Upcoming changes to benefits

I doubt any of us could guessed the extent of the cruelty.

More from "The I" this morning about ongoing concerns in the Labour ranks despite the PIP freeze thawing out:

You can tell that a Cabinet row is underway when the concessions start coming to try to close it down.

Rachel Reeves, the discipline-driven Chancellor who has insisted that the key to making precariously balanced public finances work is to “get a grip” on the welfare bill, is hitting a rock of resistance from many Labour MPs in a revolt which has spread fast from backbenches and junior ministerial ranks into the Cabinet itself.

A flurry of stories about concerns at the impact of expected cuts to the welfare budget, and particularly the impact on the burgeoning numbers of sickness and disability-related claims, have created a tricky backdrop for the publication of  the Government’s Green Paper on welfare reform this week.

The aim is to distinguish more clearly between deserving recipients of benefits and those who need more support to work, and to end the wonky incentives of a system which traps many young people into a category of skimpy benefit support rather than helping propel them into training or the job market.

The difficulty is one that has long haunted welfare-reforming politicians of both main parties. How to tamp down burgeoning welfare bills to redirect funds to the NHS and (urgently, nowadays) defence, without hitting the wrong people or causing anxiety with no certain reward of a more efficient welfare-to-work system at the end of it all?

It might be scant comfort to Labour politicians, but this is a close repeat of the massive row which broke out between Iain Duncan Smith when he was the Tories’ chief welfare reformer and former chancellor George Osborne, who oversaw swingeing benefit cuts which ultimately led to Duncan Smith’s resignation in 2016 after a damaging turf war.

As several Labour ministers have pointed out in Cabinet meetings which even loyalists admit have been “tense”, Osborne – who ranks in Labour’s iconography as a steel-toed purveyor of austerity – did not ultimately freeze the personal independence payment (PIP), the core benefit specifically for those whose capacity to work and even get around is limited because of persistent sickness or disability. On his latest podcast, Osborne is frank about why.

“I didn’t freeze PIP. I thought [it] would not be regarded as very fair. What I did try to do was reform PIP,” he said. General freezes have been easier to sell than specific reforms that actually cut in cash terms the payments that certain sections of the population rely upon.

Exactly this problem has rolled up at Labour’s door as the party’s spending plans hit reality. Whips worry that the ferocity of the rebellion was more likely to grow than be quelled by the stern prime ministerial edicts of recent weeks.

“Keir is aware that he needs to keep some powder dry for future clashes over sacrifices to fund defence,” says one aide. “He will back Reeves in the fight on welfare, but he doesn’t intend it to be his Waterloo.”

Hence the step back this week. Liz Kendall, the Work and Pensions Secretary now appears likely to leave the PIP payments intact. At the same time, this Chancellor and the Prime Minister are clear that the health and disability-related benefits bill, currently £65bn a year and projected to increase to £100bn over the next four years, cannot carry on without a reduction. Even if PIP is saved, entitlements for new and especially younger claimants will have to be tightened to bring down this sum.

Secretary of State for Work and Pensions Liz Kendall is preparing to announce cuts to benefits next week (Photo: Wiktor Szymanowicz/Future Publishing via Getty)

The broader problem for Starmer and Reeves is that Labour’s response to welfare changes is starting to look like a political Rorschach test, which endangers its hard-fought unity. It reminds us that behind the facade of a settled view of political economy lurk schisms which re-emerge when decisions get tough and the conversation turns to “what it means to be Labour” – a question of ideology which Starmer has so far adroitly dodged, by having it mean whatever he says it is at the time.

One vocal group here are those like the Home Secretary Yvette Cooper, Energy Secretary Ed Miliband and leader of the Commons Lucy Powell, who rank in the taxonomy of this government as hailing from the old Gordon Brown set of loyalists. Kendall, on the other hand, is clearly a product of the reformist aspirations of the Blair years – tougher in her rhetoric about people “taking the Mickey” from the system.

Reeves sits uneasily at times between these positions. Both she and Starmer are also relatively inexperienced in the ritual tug of war between the Treasury and departments, whereas senior figures like Cooper have held office as chief secretary to the Treasury and Miliband knows the ropes having been one of Brown’s closest confidants during his chancellorship and a former chairman of the Treasury’s Council of Economic Advisers.

Fundamentally, a lot of instinctive Labour thinking on budgets is fuelled by a desire to escape the strictures Reeves believes have been key to convincing voters that the Government is trustworthy on spending, welfare and taxation.

They look enviously at alternatives like the new German government’s moves to exempt infrastructure and defence spending from the tight restrictions of the “debt brake” which restricts borrowing. That is wishful thinking: Germany’s public debt is just over 60 per cent of GDP while the UK’s is 100 per cent, so the costs and risks of borrowing are much higher.

For the first time, the trade-offs and tensions which flow from the Chancellor’s tight spending corset are starting to cause trauma for senior Labour colleagues who have to administer real-term cuts. Tweaks, twiddles and fixes will result, which tie departments into fiddly compromises.

When Ed Balls (no longer inside politics but as Cooper’s husband, and a former shadow chancellor) says on his podcast with Osborne that the cuts are “not a Labour thing to do,” the temperature inevitably rises. Little by little, the omertà which has protected the Government from splits since the last election will start to dissolve. PIP may have been benched. The rows, however, won’t stop here.

Anne McElvoy is the executive editor of the Politico website

I have 30 years of NHS records but no neat diagnosis label. They're floating the idea of abandoning people with depression & anxiety, these are some of symptoms but they are not the cause. I never wanted a label, but now not having one might condemn me.