Benefits rebels are eyeing their next target: the rich

Telegraph

02-07-2025

Having forced Sir Keir Starmer to climb down on benefits cuts, Left-wing Labour MPs scent blood in the water.
The question is what will the rebels demand next from the Prime Minister? And can Downing Street regroup to take back control?
Wealth taxes
The most obvious crunch point is the autumn Budget, when – on its current trajectory – the Government must choose between a series of unpalatable options.
Rachel Reeves has staked her credibility on being the 'Iron Chancellor', who will not budge her fiscal rules to get borrowing under control.
But worsening economic forecasts, rising debt interest rates and costly about-turns have left another promise of hers at risk: no more large tax increases before the next general election.
It is here where rebels will press their advantage, with some now calling for a raid on wealth to balance the books.
Andy McDonald, one the 49 Labour MPs who voted to throw out the welfare Bill even after ministers made significant concessions, is among them.
He singled out two ideas for new wealth taxes to The Telegraph on Wednesday. The first is a 2 per cent tax on assets of more than £10 million, which is an idea being pushed by the Patriotic Millionaires UK campaign group, and the second is increasing capital gains tax in line with income tax.
'It is the broadest shoulders argument. 'Distributed to each according to his need.' That's not Marx, it's the Bible,' Mr McDonald said.
'I've made the case for the last six months for wealth taxes. I'll continue to do so in the next six months because it's right.'
Another rebel had a similar message on welfare taxes: 'I think it is inevitable. I don't think the Chancellor [Rachel Reeves] has got any options left.
'I think they're also going to have a conversation about income tax. I don't know if they have the strength or authority to do that, but it's going to come about.'
The calls echo one of the suggestions made by Angela Rayner in a memo she sent to Ms Reeves that was revealed by The Telegraph in May, proposing measures to raise money without making spending cuts.
However, the rebels will not be without their opponents.
Liz Lloyd, the new Downing Street policy chief, 'scandalised' colleagues at a recent meeting by asking about existing wealth taxes and raising concerns about their impact on the mission to boost economic growth, according to the Financial Times.
This raises the possibility that – far from introducing new wealth taxes – some in Sir Keir's inner circle may be mulling over diluting their non-dom crackdown.
The rebels not being a homogenous group will present another challenge.
The strength of the uprising against the welfare Bill was that it was not comprised of just the 'usual faces' on the Left, with moderate heads of Commons committees leading the charge.
While some push for more taxes, other rebels are attempting to water down the inheritance tax hike on farmers.
Immigration and Donald Trump
Sir Keir may have rowed back his tough rhetoric on immigration, saying he 'deeply' regrets using the phrase 'island of strangers' after it led to accusations that he had echoed language from Enoch Powell's 'rivers of blood' speech.
But policies tightening up the visa system remain – could this become a rallying point for the Left?
Another potential clash is over Sir Keir's willingness to ingratiate himself with Donald Trump, who will briefly visit the UK this month before enjoying a full state visit in September.
British public opinion is firmly disapproving of the US President, according to the polls. Labour MPs in private are just as vociferous, with some uneasy of Sir Keir's buttering up of his counterpart.
Could a reshuffle save Starmer?
Downing Street's options for a reset are numerous.
There is speculation that a ministerial reshuffle of some form is being planned for either this month – before the parliamentary summer recess – or upon its return in the autumn, with mutterings about those at risk.
Liz Kendall, the Work and Pensions Secretary, oversaw the specifics of the welfare package that had to be shredded to avoid defeat.
Peter Kyle, the Science Secretary, has walked back his support for artificial intelligence proposals after a campaign backed by celebrities such as Sir Elton John that demanded stronger copyright protections.
Lord Hermer, the Attorney General, has rubbed some colleagues up the wrong way with his championing of international law, though he could be salvaged by a friendship with Sir Keir that long predates politics.
Should Sir Keir choose to rearrange his Cabinet, which is by no means a certainty, any moves risk creating new headaches.
Thrusting newbies who are not promoted on to the Government benches could become disillusioned. One Labour aide noted that none of the Downing Street sycophants looking for promotions spoke out about welfare, and not rewarding them could have consequences.
Those demoted in any reshuffle will also have their noses out of joint. A sacked minister can create more political problems than an underperforming one.
And then there is the Number 10 team itself. Sir Keir notably swung a supportive arm around Morgan McSweeney, his under-fire chief of staff, at the Cabinet gathering on Tuesday morning.
'We will not turn on our staff, including our chief of staff, without whom none of us would be sitting around this cabinet table,' Sir Keir remarked, according to The Times.
But are others safe? Claire Reynolds, who was appointed Sir Keir's political director, oversees relations between MPs, the party and Downing Street – links that broke down over welfare.
Supporters of Sir Alan Campbell, the veteran Labour MP who is in charge of delivering the votes to pass laws as Chief Whip, are firmly defending his handling of the benefits reforms.
He is said to have repeatedly warned those in Downing Street about the scale and severity of opposition for months. If so, did those in the centre not respond accordingly? And to what consequences?
One area Number 10 is already looking to beef up is its economics brief, with the hiring process for a senior economist to keep an eye on Ms Reeves's policy agenda being in train.
It is nothing new for governments to face tussles on policy and pressure for personnel shake-ups. But what gives this welfare rebellion its political bite is its size and how early it has come for this Prime Minister.
Sir Keir, a politician who talked about the need for a decade of renewal in opposition, is only just approaching his one-year mark in office and yet, is being bounced by backbenchers into billion-pound changes.
Rebellions past are not always an accurate predictor of those yet to come.