Labour faces a major challenge from its own backbenchers ahead of an announcement to restrict some sickness and disability benefits.

The plans are likely to be opposed by those in the party who are concerned about attempts to slash the ballooning welfare bill and encourage adults back to work.

Work and Pensions Secretary Liz Kendall is expected to set out the reforms on Tuesday, but details of where those cuts could fall is proving highly divisive within Labour.

Total welfare spending in 2023-23 was about £296bn, by the end of the decade it is forecast to reach almost £378bn.

Explainer: Where could welfare cuts be made?

The chancellor needs to find savings to meet her strict fiscal rules and Rachel Reeves has previously insisted “we do need to get a grip” on the welfare budget.

One proposal reportedly under consideration is to save around £5bn by freezing or tightening the rules around the personal independence payment (PIP).

But Labour’s Mayor of Greater Manchester Andy Burnham, a former Labour health secretary, has “urged great caution on how changes are made” although, writing in The Times, he accepts “the benefits system needs a radical overhaul”.

“I would share concerns about changing support and eligibility to benefits while leaving the current top-down system broadly in place. It would trap too many people in poverty,” he added.

Health Secretary Wes Streeting argued on Sunday Morning With Trevor Phillips that the current system is “unsustainable” and welfare reforms are needed. He also said mental health conditions are often overdiagnosed.

PIP is a payment of up to £9,000 a year for people with long-term physical and mental health conditions.

Campaigner Steve Morris is one of those 3.6 million PIP claimants and says freezing it at the current level would make his life much harder.

“I’m deafblind. PIP makes a huge difference to my life. It enables me to, afford some of the additional costs that are associated with my disability.

“For so many disabled people benefits are a lifeline. So to hear that lifeline might be taken away or severely restricted is hugely concerning.”

Liz Kendall told The Sunday Times it was an “absolute principle” to protect welfare payments for people unable to work. “For those who absolutely cannot work, this is not about that,” she said.

But she said the number of people on PIP is set to more than double this decade, partly driven by younger people.

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Sky’s political correspondent Liz Bates said the government had been expected to announce a detailed plan over welfare spending last week.

“This particular issue of PIPs stopped that plan being announced because of the strength of backlash… from the backbenches all the way up to cabinet level.”

She added that talks were going on behind the scenes about whether the policy could be softened in some way, although it was unlikely reforms could be avoided completely ahead of the spring statement on 26 March.

“Could there be a bit of backtracking from Number 10 and from the department? This is what we’re going to find out on Tuesday. There is, of course, a lot of pressure coming from the chancellor.”

Labour is also aiming to tackle economic inactivity – especially among those under 35 – with an increasing proportion out of work due to long-term sickness.

A recent PwC report warns “a significant proportion of working adults are close to becoming economically inactive” and ill-health “is a major driver”.

The poll of 4,000 people shows 10% of the workforce are currently actively considering leaving work, and not just their current role.

That rises to 37% of those aged 18-24, who say they have either seriously considered leaving work in the last year, or are actively considering doing so now.

While the factors are complex and vary by age, the report reflects mental health is a major concern with 42% of 18-24 year-olds citing it as the biggest reason to leave work.

On Sunday, Ms Kendall teased one policy announcement to attract people back to work, effectively giving disabled people the right to try employment without the risk of losing their benefits.

The so-called “right to try guarantee” aims to prevent those people who receive health-related benefits from having their entitlements automatically re-assessed if they enter employment.

The Conservatives support welfare reform but claim Labour is “divided” over the issue and “cannot deliver the decisive change we need”.

Shadow work and pensions secretary Helen Whately said: “The government’s dithering and delay is costing taxpayers millions every day and failing the people who rely on the welfare system.”

Since taking office nine months ago Sir Keir Starmer has weathered party rows about winter fuel payments, the two child benefit cap, WASPI women, airport expansion and cuts to international aid.

All of these decisions have been justified in the name of balancing the books – filling that notorious £22bn black hole, sticking to the fiscal rules, and in the pursuit of growth as the government’s number one priority.

But welfare reform feels like a far more existential row.

Health Secretary Wes Streeting argued on Sunday Morning With Trevor Phillips that the current system is “unsustainable”.

Ministers have been making the point for weeks that the health benefits bill for working-age people has ballooned by £20bn since the pandemic and is set to grow by another £18bn over the next five years, to £70bn.

But the detail of where those cuts could fall is proving highly divisive.

One proposal reportedly under consideration has been to freeze personal independence payments (PIPs) next year, rather than uprating them in line with inflation.

Charities have warned this would be a catastrophic real-terms cut to 3.6 million people.

Concerned left-wing backbenchers are calling on the government to tax the rich, not take from the most vulnerable.

The Sunday Times and Observer have now reported that Work and Pensions Secretary Liz Kendall has dropped the idea in response to the backlash.

Read more:
Streeting denies Labour ‘changing into Tories’
Planned PIP freeze set to be scrapped – reports
What cuts could be announced?

Wes Streeting denied reports of a cabinet row over the plan, insisting the final package of measures hasn’t yet been published and he and his cabinet colleagues haven’t seen it.

Not the final version perhaps – but given all backbench Labour MPs who were summoned to meetings with the Number 10 policy teams for briefings this week, that response is perhaps more than a little disingenuous.

In his interview with Sir Trevor Phillips, he went on to make the broader case for PIP reform – highlighting the thousand people who sign up to the benefit every day and arguing that the system needs to be “sustainable”, to “deliver for those that need it most” and “provide the right kind of support for the different types of need that exist”.

