02-07-2025
Last-minute welfare concessions will have a 'financial consequence', minister says
The 11th-hour concessions to the government's welfare cuts will have a "financial consequence", a government minister has said, fuelling speculation of tax rises in the autumn.
Sent out to defend the government after chaotic scenes in Parliament on Monday night, Chancellor of the Duchy of Lancaster Pat McFadden said: "There's definitely a financial consequence to the decision taken last night."
He would not be drawn on whether that means tax rises, insisting "all the figures on this will be set out at the budget - this is one moving part of the public expenditure picture".
Prime Minister Keir Starmer was forced to abandon a key plank of his welfare reform package after MPs threatened to derail the Bill.
The government shelved plans to restrict eligibility for the personal independence payment (Pip) and any changes will now only come after a review of the benefit.
The changes were announced by disability minister Sir Stephen Timms to MPs in the Commons, and came after a first round of concessions offered last week did not seem enough to quell the rebellion.
McFadden said it was not unusual for Labour to have issues with votes over welfare reform, saying "there's a history of these issues being difficult for the Labour Party".
Despite the last-minute climbdown, 49 MPs still voted against the government, which is higher than the biggest rebellion former Labour MP Tony Blair faced during his first year, when 47 MPs rebelled over the Lone Parent Benefit.
The U-turn on Tuesday night also wiped out all of the £5 billion planned savings from the welfare package by 2030, sparking fierce speculation about how Chancellor Rachel Reeves will plug the gap.
Ministers have repeatedly insisted Labour will not raise taxes on 'working people', specifically income tax, national insurance or VAT.
Reeves also remains committed to her 'iron clad' fiscal rules, which require day-to-day spending to be covered by revenues, not borrowing in 2029/30.
The Institute for Fiscal Studies' incoming director Helen Miller, said that "tax rises look increasingly likely" after the government's decision to U-turn once again.
'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."
'This will doubtless intensify the speculation over the summer about which taxes may rise and by how much", Miller said.
Deputy Prime Minister Angela Rayner, who was one of the key figures to broker the 11th-hour deal with backbenchers, told ITV's Lorraine on Wednesday that "welfare reform is always difficult".
She denied the scenes in the Commons were embarrassing for the government. "People might see it as chaos, but we've actually got to a better place now," Rayner said.
"The process of parliament can look argy-bargy... but that's the way you get to a consensus," Rayner insisted.
Rayner sought to reassure people who had been 'scared' about the proposed benefits changes.
The deputy prime minister told Lorraine: 'Anyone listening to your show today, they know that there will be no changes to their welfare.
'I want to make sure that people are reassured by that, because a lot of people have been scared about what's going to happen.'
Shadow Chancellor Sir Mel Stride said: 'Tax rises are on the way to pay for Labour's mismanagement of the economy.
'Hard-working families will have an agonising summer waiting to hear how Rachel Reeves will claw back the cash to make up for the failings of this weak Prime Minister.'
Speaking after the vote, Work and Pensions Secretary Liz Kendall insisted the Labour Party is '100% behind' Starmer, despite the rebellion, but acknowledged there were 'lessons to learn'.
'I think people are 100% behind a prime minister that secured the first Labour government in 14 years," she said.
'They were elected on a mandate for change. There are definitely lessons to learn from this process. I certainly will do that, and I'm sure my colleagues will too.'
