Labour in ‘good place now' on welfare, Kendall insists after Government U-turn

Independent

27-06-2025

Labour is in a 'good place now' on welfare reform, a Cabinet minister has insisted after the Government agreed to water down its plans for benefits cuts amid the prospect of a major rebellion.
Work and Pensions Secretary Liz Kendall sought to downplay party splits over the legislation after Downing Street offered concessions in a late-night climbdown to head off Prime Minister Sir Keir Starmer's first Commons defeat.
Meanwhile, Number 10 said there will be no 'permanent' increase in borrowing as a result of the U-turn but declined to rule out tax rises in the autumn amid mounting questions about how the changes will be funded.
Some 126 Labour MPs had signed an amendment that would halt the Universal Credit and Personal Independence Payment Bill in its tracks when it faces its first Commons hurdle on Tuesday.
Leading rebels now believe the concessions on offer, which include protecting personal independence payments (Pip) for all existing claimants, will be enough to win over a majority.
However, the fallout threatens to cause lasting damage as harder line rebels remain opposed to the legislation and some backbenchers have called for a reset of relations between Number 10 and the parliamentary party.
Facing questions about the climbdown on Friday, Ms Kendall denied suggestions she had found it 'difficult' to water down reforms she had so strenuously defended and said the concessions left the Bill in 'the right place'.
'We have listened to people, we have engaged with them,' she said.
'I think we're in a good place now, alongside the huge investments we are putting in to create the jobs that people need in every part of the country… but also to make sure there's employment support for those who can work and protections for those who can't.'
Asked how she felt about softening the impact of the policy, Ms Kendall said: 'I don't find it difficult, because the principles that I strongly believe in, that work for those who can is the best route out of poverty… that we must protect those who can never work, that is really, really important.
'Those principles are ones we all agree on.
'We're in the right place with the changes we've made.'
The Government has also left the door open to further reform later down the line, with Ms Kendall saying there need to be 'changes in the future' to ensure 'people who can work do'.
Ministers had hoped the Bill would save up to £5 billion a year, but the changes announced after crisis talks with rebels on Thursday mean Chancellor Rachel Reeves would need to find the money elsewhere to make up the shortfall.
The Government's original package had restricted eligibility for Pip, the main disability payment in England, as well as cutting the health-related element of universal credit.
Existing recipients were to be given a 13-week phase-out period of financial support in an earlier move that was seen as a bid to head off opposition.
Now, the changes to Pip will be implemented in November 2026 and apply to new claimants only while all existing recipients of the health element of universal credit will have their incomes protected in real terms.
The concessions on Pip alone protect some 370,000 people currently receiving the allowance who were set to lose out following reassessment.
The changes represent a major climbdown for the Prime Minister, just days after he insisted to reporters he would 'press on' with the cuts, arguing there was a 'moral case' for them.
Ms Kendall confirmed the U-turn in a letter to MPs late on Thursday night, along with plans for a review of the Pip assessment to be led by disabilities minister Sir Stephen Timms and 'co-produced' with disabled people.
A Number 10 spokesperson said: 'We have listened to MPs who support the principle of reform but are worried about the pace of change for those already supported by the system.
'This package will preserve the social security system for those who need it by putting it on a sustainable footing, provide dignity for those unable to work, support those who can and reduce anxiety for those currently in the system.'
Dame Meg Hillier, one of the leading rebel voices, hailed the concessions as 'a good deal' involving 'massive changes' to protect vulnerable people and involve disabled people in the design of future reforms.
She said: 'It's encouraging that we have reached what I believe is a workable compromise that will protect disabled people and support people back into work while ensuring the welfare system can be meaningfully reformed.'
Not all the rebels have been satisfied with the changes, with several suggesting they would create a 'two-tier system' and raising questions about who would be classified as a new claimant after November 2026.
One told the PA news agency that discontent and low morale among the backbenches would 'continue to fester' without a 'wider reset' of relations between Number 10 and the Parliamentary Labour Party.
Another accused decision-makers in Government of operating as an 'exclusive club' and showing 'disregard' for both its MPs and experts outside Westminster.
The concessions could also leave Ms Reeves scrambling to fill a hole in her budget come the autumn, with economists suggesting they could reduce the projected savings by at least £1.5 billion per year.
The Institute for Fiscal Studies said the changes make further tax rises in the budget 'even more likely' in order for the Chancellor to balance the books.
Meanwhile Ruth Curtice, chief executive of the Resolution Foundation think tank, suggested the changes could cost as much as £3 billion.
Facing questions from reporters about how the reduction in cuts would be funded, Downing Street said there would be 'no permanent increase in borrowing' and promised further detail on the policy next week.
'We'll set out how this will be funded at the budget, alongside a full economic and fiscal forecast in the autumn, in the usual way,' a Number 10 spokesman said.
'The full details (of the changes) will be set out to Parliament ahead of the second reading on Tuesday.'
Asked whether the Government could say there would be no tax rises to pay for the changes, the spokesman said: 'As ever, as is a long-standing principle, tax decisions are set out at fiscal events.'
Number 10 dismissed suggestions that Sir Keir's leadership had been marked by a pattern of caving in 'if enough people kick up a fuss' following similar policy changes over the winter fuel payment and grooming gangs.
Sir Keir earlier this month announced the fuel allowance would be reinstated for millions of pensioners and also agreed to a national inquiry into grooming gangs after an independent audit recommended a probe, following months of opposition pressure.
'It's not unusual as part of the parliamentary process to introduce a Bill, have a debate about the principles and then look at how those are implemented,' the spokesman said.
'Sometimes that's with amendments along the way.'
On Friday morning, care minister Stephen Kinnock refused to be drawn on how the changes would be covered, saying it was 'very much the Chancellor's job as we move into the budget in the autumn'.
He also declined to comment on whether it was fair that two people with the same condition would receive different amounts of money depending on when they started their claim.
Mr Kinnock told Times Radio there were 'many different individual circumstances' and it was 'not possible to generalise'.
Asked whether the Government now expected the Bill to pass, he said: 'Yes.'
There was mixed reaction among charities to the prospect of concessions.
Learning disability charity Mencap said the news would be a 'huge relief to thousands of people living in fear of what the future holds'.
Director of strategy Jackie O'Sullivan said: 'It is the right thing to do and sends a clear message – cutting disability benefits is not a fair way to mend the black hole in the public purse.'
The MS Society urged rebels to hold firm and block the Bill, insisting any Government offer to water down the reforms would amount to 'kicking the can down the road and delaying an inevitable disaster'.
Charlotte Gill, head of campaigns at the charity, said: 'We urge MPs not to be swayed by these last-ditch attempts to force through a harmful Bill with supposed concessions.
'The only way to avoid a catastrophe today and in the future is to stop the cuts altogether by halting the Bill in its tracks.'
The Tories described concessions as 'the latest in a growing list of screeching U-turns' from the Government.
Shadow chancellor Mel Stride said: 'Under pressure from his own MPs, Starmer has made another completely unfunded spending commitment.
'Labour's welfare chaos will cost hardworking taxpayers. We can't afford Labour.'