Sir Keir Starmer gutted his controversial welfare bill on Tuesday as he fended off a full-scale Labour rebellion in chaotic scenes in the House of Commons, leaving a multibillion-pound hole in UK public finances.
Amid fears of imminent defeat, Starmer authorised a last-minute climbdown. Experts said the emasculated bill, which passed a parliamentary vote on Tuesday evening, could even lose the government money overall after it was initially intended to generate net savings of £5bn.
The changes stripped out a clause that had been intended to generate the bulk of welfare savings by tightening eligibility criteria for the personal independence payment (Pip), the main disability benefit.
Labour MPs were astonished by the move, which leaves Chancellor Rachel Reeves facing the prospect of raising taxes to cover the £5bn she had expected to save from the welfare bill.
Kemi Badenoch, Conservative leader, said on X: “This is an utter capitulation. Labour’s welfare bill is now a TOTAL waste of time. It effectively saves £0, helps no one into work, and does NOT control spending.”
Even after Starmer in effect dismantled the bill, there was still a significant Labour rebellion on its crucial second reading, which was carried by 335 to 260, a government majority of 75. A total of 49 Labour MPs voted against the bill, along with 100 Tories, 70 Liberal Democrats and 12 independents.
Sir Stephen Timms, disabilities minister, said any changes to the Pip criteria would now await the conclusion of the Pip review he is leading, in collaboration with disability groups, kicking the issue into the long grass.
Government insiders admitted they no longer knew how much the bill, which now mainly covers universal credit, would save. “It has all moved so quickly,” said one.
Many Labour MPs agreed with Badenoch that the bill had been rendered largely pointless. “It’s completely neutered,” said one.
Work and pensions secretary Liz Kendall agreed the last-minute climbdown after a day of negotiations with Labour rebels, talks that also involved Starmer and Reeves.
“What you’re netting out at is basically no savings — it will be just around zero,” said Louise Murphy, a senior economist at the Resolution Foundation, about the decision to scrap all tracts of the bill relating to disability benefit reform.
Murphy said that, after all of the Pip reforms had been removed, the package would likely cost the Treasury around £300mn in 2029-30.
Helen Miller, deputy director at the Institute for Fiscal Studies, said the government was now “returning to the drawing board” in the bid to reform working-age health-related benefits.
“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,” she said.
“Perhaps more important than the precise number of billions involved, and what it might mean for the government’s so-called fiscal headroom, is the potential impact on how this government’s fiscal credibility is perceived.”
A person close to the discussions said the final change — to scrap all elements of the Pip reform — would not have happened if ministers were confident they would win the vote on Tuesday.
“There was an acknowledgment across government that we moved too quickly and we need to learn lessons from that,” they said.
One Labour MP described the scenes on Tuesday evening as a “shitshow on stilts”.
“That is one of the most disgraceful pieces of parliamentary business I’ve seen in my time here,” they said. “They cannot be happy with how this has gone and someone’s inevitably going to take the fall for this.”
Another said that Reeves “must be toast after this — she can’t avoid the blame game and she is ultimately responsible”.
Late on Tuesday, around an hour before a key vote, the government announced that it would be removing Clause 5 of the welfare bill — the entire section relating to changes to the Pip eligibility criteria.
There had been signs of growing unease earlier in the day as members debated the bill.
The reforms had been intended to tighten Pip criteria but a concession by Stamer last week meant that the changes would not affect existing beneficiaries. Now they have been removed entirely from the bill.
Rachel Maskell, the Labour MP for York Central who brought an amendment on Monday that contributed to the government climbdown, said the outcome still left “a lot of confusion for disabled people . . . [who] watched on as their future was being debated and the legislation was falling apart”.
Starmer’s allies admitted that major reforms to disability benefits were now on hold, pending the conclusion of Timms’ review, although Labour officials insisted the massively watered down bill would not be killed off.
One said: “We accept the will of the House and will look at it again post-review. The destination — a system that supports the most vulnerable and doesn’t trap people — remains. It’s been less than smooth, but change isn’t easy.”
Additional reporting by Sam Fleming