To me this signals the government are preparing to unveil a tighter set of PIP eligibility criteria, with a refocus on supporting those with the greatest needs.

Changes to incapacity benefit to better incentivise working – for those who can – are also clearly on the cards.

The health secretary has been hitting out at the “overdiagnosis” of mental health conditions, arguing that “going out to work is better for your mental and physical health, than being spent and being stuck at home”, and promising benefit reforms that will help support people back to work rather than “trapped in the benefits system”.

Turning Tory?

Starmer said this week the current welfare system couldn’t be defended on economic or moral grounds.

The Conservatives don’t disagree.

Before the election, they proposed £12bn in cuts to the welfare bill, with a focus on getting people on long-term sickness back to work.

This morning, shadow education secretary Laura Trott claimed Labour denied that welfare cuts were needed during the election campaign and had wasted time in failing to include benefits reform in the King’s Speech.

“They’re coming to this chaotically, too late and without a plan,” she said.

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Notwithstanding the obvious critique that the Tories had 14 years to get a grip on the situation – what’s most striking here is that, yet again, the Labour government seems to be borrowing Conservative clothes.

When challenged by Sir Trevor this morning, Streeting denied they were turning Tory – claiming the case for welfare reform and supporting people into work is a Labour argument.

But, from increasing defence spending and cutting the aid budget to scrapping NHS England, there’s a definite pattern emerging.

If you didn’t know a Labour administration was in charge, you might have assumed these were the policies of a Conservative government.

It’s a strategy which makes many of his own backbenchers deeply uncomfortable.

But it’s doing a good job of neutering the Tory opposition.

A row is brewing between teaching unions and Number 10 over the impact AI could have on jobs, Sky News has learnt.

The National Education Union (NEU), the largest teaching union in the UK, is concerned AI teaching tools could lead to some in the profession losing work, particularly lower-paid teaching assistants whose tasks could become automated.

Alarm bells were set off in January when the government announced it was giving £1m in funding to 16 tech companies to build teacher AI tools “for feedback and marking, driving high and rising education standards”.

NEU general secretary Daniel Kebede told Sky News that while there were positive aspects to the rollout of AI, he felt there had “not been any meaningful discussion with the sector yet” and that the Department for Education (DfE) was “running away with itself”.

“AI can reduce workload, slash bureaucracy and there is a role to reduce admin and workload for teachers – but education and learning is ultimately a relational and social experience,” he said.

“AI can be used in a progressive way or it can be used in the way of Elon Musk,” he added, referring to the tech billionaire who is spearheading Donald Trump’s Department of Government Efficiency (Doge) to cut federal waste.

“Elon Musk says we need to gamify education – his direction of travel is no teachers, no teaching assistants.

“The profession is sick of having things done to it from the top down, without consideration of how it affects us.

“If it is used to free up educators’ time so they can focus their time more effectively, then fair enough – but we will resist a direction of travel that seeks to de-professionalise, deskill or replace teaching assistants.”

A DfE spokesperson rejected the NEU’s accusations, telling Sky News: “It is flat out wrong to suggest that we have not meaningfully engaged with the sector on the use of AI.

“From the initial call for evidence, through to our published policy on AI, we have communicated and engaged with the sector, and we will continue to do so as we use this great new technological era to modernise our education system, back our teachers and deliver for our children.”

The issue of AI nevertheless could pose a challenge for Education Secretary Bridget Phillipson who will have to balance the concerns of the unions alongside the government’s drive to use AI to maximise efficiency and make savings in its bid to stimulate a subdued economy.

She has been subject to a number of hostile internal briefings suggesting her policy agenda, particularly on academies, has been driven by a desire to foster a close relationship with the unions, whose endorsement she may need in a future potential leadership bid.

The NEU has however threatened to strike over the government’s offer for a 2.8% pay rise, while it also issued a critical response to Ms Phillipson’s decision to scrap one-word Ofsted grades in favour of a colour-coded five-point scale.

An ally of Ms Phillipson described the briefings against her as “baseless and misogynistic”.

“It’s increasingly clear that they’re being made by people who are intent on attacking the prime minister by briefing against his allies,” they added.

The scale of the government’s ambition to take on the “blob” – the term used by former Tory education secretary Michael Gove to describe unions, councils and a civil service resistant to change – was made clear when Sir Keir Starmer announced NHS England would be scrapped and brought under ministers’ control in a bureaucracy crackdown.

He made the announcement in a speech heralding the benefits of AI, which he said could reform an “overstretched, unfocused” state, and deliver savings of up to £45bn.

He described AI as a “golden opportunity” to reform the state, which he said was “weaker than it has ever been -overstretched, unfocused, trying to do too much, doing it badly, unable to deliver the security that people need”.

Science and Technology Secretary Peter Kyle admitted the government’s efforts would mean it was “almost certain” civil service staff numbers would be slashed but that the public would appreciate a “leaner, smarter, smaller state over time”.

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Rob Poole, a teacher in the north of England who is also a member of the NEU, said large language models (LLMs) such as Chat GTP and Gemini were already being used in classrooms and help with planning lessons and assessments.

But he said that while AI was useful it could never replace the “personal connection” pupils – especially those with special needs – have with teaching assistants.

“AI doesn’t know that pupil or their needs,” he told Sky News.

“The rollout of AI needs to be done in consultation with the unions, which is not happening at the moment,” he added.

“We are concerned about the de-skilling teachers and a lack of professional autonomy – do we need teachers at all is the next question.”