Starmer Pushes Through Weakened Welfare Bill Amid Labour Revolt and Fiscal Fallout

Prime Minister Keir Starmer has narrowly passed a significantly diluted welfare reform bill through Parliament, following a major revolt within the Labour Party that forced the government to abandon key savings measures. The revised bill, stripped of significant disability benefit cuts, has triggered fiscal concerns and exposed deep divisions within Labour ranks, marking one of Starmer’s leadership’s most serious political challenges.

The original welfare proposal aimed to tighten eligibility rules for Personal Independence Payments (PIP) and Universal Credit, targeting £5 billion in annual savings by 2030. However, backlash from over 120 Labour MPs and disability rights groups led to a dramatic U-turn. The revised legislation now applies only to new claimants, deferring any changes for existing recipients until at least 2026. Despite passing the Commons by 335 votes to 260, the vote revealed the party’s internal rift, with 49 Labour MPs breaking ranks to oppose the bill and many others voicing discontent.

The fallout from the rebellion has significant economic and political consequences. Chancellor Rachel Reeves faces a gaping hole in her fiscal strategy with the key savings element removed. Analysts warn that the government must now find alternative means to close the gap, either by raising taxes or cutting spending elsewhere, which could undermine Labour’s core economic promises. Financial markets have already shown concern, with bond yields rising and the pound slipping in response to fears of a weakened fiscal stance.

Inside Downing Street, the crisis has sparked a wave of introspection. Starmer publicly admitted the process had gone wrong, while Work and Pensions Secretary Liz Kendall acknowledged failures in communication and strategy. Critics argue the leadership misjudged internal party sentiment and mishandled public messaging on sensitive welfare issues.

Disability campaigners welcomed the climbdown but cautioned that the revised bill still risks harming vulnerable people. They have called for a complete overhaul of the legislation, demanding inclusive consultation and stronger safeguards for claimants.

As the government prepares for the upcoming autumn budget, the pressure is mounting to present a coherent fiscal plan that restores market confidence without alienating its voter base. Though the bill survived a crucial vote, it did so at the cost of party unity and economic certainty, raising fresh questions about the government’s direction and resilience.

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