Labour Chancellor Rachel Reeves in tears after criticism over major welfare reform u-turn
Starmer faced MPs at Prime Minister's Question after being forced to scrap key planks of his welfare reforms.
The welfare u-turn has left an almost £5 billion (€5.8b) black hole in Reeves's spending plans and has fuelled speculation she could be forced to hike taxes.
Tory leader Kemi Badenoch said Reeves looked 'absolutely miserable' and challenged Starmer to say whether the Chancellor would keep her job until the next election.
Watch as Chancellor Rachel Reeves sheds tears during Prime Minister's Questions 📽️
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— The National (@ScotNational)
July 2, 2025
Starmer dodged the question about whether Reeves would be in place for the remainder of the UK Parliament, saying Badenoch 'certainly won't'.
The Tory leader said: 'How awful for the Chancellor that he couldn't confirm that she would stay in place.'
Despite Starmer not backing her in the Commons, Downing Street insisted she was 'going nowhere' and had the prime minister's 'full backing'.
Asked about Reeves's tears, a spokesman for the Chancellor said it was a 'personal matter'.
Welfare u-turn
Welfare spending in the UK stood at £40billion before the Covid pandemic but is projected to skyrocket to £100 billion by 2030.
In March, reforms to the UK's welfare system – aimed at encouraging more people off sickness benefits and into work – were announced.
The aim was to make welfare savings of £4.8 billion by 2029-30.
But yesterday, Starmer was forced to abandon a key plank of his welfare reform package in the face of a Labour rebellion.
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The climbdown came just 90 minutes before MPs were due to vote for the first time on the Universal Credit and Personal Independence Payment (Pip) Bill.
Universal Credit is a means-tested benefit that replaced and combined six 'legacy' benefits – it is paid to those looking for work, unable to work due to illness or disability, those on a low income or those with caring responsibilities.
Meanwhile, Pip is a payment for people who have extra care needs or mobility needs as a result of a disability.
With around 1,000 new Pip awards every day, the UK Government argued the current situation was unsustainable.
Proposals to cut the health element of universal credit by almost 50% for most new claimants from April 2026 remains in place following yesterday's u-turn.
However, the UK Government shelved plans to restrict eligibility for the Pip and any changes will now only come after a review of the benefit, which is due to conclude in the autumn of 2026.
The move caused a major headache for Reeves as the welfare squeeze was originally meant to save £4.8 billion a year, which was subsequently reduced to £2.3 billion when the Bill was first watered down last week.
But after another concession yesterday, it is uncertain how much the reforms will save from the soaring welfare bill, if anything.
Indeed, the Resolution Foundation think tank suggested the concessions meant there would now be no 'net savings' from the reform by the end of the decade.
The Bill changed so much in the interim that MPs questioned if there was even any point in voting on it.
Tory leader Kemi Badenoch accused Labour of 'utter capitulation' and said the legislation was now 'pointless'.
She said: 'They should bin it, do their homework, and come back with something serious. Starmer cannot govern.'
A previous effort to kill the Bill had attracted more than 120 Labour supporters, but was dropped after the first partial u-turn on the legislation last week.
And in yesterday's vote, Starmer faced a revolt of almost 50 MPs despite the changes, with the legislation clearing its first parliamentary hurdle by 335 votes to 260, a majority of 75.
-With additional reporting by Diarmuid Pepper
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