Sir Keir Starmer’s decision to roll back parts of his Government’s welfare reform plans could cost the Treasury as much as £3 billion, according to the Resolution Foundation.
In a major concession to Labour rebels, the Prime Minister announced that existing recipients of the Personal Independence Payment (PIP) will continue to receive their benefits, with tougher eligibility rules only applying to new applicants. The move followed a mounting rebellion from Labour MPs over proposed £5 billion a year welfare savings, set to be in place by 2030.
Ruth Curtice, chief executive of the Resolution Foundation, told the BBC that the revised policy is likely to carry a hefty price tag. “The PIP changes alone could cost between £1.5 billion and £2 billion, especially when you factor in related spending like carer’s allowance,” she said. “Add to that the reversal of the freeze on Universal Credit health-related support, which we estimate will cost around £1 billion, and the total could come close to £3 billion.”
Care Minister Stephen Kinnock declined to say how the Government would fund the shortfall, stating only that Chancellor Rachel Reeves would outline the fiscal implications in the autumn Budget. The announcement adds further pressure to Reeves, who is already facing what some estimate to be a £20 billion hole in the public finances, worsened by slower than expected economic growth and likely downgrades from the Office for Budget Responsibility.
The backtrack followed a week of tension within Labour, with a group of MPs demanding changes to the proposed cuts. The scale of the revolt reportedly caught both Downing Street and the Labour whips by surprise and is seen as a blow to Sir Keir’s authority, despite his strong majority in the Commons.
Government ministers have continued to argue that without reform, welfare spending is projected to rise sharply. A recent impact assessment warned that social security costs could balloon by £18 billion over the next five years roughly equivalent to the UK’s entire annual policing budget. Even with the original reforms, the welfare bill was expected to grow by £8 billion by the end of the decade, according to ministers.
