A Labour Party in Tory clothing? Why Starmer’s backbenchers are deeply uncomfortable
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.
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Streeting defends PM’s comments on ‘flabby’ public sector
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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.
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Liz Bates: Will there be a backlash over benefits?
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.
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Conservatives: Scrapping NHS England is ‘right thing’
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.
Those with “milder mental health” issues and “lower-level physical conditions” could see their disability benefits cut, as the government looks to shave £6bn off the welfare bill.
Liz Kendall, the work and pensions secretary, is expected to target sickness and disability benefit payments for savings today, which comes ahead of the spring statement next Wednesday.
Politics latest: Welfare reforms ‘imminent’
Her welfare reform green paper will arrive after Downing Street insisted there is a “moral and an economic case for fixing our broken system”.
Government figures argue the rising sickness and disability bill, which has ballooned since the pandemic, is unsustainable and will “leave the welfare state losing legitimacy” in the eyes of the wider public if not dealt with.
The cuts come as the chancellor eyes a hole in the public finances on the back of lower than expected growth and rising borrowing costs, with the £9.9bn headroom she had at the budget in October now wiped out.
Rachel Reeves’ self-imposed fiscal rules mean day-to-day government spending must be covered by tax revenue by 2029-30, which leaves her needing billions of pounds in spending cuts (after ruling out further tax rises, her other option).
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Welfare reforms will ensure ‘trust in system’
What changes should we expect?
Ms Kendall is expected to target personal independence payments (PIP) – one of the main forms of disability benefits for those with long-term illnesses or disabilities – amid a spike in claimants.
The PIP bill has grown from £13.7bn a year before the pandemic to £21.8bn in the current financial year, and is set to increase to £34.1bn by the end of the decade.
The number of people claiming this disability benefit is projected to more than double from two million to 4.3 million.
The work and pensions secretary will tell MPs that Labour will protect those who have a serious condition and can’t work, and the government’s rowed back from plans to freeze PIP payments after backlash from its backbench MPs.
These payments are now expected to rise in line with inflation, but the eligibility criteria will be tightened to whittle back the number of people eligible to claim.
One government figure told me it would result in some conditions – such as “milder mental health” or “lower-level physical conditions” – being ineligible for PIP.
But they stressed that those with more severe conditions and who are never going to be able to work would be protected and cared for.
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Which benefits could be cut?
Why Labour MPs are so uncomfortable
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Why is there a surge in youth unemployment?
The key principles driving reforms
The changes are likely to draw criticism from some MPs, though one senior Labour source said they didn’t think there would be any ministerial resignations over the benefit announcements.
Another Labour figure told me they would be “massively shocked” if there were resignations.
However, a number of Labour MPs have voiced their concerns, as has Greater Manchester Mayor Andy Burnham.
In a bid to assuage MPs, the work and pensions secretary is also expected to earmark £1bn of savings into employment support programmes as she frames the reforms around three clear principles.
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The first will be to prevent people from falling into long-term economic inactivity with a better support offer to get people back into work quickly.
The second will be to change the incentive systems to move people away from welfare dependency.
This could see Ms Kendall slash the highest level of incapacity benefit for working age people who have an illness or disability that limits their ability to work, while increasing the basic rate of support for those out of work (universal credit).
This is because the lower level of unemployment benefit has led to more people claiming for additional incapacity and disability benefits, while disincentivising them to try to find work.
The government will also announce a “right to try” scheme, allowing those on incapacity benefits to try returning to work without the risk of losing their benefits, as happens in the current system.
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Will there be a backlash over benefits?
‘I don’t think they go far enough’
But with one in 10 working age people claiming sickness benefits, and one in eight young people not in education, employment or training, the reforms could be just the start of bigger changes – and potentially bigger political battles.
The cost of long-term sickness and disability benefits for working-age people has risen by about £20bn since the pandemic to about £48bn, and is forecast to hit almost £100bn by 2030.
“People are trapped on benefits and the bill is getting out of hand,” said one government figure.
“We are currently spending more than three times the annual policing bill on these benefits. It’s getting out of hand.
“I don’t think the reforms go far enough, and I don’t think people have clocked the size of the numbers going on here.”
The Libra token scandal is set to be reviewed by the Supreme Court of New York after a newly filed class-action lawsuit accused its creators of misleading investors and siphoning over $100 million from one-sided liquidity pools.
Burwick Law filed the suit on behalf of its clients against Kelsier Ventures, KIP Protocol and Meteora on March 17 for launching the Libra (LIBRA) token in a “deceptive, manipulative and fundamentally unfair” manner. The token was then promoted by Argentine President Javier Milei on X as an economic initiative to stimulate private-sector funding in the country.
The law firm slammed the two crypto infrastructure and launchpad firms behind LIBRA — KIP and Meteora — claiming that they used a “predatory” one-sided liquidity pool to artificially inflate the memecoin’s price, allowing insiders to profit while “everyday buyers bore the losses.”
