Taking the Pip: Starmer’s £5 billion U-turn

It’s Keir Starmer’s one-year anniversary as Prime Minister this week – which is supposed to be Labour’s honeymoon, riding high on a super majority in Parliament. As it turns out, however, Starmer could be heading for an early divorce.

Last night, Starmer’s Labour government won the vote on its controversial welfare bill by just 75 votes, after 49 Labour MPs rebelled and 18 others abstained.

But even this hollow victory was only achieved after the government significantly watered-down its plans – completing Starmer’s embarrassing hat-trick of U-turns. The man’s U-turned so much, I wouldn’t be surprised to see him walk into 10 Downing Street backwards this morning.

The headline is that Labour’s welfare reform plans have been an absolute disaster. So let’s see exactly why.

How has the bill changed – what was the U-turn?

The short answer is it’s as clear as mud. Starmer has U-turned so many times on welfare that anybody looking to claim Pip has a better chance of predicting the weather than knowing how much benefit they’ll be entitled to.

But the fact of the matter is that 800,000 disabled people were set to lose out on Pip – personal independence payments – by 2030. This was thanks to the government’s plans to tighten eligibility criteria to claim Pip.

Now there will be no changes to Pip until the Timms review has been completed.

Universal credit was also going to be frozen for existing claimants until 2030, but this will now rise with inflation to quell the Labour rebels.

However, for new claimants from 2026, universal credit top-ups will be cut in half – from £97 a week to £50 a week. This is a two-tier system which disadvantages new, probably younger, claimants.

So, it’s all a complete and utter mess.

But one thing is for certain. Rachel Reeves will be quaking in her boots because the intended welfare savings of £5 billion a year by 2030 are now completely eviscerated.

Image: Eliot Lord. Licence.

Taxpayers, we need another £5 billion

Guess what this all means? Rachel Reeves will have no choice but to come after your hard-earned cash yet again.

And I wonder where she might pinch that from. Taxes on working people can’t go up (they have, by taxing their jobs via Employer NI hikes), so where could Reeves possibly nick a quick £5 billion…?

What a coincidence that, just days before the government watered-down its welfare bill, Reeves found her new pot of gold at the end of her miserable rainbow: savers.

Yep, Rachel Reeves is coming after your savings next. You’re currently allowed to save £20,000 a year – tax-free – in cash ISAs. That’s enough for an average first-home deposit.

If you exceed this threshold, you’re taxed at your usual tax rate – for example, 20% for basic rate taxpayers.

However, if Rachel Reeves gets her way, this £20,000 ceiling will fall to an extremely claustrophobic £5,000. Barely enough to pay the movers.

So, if you’re saving to buy your first home, to buy a car, or to get married any time soon, you could find your savings raided by Labour’s Chancellor – who seems hellbent on suffocating anything that breathes.

A £5 billion botched – but much-needed – plan

Now, I’m not saying that Reeves wouldn’t have raided your savings if it weren’t for the government’s shambolic handling of welfare reform.

But let’s be real – it seems like a remarkable coincidence.

And the worst thing about it all is that the entire mess – for disabled people, their families, and potentially now for savers – could all have been avoided if the government hadn’t tried to rush through an ill-conceived, mis-executed bill.

Why was this necessary? Because Rachel Reeves needs the money – and fast. After announcing £2 trillion worth of spending, the Chancellor needed some savings to play with.

But that’s resulted in traumatic anxiety for disabled people up and down Britain.

Don’t get me wrong – we need benefit reform. Since 2020, the proportion of universal credit claimants not required to seek work has increased from 25% to over 40%.

Over the same period, the number of economically inactive ‘long-term sick’ has skyrocketed from around 150,000 to almost 700,000.

We cannot support all of these people, such as those with acne and writer’s cramp. By this bizarre logic, I’m currently in need of Pip owing to sunburn.

But let’s not forget that Rishi Sunak went after benefit fraudsters last year before the election – only to be faced with a barrage of statistics showing a 0% fraud and error rate in Pip payments.

Starmer must’ve been in between gifted Specsavers glasses to miss this critical point – which explains why his arrow has missed the fraudster target and hit disabled people instead.

A missed opportunity

So that’s exactly what this is: a missed opportunity to tackle a real problem with an exponential rise in benefit claimants, who we simply cannot afford to support.

It has become too easy to game the system. The back to work lag from lockdown needs to be addressed, supporting people back into work and pulling benefits from those who are indeed fit to work. 

Instead, Starmer has tried to pull benefits from disabled people – who are the wrong target. Captain U-turn has slashed his own working majority from 165 to just 75 in the process.

This is a £5 billion mistake that will cost us all in the very near future, whether by tax hikes, further spending cuts – or probably both.

Illustration by Will Allen/Europinion