Sir Keir Starmer told his cabinet on Tuesday to look back with a “sense of pride and achievement” on Labour’s first year in office — but across the road in the House of Commons his party was convulsed in disarray and recrimination.
Plans to cut £5bn from Britain’s spiralling benefits bill lie in tatters after a week-long Labour rebellion, culminating in a last-minute climbdown by Starmer which ripped the heart out of what was supposed to be his flagship welfare bill.
“People have to understand it was an honest mistake, it wasn’t malicious,” said one cabinet minister minutes before the vote. A bill intended to save £5bn may now actually end up costing money.
Although the watered down welfare bill passed its crucial second reading on Tuesday, the damage caused to the reputations of the prime minister and his key lieutenants, party unity and the public finances is considerable.
After a disorderly retreat over the last week failed to avert the risk of a potential House of Commons defeat, Starmer was forced to bow to his own MPs. “Literally, what’s the point of it now?” asked one Labour MP, looking at the remnants of the bill. “The whole thing has been gutted.”
Kemi Badenoch, Conservative leader, called it a “capitulation” and it was hard to find a Labour MP who disagreed. The blame game on Tuesday night was already in full swing, with chancellor Rachel Reeves attracting a lot of it.
It was Reeves who insisted on £5bn of welfare savings to patch up the public finances, and was blamed by Labour MPs for trying to drive through reforms that were always going to be a hard sell politically.
While there is cross-party consensus on the need to rein in the rising welfare bill, the idea of pushing through cuts equating to taking £5,000 from 1mn sick or disabled people was always likely to create widespread anger at a grass roots level.
Some pointed fingers at the government whips — the parliamentary enforcers who make sure their MPs toe the line — for failing to spot a rebellion that grew to 126 MPs last week.
But Starmer, attending another overseas summit last week in the Netherlands, was accused by several of his MPs of running a Number 10 operation dangerously detached from its parliamentary party and domestic concerns.
“It wasn’t the whips’ fault,” said one Labour MP. “Downing Street was warned, but they didn’t listen.”
Morgan McSweeney, Starmer’s chief of staff, worked closely with Reeves to initially try to force through the original reforms. “They were heavy handed,” said one Labour MP.
One Labour individual close to the discussions said Labour’s high command believed the welfare cuts would be popular with working people, even if they were unpalatable to many MPs.
“It’s not like the winter fuel payment issue,” they said, referring to Reeves’ earlier U-turn in which she agreed to ease public anger by restoring the benefit to millions of pensioners. “The public really cared about that.”
A YouGov poll in March found that 68 per cent of Britons thought the benefit system needed reform, against 18 per cent who said it did not. Some 53 per cent thought the criteria to receive benefits were not strict enough, against 25 per cent who disagreed.
But the public were more supportive of benefits for the disabled and crucially Labour MPs were spooked. The prospect of Starmer facing a rebellion by over 100 MPs set alarm bells ringing last week, and the concessions began.
Starmer’s biggest previous rebellion was 16 MPs voting on planning reforms, according to Phil Cowley, politics professor at Queen Mary University of London.
A deal was cooked up last Thursday to soften the package of cuts to personal independence payments and the health element of universal credit — reducing the potential savings by £2.5bn — including ensuring that existing claimants would not be affected by new eligibility rules.
McSweeney, Labour chief whip Sir Alan Campbell, and deputy prime minister Angela Rayner oversaw the changes from the government side, which satisfied some Labour MPs, but left many still wanting more.
Labour MPs Dame Meg Hillier, Helen Hayes and Debbie Abrahams were in the talks on the “rebel” side, although one normally loyal Labour MP disliked that phrase. “The fact that I’m supposed to be part of a ‘rebel alliance’ shows how wrong the government has got this.”
Liz Kendall, work and pensions secretary, cut an increasingly forlorn figure as she tried to sell the reforms. “She looks as if she’s being tortured,” Badenoch said in the Commons on Tuesday.
But Labour MPs recognised that it was Reeves driving the policy. “The message was confused,” said one minister. “It looked like it was being done for fiscal reasons, rather than to fix a broken system that traps people on benefits.”
One Labour official added that Reeves was getting “most of the stick” from colleagues, claiming that ministers in Kendall’s department were privately saying the cuts were forced on them by the Treasury.
Badenoch claimed the welfare bill had been “rushed for Rachel” and senior government insiders admitted the chancellor had insisted on a hastily prepared welfare package to shore up her fiscal position in the March Spring Statement.
Until Tuesday night, calls for the chancellor’s sacking had been muted. But after the scale of the debacle there were signs that could change. “Rachel must be toast after this,” said one Labour MP.
Starmer, according to the prime minister’s allies, remains fully supportive of Reeves. “Rachel is the one having to do the lifting on the difficult stuff,” said one colleague.
One well-connected Labour MP said Reeves had opposed the decision last week to make a £2.5bn concession to rebels, fearing it would simply lead to them coming back for more ahead of Tuesday’s vote. “That was Starmer’s decision,” the MP said.
McSweeney, an abrasive political operator with knuckles bruised from his battles with Labour’s hard left, is also facing criticism, although the prime minister on Tuesday told his cabinet that the briefing against him had to stop.
Ultimately it is Starmer, who marks his first anniversary in Downing Street on Friday, who carries the can.
His authority has been dented, the Ming vase of party discipline lies shattered, and the prospect of further welfare reforms by this government has been severely undermined.
Meanwhile Reeves is left with a potential £5bn fiscal hole that economists say may force her to do the politically untenable in the autumn: raise Britain’s taxes again.
