Labour’s meltdown on benefits gathered pace today as ministers warned there is no option about cutting the spiralling bill.
As tensions mount ahead of plans being unveiled tomorrow, Manchester Mayor Andy Burnham has warned the PM that reducing eligibility could leave people ‘trapped in poverty’.
Left-winger Diane Abbott demanded the government raises extra money from a ‘wealth tax’ instead of cutting welfare.
But Rachel Reeves has sounded defiance, saying benefits are ‘unsustainable’ and Labour must ‘get a grip’ on the public finances.
Dismissing suggestions that she could rip up fiscal rules instead of cracking down on welfare, the Chancellor told Bloomberg in an interview: ‘When we’re spending £100billion a year on servicing government debt, I don’t think anyone could seriously argue that we don’t need to get a grip of government borrowing and government debt.’
She added: ‘Every day an additional 1,000 people are going onto Personal Independence Payments, disability benefits. That is not sustainable.’
The clashes come despite ministers already looking to have staged a climbdown on the idea of freezing PIP – personal independence payment, the main disability benefit.
That sparked an outcry on Labour benches as it would have meant a real-terms cut for 3.6million claimants.
Some have claimed the proposal was leaked out in ‘bad faith’ before agreement between Work and Pensions Secretary Liz Kendall and Ms Reeves.
The Chancellor is desperately scrambling to fill an estimated £15billion hole in the public finances at the Spring Statement this month, caused by stalling growth and higher debt interest costs.
Rachel Reeves has sounded defiance over a Labour revolt, saying benefits are ‘unsustainable’ and Labour must ‘get a grip’
Keir Starmer is bracing for an ‘absolute horror’ clash with Labour MPs on moves to cut the spiralling benefits bill
The benefits bill has been rising and is forecast to continue going up
Touring broadcast studios this morning, Treasury minister Emma Reynolds tried to play down tensions but again stressed the moral case for getting people off benefits and back into work.
She swiped that Labour colleagues were ‘jumping to conclusions about our plans before they’ve heard them’.
But Ms Abbott told BBC Radio 4’s Today programme: ‘I would introduce the wealth tax. If you brought in a wealth tax of just 2 per cent on people with assets over £10million, that would raise £24billion a year. That’s what I would do.’
Ms Kendall is expected to set out plans for reform tomorrow after Sir Keir branded the rising burden ‘unsustainable’. They were originally mooted as saving £5billion a year for the Treasury, including £1billion reinvested in supporting people back to jobs.
However, the announcement has been pushed back a week as the premier tries to quell a prospective revolt.
No10 has been holding ‘engagement sessions’ to explain the changes, but they have been dismissed as ‘a tick box exercise’ by some Labour MPs.
One MP told the Guardian that they were anticipating the coming days with ‘absolute horror’.
It is unclear whether there will need to be a vote on the benefits changes if PIP is not going to be frozen in real terms – in a possible relief for Downing Street.
Answering questions in the Commons this afternoon, Ms Kendall said the number of young people not working because of mental health conditions had risen by more than 25 per cent in the last year.
The Work and Pensions Secretary said the number of young people considered ‘economically inactive’ now totalled 270,000.
Labour MP Chris Curtis had said he was ‘increasingly concerned by the rising number of young people in Milton Keynes who are out of work due to mental health issues’.
‘Can the Secretary of State outline what steps the Government is taking to ensure these young people have the support and opportunities that they need to continue to improve their health, secure stable employment and live independently with better living standards?’ he asked.
Ms Kendall said: ‘I really share concern about the number of young people not in work due to mental health conditions.’
She added: ‘That is why we are focusing on early intervention, providing mental health support in every school, recruiting an extra 8,500 more mental health staff, but also why this is such an important part of our youth guarantee.’
During the Commons grilling, Hartlepool MP Jonathan Brash said he wanted to support people into work but it was ‘imperative that those who are sick, vulnerable or disabled are always protected’.
Work and pensions minister Sir Stephen Timms replied: ‘That balance will be at the heart of the green paper that we’re bringing forward.
Ministers point to the number of people in England and Wales claiming either sickness or disability benefit having soared from 2.8million to about 4million since 2019.
The bill for working age adults claiming these benefits was £48.5billion in 2023-24.
It is forecast to continue rising to nearly £76billion in 2029-30 – more than the current schools budget.
Health Secretary Wes Streeting said yesterday that the full proposals are yet to come before Cabinet – where several ministers previously voiced concerns.
He told the BBC: ‘What I do know is the Work and Pensions Secretary wants to support people who need help the most, and we’ve got to make sure that there is a wide range of support and that everyone’s playing their part.’
Writing in The Times, Mr Burnham said he agreed that the welfare system needed ‘a radical overhaul’, but said the Government should focus on helping people into work rather than simply cutting benefits.
The mayor – often tipped as a successor to Sir Keir – said: ‘I would share concerns about changing support and eligibility to benefits while leaving the top-down system broadly in place. It would trap too many people in poverty.
‘And to be clear: there is no case in any scenario for cutting the support available to disabled people who are unable to work.’
Over the weekend, Government sources indicated that Ms Kendall’s reforms would include a ‘right to try guarantee’ allowing disabled people to enter employment without risk of losing their benefits if it did not work out.
Downing Street said Sir Keir ‘has been clear there is both a moral and an economic case for fixing our broken social security system that’s holding our people back, and our country back’.
‘Three million people are out of work for health reasons, and one in eight young people not currently in work, education or training,’ the PM’s spokesman said.
‘So we’ve got a duty to fix the system, to ensure that that safety net is always there for the most vulnerable and severely disabled, but also supports back into work, rather than leaving people written off.’
He added: ‘That is why tomorrow the Government will set out plans to overhaul the health and disability benefits system so it supports those who can work to do so, while protecting those who are most in need, and put the welfare system back on a more sustainable path.’
Asked if the reforms were being carried out because of the UK’s fiscal backdrop, the spokesman replied: ‘No, I think when you look at the fact that we have the highest level of working-age inactivity due to ill health in western Europe, we’re the only major economy whose employment rate hasn’t recovered since the pandemic, there is a duty to fix the broken system that is letting millions of people in this country down.’
But Conservative shadow work and pensions secretary Helen Whately said Labour was ‘divided’ over welfare and ‘cannot deliver the decisive change we need’.
She said: ‘The Government’s dithering and delay is costing taxpayers millions every day and failing the people who rely on the welfare system.
‘Under new leadership, the Conservatives are the only party united in the need to reduce spending on benefits – which is why we committed to save £12 billion-a-year from the welfare bill which Labour scrapped. Labour must come forward with a serious plan to deliver savings.’
Ms Reynolds was asked on Sky News this morning whether MPs should fall in line.
She told the broadcaster: ‘We have a big majority, we are a Government that secured a mandate for change.
As tensions mount ahead of the plan being unveiled tomorrow, Manchester Mayor Andy Burnham has warned the PM that reducing eligibility would leave people ‘trapped in poverty’
‘It is absolutely everyday business that we should have discussions with backbenchers, meetings between our MPs and ministers happen all day, every day. So this isn’t something that is any different, but we’re determined to strike the right balance here.
‘We’ve got to reform a system that is failing everybody, and we’ve got to do that according to our values.
‘As Liz Kendall has said, there is a Labour case for reform here, because too many people are locked out of the labour market market, and there is dignity in work, and we want people to to get back into work if they can.’