The UK Labour government has been forced into a significant welfare policy climbdown, creating a £5bn financial hole and undermining its authority. This U-turn, stemming from strong opposition within its own party and from disability charities, has left the government facing a double challenge: plugging the budget gap and reasserting control. The chancellor, Rachel Reeves, has indicated that the forthcoming budget will involve 'hard choices,' including potential tax rises and cuts to other progressive priorities like ending the two-child benefit limit, leading to internal party tensions and market instability.
Welfare climbdown lets genie out of the bottle, and no one knows what happens next
WelfarePoliticsUKKeir StarmerBudgetRachel ReevesPublic financeSocietyLabour
AI Summary
TL;DR: Key points with love ❤️The UK Labour government has been forced into a significant welfare policy climbdown, creating a £5bn financial hole and undermining its authority. This U-turn, stemming from strong opposition within its own party and from disability charities, has left the government facing a double challenge: plugging the budget gap and reasserting control. The chancellor, Rachel Reeves, has indicated that the forthcoming budget will involve 'hard choices,' including potential tax rises and cuts to other progressive priorities like ending the two-child benefit limit, leading to internal party tensions and market instability.
Trending- 1 A fortnight ago (mid-June 2025): Discussions about the welfare vote and potential consequences.
- 2 This week (July 2025): Welfare policy climbdown.
- 3 Wednesday (July 2, 2025): Rachel Reeves sat on frontbench during PMQs; Pat McFadden sent out to state budget implications.
- 4 Next May (2026): Potential election date mentioned.
- £5bn budget hole
- Undermining of government authority and discipline
- Questioning of Keir Starmer's position
- 'Hard choices' in forthcoming budget (potential tax rises, cuts to other progressive priorities like ending two-child benefit limit)
- Internal party anger
- Market instability (gilt yields affected)
What: The UK Labour government was forced to reverse a welfare policy, resulting in a £5bn budget deficit and a perceived loss of authority and control.
When: A fortnight ago (mid-June 2025) for initial discussions, 'this week' (July 2025) for the climbdown, Wednesday (July 2, 2025) for PMQs and Cabinet Office minister's statement.
Where: United Kingdom, specifically House of Commons, No 10, Treasury.
Why: Climbdown: Strong opposition from Labour MPs (desire to protect vulnerable, belief policy was wrong) and disability charities, coupled with the chancellor's limited headroom in the spring statement. Political fallout: Internal party tensions, perceived loss of government authority, market reaction.
How: Labour MPs rebelled against the government's welfare bill, forcing a U-turn. The government is now signaling 'hard choices' for the upcoming budget to address the financial hole and reassert control.