Within hours, the insiders “rapidly siphoned approximately $107 million from the liquidity pools,” causing a 94% crash in LIBRA’s market value, Burwick Law said in a March 17 filing shared on X.
Source: Burwick Law
President Milei was mentioned in the lawsuit but wasn’t named a defendant.
Burwick accused the defendants of leveraging Milei’s influence to aggressively promote the token, deliberately creating a false sense of legitimacy and misleading investors about its economic potential.
Approximately 85% of LIBRA’s tokens were withheld at launch and the “predatory infrastructure techniques” allegedly used by the defendants weren’t disclosed to investors, Burwick said.
“These tactics, combined with omissions about the true liquidity structures, deprived investors of material information.”
Burwick is seeking compensatory and punitive damages, the disgorgement of “unjustly obtained” profits and injunctive relief to prevent further fraudulent token offerings.
Related: Law firm demands Pump.fun remove over 200 memecoins using its IP
Data from blockchain research firm Nansen found that of the 15,430 largest Libra wallets it examined, over 86% of those sold at a loss, combining for $251 million in losses.
Only 2,101 profitable wallets were able to take home a combined $180 million in profit, Nansen noted in a Feb. 19 report.
The venture capital firm behind the LIBRA token, Kelsier Ventures, and its CEO, Hayden Davis, were apparently two of the biggest winners from the token launch. They claim to have netted around $100 million.
Davis, who is now facing a potential Interpol red notice following an Argentine lawyer’s request, said on Feb. 17 that he didn’t directly own the tokens and wouldn’t sell them.
Meanwhile, Milei has distanced himself from the memecoin, arguing he didn’t “promote” the LIBRA token — as fraud lawsuits filed against him have alleged — and instead merely “spread the word” about it.
Argentina’s opposition party called for Milei’s impeachment but has had limited success thus far.
Magazine: Meet lawyer Max Burwick — ‘The ambulance chaser of crypto’
Paul Atkins could move one step closer to becoming the US Securities and Exchange Commission’s new crypto-friendly chair, with a Senate committee hearing reportedly in the works for March 27.
President Donald Trump nominated Atkins to lead the SEC on Dec. 4, but his marriage into a billionaire family has reportedly caused headaches with financial disclosures — delaying his potential start date.
While it isn’t clear whether the White House has produced those papers to the Senate, Senate Banking, House and Urban Affairs Chair Tim Scott is reportedly eyeing a March 27 hearing to review Atkins’ standing, Semafor’s Eleanor Mueller said in a March 17 X post.
“No clarity yet on whether the committee has Atkins’ paperwork in hand, but either way, this is the most momentum we’ve seen so far.”
Atkins would, however, need to be voted in by the Senate at a later date.
Mueller also said the Senate banking committee is also planning to hold a bipartisan meeting on Atkins’ nomination on March 21.
Source: Eleanor Mueller
It follows an earlier March 3 Semafor report, where Mueller said financial disclosures had held Atkins back from scheduling a Senate hearing to review his standing.
His wife’s family is tied to TAMKO Building Products LLC — a manufacturer of residential roofing shingles that reportedly turned over $1.2 billion in revenue in 2023, Forbes said on Dec. 14, 2024.
“It’s a lot to go through,” one former Senate Banking Committee staffer reportedly told Mueller on March 3.
“But he got named so early on, so I think that’s why people are starting to be like, ‘What the hell’s taking so long?’”
Atkins previously served as an SEC commissioner between 2002 and 2008 and worked as a corporate lawyer at Davis Polk & Wardwell LLP in New York before that. He is expected to regulate the crypto arena with a more collaborative approach than former SEC Chair Gary Gensler.
It’s been almost four months since Atkins was chosen by Trump to lead the SEC on Dec. 4, and over two months since Trump was inaugurated on Jan. 20.
A late start for an SEC chair wouldn’t be too unusual, however.
The two most recent SEC chairs, Gary Gensler and Jay Clayton, started on April 17, 2021, and May 4, 2017 — months after presidential transitions occurred in those years.
Related: SEC’s enforcement case against Ripple may be wrapping up
Meanwhile, Mark Uyeda has been serving as the SEC’s acting chair since Gensler left on Jan. 20.
Since then, the Uyeda-led SEC has established a Crypto Task Force led by SEC Commissioner Hester Peirce and canceled a controversial rule that asked financial firms holding crypto to record them as liabilities on their balance sheets.
The SEC has dropped several investigations and lawsuits that the Gensler-led commission filed against the likes of Coinbase, Consensys, Robinhood, Gemini, Uniswap and OpenSea over the last month.
The SEC is also looking to abandon a rule requiring crypto firms to register as exchanges and may even axe the Biden administration’s proposed crypto custody rules, Uyeda said on March 17.
Magazine: SEC’s U-turn on crypto leaves key questions unanswered
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