Under threat of a rebellion, the Government has u-turned on its welfare reform plans. But Melanie Henwood argues that the Government will still have to deal with the rising cost of the welfare bill, as well as the political cost of its policy reversal.
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Just short of the first anniversary of the Labour government coming to power with the enormous mandate of 403 MPs and a majority of 174, few people would have expected that Labour would be doing last minute deals to head off possible defeat from its own members, and making major concessions on proposed legislation. But so it has played out, with Prime Minister, Kier Starmer, looking at worst seriously weakened and lacking authority, and at best directionless.
It’s not the style of a Labour administration to be associated with targeting the poorest and often vulnerable members of society for additional hardship, and yet that would have been the impact.
The media excitement will probably be temporary, with the government no doubt counting down the days to the summer recess to provide a change of tone and mood, but this is not just end of term frenzy. Something more fundamental is happening which could question the entire mission of this government and its hope of delivering the manifesto pledge of “change”.
The trap of a Labour welfare reform
The issue of welfare reform is always a sticky one, but Labour values and principles might have been expected to define the approach to reform – balancing cost-control with decent benefit levels to support people to have dignified lives while avoiding perverse incentives that make work less attractive. In practice, the apparent dominance of cost reduction has focused on changing the rules around benefits for disabled people delivered through Personal Independence Payments (PIP) and the health element of universal credit. The welfare bill would have seen the threshold for PIP raised as the eligibility criteria tightened with a new four point qualifying assessment. People living with the extra costs of disability faced the prospect of reduced or withdrawn benefits (cuts to PIP were expected to save £5bn a year).
It’s not the style of a Labour administration to be associated with targeting the poorest and often vulnerable members of society for additional hardship, and yet that would have been the impact, with the government’s own figures indicating 250,000 people would face poverty as a result. Even more astonishing was the fact that this has happened so soon after the government was forced into retreat over the withdrawal of winter fuel payments for pensioners.
The genuine distress and emotion caused to Labour members was all too evident in debate in the House of Commons on 1 July; this was absolutely not what these members believed they were elected to do. It was not only recalcitrant back benchers who opposed the changes, an amendment to the bill was signed by 126 MPs including high profile committee chairs, a former cabinet minister and a former Labour whip. These were people the government might usually look to for support. The fact that they were prepared to offer resistance underlines the significance of both the content of the bill and the direction of travel.
Concessions agreed on 27 June would have introduced a two-tier system of benefits, with existing claimants enjoying a protected status, and new claimants penalised (the savings to the Treasury reducing to £2bn a year). There is something deeply invidious about two classes of benefit recipients – and any student of social policy will be alert to the clanging echoes of the 19th century Poor Law between “deserving” and “undeserving” claimants. Principles of equity and fairness are fundamental to the historic Labour mission and the risks of going against them should have been obvious.
The minister for social security and disability (Sir Stephen Timms) was charged with undertaking a review of PIP, including the assessment model, and is expected to report in autumn 2026. Although making a virtue over the apparent commitment to “co-producing” the review with disabled people, there has been much criticism over the fact that the welfare reforms would have been introduced in advance of the conclusions of the review.
The number of people of working age who are disabled has been growing, and the increase in disability prevalence (particularly of mental health conditions) among young people is a particular concern.
At the real prospect of the government being defeated, a late concession to the bill prior to the vote on 1 July which saw the plans for changes to PIP being abandoned, and no reforms to be introduced in advance of the findings of the Timms review. It was enough to save the bill (by 335 votes to 260), but his isn’t the end of the issue. Controversy will return when the review reports (and the government will hopefully have learnt the reality of understanding co-production rather than merely token consultation), and meanwhile the fiscal pressures on the Treasury will intensify as the soft target of savings from the PIP changes vanish.
Unfinished business
There are two major challenges for the government. First is the undoubted dilemma of what to do about the rising costs of welfare. The number of people of working age who are disabled has been growing, and the increase in disability prevalence (particularly of mental health conditions) among young people is a particular concern. The costs of PIP, which is paid to people with long term physical or mental health conditions, have grown steeply, with two million recipients of working age in 2019 increasing by 50 per cent in the following five years, and expected to double to over 4 million people by the end of the decade. Something lies behind these trends and must be properly understood if it is to be addressed humanely. A genuinely open and co-produced review could inform the approach by reflecting people’s lived experience and identifying what employment support needs to be in place to enable people to move into work whenever possible.
Second are the political issues; several key players have been personally damaged by the fiasco around the welfare reform bill – Liz Kendall, the Secretary of State for Work and Pensions has seen her authority and credibility largely vanish. The chancellor Rachel Reeves is highly distressed and has little room for manoeuvre with her fiscal rules. Either or both could yet see their political careers come to a premature collapse.
And then there is the Prime Minister himself. Already damaged and seen as indecisive before the latest chaos, but the biggest questions are about his vision for Labour and the objectives for the government. He has claimed he is not ideological but being prepared to change direction and adopt pragmatic strategies is hard to communicate as a strength. Where is the vision for change and for principle-driven aspirations for better lives for all citizens, greater opportunities and equity? Without this there is no coherent approach to reform, merely a reactive and defensive incremental set of contradictory or poorly coordinated policies.
The optics and comms have been dire. If Labour is to achieve the positive changes it has a mandate for, it’s time for a re-set and a return to clear values and objectives and a sense of the desired destination, not merely the journey.
All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.
Image credit: House of Commons on flickr
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