling for more flexibility. Some serving ministers privately believe that if – as the chancellor says – "the world has changed", then her rules can change with it.One of former prime minister Tony Blair's closest former advisers – John McTernan – has advocated an exemption for defence in the New Statesman.The Fabian Society – a think tank affiliated to Labour – has said that if the UK faces further fiscal pressure, the government must look again "at how it can raise revenue progressively to protect our public services and support the vulnerable".Rachel Reeves made it clear in her Spring Statement that her rules – which she tweaked at the Budget – were "non-negotiable".And the Treasury insists that following Germany's lead would push up the cost of borrowing – and therefore mortgages – even further.The chancellor has insisted that to ensure economic stability, there is no alternative to her approach.With fears that stubbornly sluggish growth will lead to more difficult decisions at the autumn Budget, some voices on the left and centre-left are now begging to differ.