10 hours ago
As Rayner and McSweeney sealed £3bn U-turn, Reeves looked at tractors 140 miles away
Rachel Reeves was looking at tractors when a new £3 billion black hole was blown in the public finances.
Thursday was a hi-vis day for the Chancellor, who sported a fluorescent green waistcoat for her visits first to a nursery supplier and then JCB World Headquarters in Rocester, Staffordshire.
The business tour was an attempt to drum up interest in the Government's new trade strategy.
However, 140 miles south, a huge about-turn on a welfare cuts package that Ms Reeves had personally demanded was being bartered away in her absence.
Morgan McSweeney, Sir Keir Starmer's chief of staff who masterminded Labour's huge general election victory, was one of the three figures present to negotiate the new terms.
That was notable – the softly-spoken Irishman had been the target of vicious briefings from rebels, some of whom darkly muttered about ousting him in a 'regime change'.
Angela Rayner, the Deputy Prime Minister, was the most senior elected figure in the room. As the most prominent Left-winger in the Cabinet, and privately a critic of the welfare cuts when they were first adopted, she was deemed best placed to win rebels over.
The third member of the Government's negotiating team was Sir Alan Campbell, a Labour MP since Tony Blair's 1997 victory, who is now Sir Keir's number-cruncher as Chief Whip.
Ms Reeves's absence was eye-catching. Would it not have been wise to have the person in charge of the nation's finances in the negotiations as billions of pounds were being bandied around? Apparently not.
Treasury sources have waved away the idea that she was out of the loop. Ms Reeves was kept abreast of negotiations by Mr McSweeney personally, taking calls and texts as she toured the nursery manufacturers and construction companies of Middle England.
Negotiations between the rebel leaders, who threatened to vote down flagship welfare legislation next Tuesday, and the three Government figures hand-picked to offer concessions did not happen in Downing Street.
Instead, it took place in the Palace of Westminster to avoid drawing attention to what had snowballed into the biggest rebellion of Sir Keir Starmer's year-old premiership.
'It was somewhere on the parliamentary estate where you would not expect it to happen,' said a source tapped into rebel strategy.
But the location had symbolism, too. This was the home turf not of ministers, but MPs.
A total of 127 Labour backbenchers had publicly attached their names to an amendment to effectively kill off the cuts to disability benefit payments.
It was enough to comfortably overturn Sir Keir's vast Commons majority, and No 10 knew it. So it was the Government that came, cap in hand, to the rebels – and not the other way round.
The rebels were headed by three Labour MPs – Dame Meg Hillier, Debbie Abrahams and Helen Hayes.
Each of them leads a Commons select committee, respectively scrutinising the Treasury, the Department for Work and Pensions and the Department for Education. These were not your usual Left-wing parliamentary agitators but moderate, highly respected Labour MPs.
The profiles of the masterminds behind the amendment reflected the core strength of the rebellion, and how widely across the Labour backbenches it reached.
Meetings had taken place on Wednesday too, but came to a head around lunchtime on Thursday. Critics were said to be pushing for moderate tweaks – perhaps a change in exactly how the new points system would work for recipients of the personal independence payments (Pip).
Cuts to Pip, which gives money to people with disabilities to cover the extra costs brought about by their condition, was at the heart of the stand-off. However, the rebels went much further.
The rebels insisted central parts of the package, which the Prime Minister had defended as recently as Wednesday and dismissed criticisms as 'noises off', had to go.
The Government team, so exposed by the size of a rebellion that had caught them off guard, was left with little power to argue back. And so there was celebration from the three committee heads, whose actions were driven by a sincere concern about the 800,000 disabled people who would lose out under the initial plan.
'Major concessions' had been won, a senior rebel source told The Telegraph on Thursday evening, adding: 'We wanted to unite around something better. We are getting there.'
As news of the victory spread, the full scale of the concessions began to leak. Gone was the plan to cut Pip from existing claimants, meaning 370,000 disabled people would keep their payments in full. Those currently receiving the health top-up to Universal Credit would also be spared.
The U-turn also allowed the rebels to reassure constituents that current claimants would not lose out, after MP inboxes had flooded with concerns from residents.
There were other concessions too, such as speeding up the new £1 billion fund to help people get back into work and a promise to properly consult with disability charities before the new system kicks in.
In a sign of how scrambled negotiations had been, Liz Kendall, the Work and Pensions Secretary who put the initial package together, sent a letter out to Labour MPs explaining the new deal at 12.27am.
Formal government communications issued after midnight are usually a tell-tale sign that all is not going to plan. The rebels had won.
The Iron Chancellor's tab
But Ms Reeves now has to pick up a tab. The promise that current Pip and Universal Credit recipients will remain untouched is a costly one. The rollback of the benefits cuts has created an estimated £3 billion dent in original savings of £4.6 billion savings from the original package.
Given it was Ms Reeves herself who insisted that the cuts were announced before her spring statement in March to help balance the books, it is hard to not read the climbdown as a Treasury defeat.
The Chancellor is already facing an incredibly tough autumn Budget. Worsening economic forecasts and increased government debt interest payments mean she is at risk of missing her promises to control borrowing.
But No 10's newly-found penchant for U-turns is making her task much harder. The recent reversal on the winter fuel payment cut lost her £1.5 billion.
Sir Keir has also hinted at lifting the two-child benefit cap, which would cost another £3.5 billion.
The 'Iron Chancellor' has staked her credibility by sticking to her fiscal rules. A determination not to break them could well mean substantial tax rises are coming, clashing with another of her past positions – that she would not impose more tax rises before the general election.
Reeves in 'deep trouble'
Those in the Chancellor's inner circle insist there are still a 'huge number of moving pieces' between now and the autumn Budget, including new growth and productivity forecasts, energy price changes and interest rate decisions from the Bank of England.
Officials widely expect the Bank to cut rates in the coming weeks, in line with external forecasts, which would reduce the cost of borrowing for the Treasury.
The Office for Budget Responsibility's (OBR) latest forecast predicts that debt interest payments will exceed £100 billion in this financial year – accounting for more than eight per cent of total public spending.
But polling shows that two thirds of Labour MPs oppose the party's fiscal rules, and see breaking them and borrowing more as the best solution to the Chancellor's dilemma.
'It's hard to forgive her for where we are now,' said one MP. 'She chose to target the poorest.'
There are few MPs now openly discussing Ms Reeves leaving the Government, but most are calling for a 'reset' in Downing Street, and for Sir Keir to consider his political strategy more carefully.
One rebel said simply that based on the economic statistics alone, the Chancellor is in 'deep trouble'.
Dr Simon Opher, another of the rebels, said: '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.'
On Friday, some rebels were vowing to continue the fight. Members of the Socialist Campaign Group, made up of a few dozen Left-wingers, plan to vote against the welfare legislation on Tuesday.
Exact numbers remain to be seen. But government insiders and decisive rebel leaders are confident enough critics will support the new package that the legislation will comfortably pass.
The Chancellor is left to clean up the mess. She could yet still dig herself out of this growing fiscal hole come autumn – but it may well be the public that ends up paying.
