There will be “financial consequences” after the government made major concessions to its welfare rebels, a senior minister has admitted.
Pat McFadden, the chancellor of the Duchy of Lancaster, indicated that the fiscal fallout of the eleventh hour U-turn will be set out at the budget expected in the autumn.
Hours before MPs were set to vote on the government’s welfare proposals, disability minister Sir Stephen Timms told the commons that changes to restrict eligibility for the Personal Independence Payment (Pip) will be delayed until after a review of the disability benefit — instead of coming into force in November 2026 as set out in the bill.
This major concession means that almost all of the £4.6 billion of annual savings the bill was meant to deliver have been lost.
Helen Miller, deputy director of the Institute for Fiscal Studies, said: “Without reform to personal independence payment, the watered-down bill is not expected to deliver any savings over the next four years.”
In political and fiscal terms, the climbdown represents the most significant knock to the prime minister, Keir Starmer, since he came into power a year ago this week.
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Speaking to Times Radio on Wednesday morning, McFadden said: “This is a decision that will have financial consequences. The process of the last couple of weeks does have financial consequences.
“They will all be taken together with all the other moving parts that there are in the economy, in the fiscal picture at the budget, and that will be set out at the time.
“But I’m not denying that when you set out on a plan that has a cost attached to it, and then you have to change that or take it forward in slower time, that is a decision with financial consequences.”
McFadden added that the government will “stick to the tax promises we made in the manifesto”, effectively ruling out an increase to National Insurance, income tax or VAT.
McFadden, regarded as one of the prime minister’s most trusted ministers, was asked by Sky News if chancellor Rachel Reeves will still be in post to deliver the next budget in the autumn.
“Of course she will”, he responded.
The minister, who served as political secretary to Tony Blair, added: “She’s doing an excellent job, we take these decisions as a team, we stand as a team and we go forward as a team.”
Conducting the morning media round for the government, McFadden admitted that the events in the House of Commons on Tuesday evening were the culmination of a “difficult process” for the government.
He told Times Radio: “It’s been a difficult process there’s no doubt about that, over the last couple of weeks on this.
“But we got to a position where the second reading of the bill was passed, and where in regard to the most contentious issue of reforms to the Pip regime that will now be taken forward in slower time, with my colleague, Stephen Timms, the minister in charge heading up a review of that.”
The revolt of 49 Labour MPs *just* surpasses the largest rebellion in Tony Blair’s first year as prime minister47 MPs rebelled against Blair's plans to cut benefits to single parent families – as per @philipjcowley.bsky.socialIt is also the largest backbench mutiny since Starmer assumed office
McFadden went on to compare Tuesday night’s backbench revolt of 49 MPs to one under Tony Blair in the 1990s.
He commented: “I have been around for a long time, and I have to reflect that it’s not the first time this has happened with Labour on welfare.
“When we first came into government in 1997 we had a very similar size of rebellion on a similar issue: we had 47 Labour MPs voting against a welfare reform measure, we had 100 abstentions.
“The headline was, ‘Blair suffers in benefits revolt’ and that government went on not only to reform welfare more, but to reduce child poverty, to turn around the NHS and to do a lot of other good things. So I don’t deny that this has been a difficult process over welfare reform, but it’s not the first time it’s happened, and it is not going to be the defining story of this government.”
The chancellor of the Duchy of Lancaster also defended the PM, telling Times Radio he is the person who has “set the direction” for the government.
Asked whether there are issues of policy or leadership, McFadden said: “Keir Starmer is the leader who took the Labour Party for only the fourth time in its history from opposition to a majority Labour government.”
Josh Self is editor of Politics.co.uk, follow him on Bluesky here and X here.
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