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First there was stonewalling, then the private complaints from MPs before a very public outburst that saw an eye-watering 127 MPs tell their prime minister they were going to defy him on a welfare vote.

Now, the inevitable climbdown has arrived, with Downing Street making a significant offer to rebels last night on their planned cuts to disability benefits.

A government with a massive 165-strong working majority had an awakening on Thursday to the importance of parliament as it embarked on a humiliating climbdown after the private warnings of MPs to Downing Street fell on deaf ears.

It’s worth taking a beat to reflect on the enormity of this moment. Less than a year ago, the prime minister was walking into Number 10 having won a landslide, with a Labour majority not seen since the Blair era.

That he has been forced to retreat by angry foot soldiers so early in this premiership, despite having such a big majority, is simply unprecedented. No government has lost a vote at second reading – this basically the general principles of a bill – since 1986 (Thatcher’s shops bill) and that was the only occasion a government with a working majority lost a bill at the second reading in the entire 20th century.

It is obviously a humiliating blow to the authority of the prime minister from a parliamentary party that has felt ignored by Downing Street. And while Number 10 has finally moved – and quickly – to try to shut down the rebellion, the fallout is going to be felt long beyond this week.

Before we get into the problems for Starmer, I would like to acknowledge the predicament he’s in.

More on Sir Keir Starmer

Over the past 10 days, I have followed him to the G7 in Canada, where the Iran-Israel crisis, US-UK trade deal and Ukraine war were on the agenda, to Chequers at the weekend as he tried to deal with the US attack on Iran and all the risk it carried, and to the NATO summit this week in the Netherlands.

He could be forgiven for being furious with his operation for failing to contain the crisis when all his attention was on grave international matters.

He landed back in Westminster from the NATO summit on Wednesday night into a domestic battle that he really didn’t need but moved quickly to contain, signing off a plan that had been worked up this week in Downing Street to try to see off this rebellion.

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What will the changes be?

The government has offered significant concessions to Labour rebels.

People who currently receive the personal independence payment (PIP) will continue to do so, as will recipients of the health element of universal credit.

Planned cuts will only hit future claimants.

The change in PIP payments will protect 370,000 existing recipients who were expected to lose out following reassessment.

One senior parliamentary source told me on Thursday night they thought it was a “good package” with “generous concessions”, but said it was up to individual MPs to decide whether to withdraw their names from the amendment that would have torpedoed the welfare bill.

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Govt makes offer to rebels on welfare reforms

In the coming days, Number 10 will have to make the case to backbenchers and whittle down the rebellion in order to get the welfare bill passed on Tuesday. But it’s clear Number 10 has given MPs a ladder to climb down.

But the bigger question is, where does it leave the government and its party?

There is quiet fury from many MPs I have spoken to, angry at the Number 10 operation and critical of what they see as a “boy’s club”.

There has been criticism levelled at the PM’s chief of staff Morgan McSweeney, with MPs in seats facing challenge from the left rather than the right frustrated that the whole Number 10 strategy seems to be seeing off Reform, rather than look to the broader Labour base and threats from the Lib Dems or the Greens.

There is also much ire reserved for Rachel Reeves – interestingly Liz Kendall is escaping the criticism despite being the architect of the reforms – with MPs, already angry over winter fuel debacle, now in open revolt over the chancellor’s decision to force through these cuts ahead of the Spring Statement in March in order to help fill her fiscal black hole.

MPs felt talked down to

One Labour figure told me on Thursday the growing drumbeat in the party is that Reeves must go.

Another MP told me colleagues hated the cabinet ring around to try to persuade them to back down over welfare, saying more MPs ended up adding their names to the list because they felt talked down to.

Read more:
Rayner refuses to repeat chancellor’s tax hikes pledge
New plans to deport foreign prisoners earlier

All of this needs work if the PM has any hope of rebuilding trust between his party and his operation.

There is also the problem of what flows from the concessions.

The chancellor will have to fund these concessions, and that could mean hard choices elsewhere. Will this mean that the government ends up doing less on reforming the two-child cap, or will it have to find welfare cuts elsewhere?

That flows into the third problem. In seeing off this rebellion, Number 10 has contained MPs rather than converting them.

What the parliamentary party has seen is a government that, when pressed, be it on winter fuel or benefit cuts, will fold.

That will only serve to embolden MPs to fight again. In the immediate term, the government will hope it has seen off a potentially catastrophic defeat.

But seeing off the growing malaise around the Starmer administration just got a bit harder after this.

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Prediction markets bet on Coinbase-linked Hassett as top Fed pick

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Prediction markets bet on Coinbase-linked Hassett as top Fed pick

Prediction markets Polymarket and Kalshi view Kevin Hassett, US President Donald Trump’s National Economic Council director, as the favorite to replace Jerome Powell as the next Federal Reserve chair.

The odds of Hassett filling the seat have spiked to 66% on Polymarket and 74% on Kalshi at the time of writing. Hassett is widely viewed as crypto‑friendly thanks to his past role on Coinbase’s advisory council, a disclosed seven‑figure stake in the exchange and his leadership of the White House digital asset working group.​

Founder and CEO of Wyoming-based Custodia Bank, and a prominent advocate for crypto-friendly regulations, Caitlin Long, commented on X:

“If this comes true & Hassett does become Fed chairman, anti-#crypto people at the Fed who still hold positions of power will finally be out (well, most of them anyway). BIG changes will be coming to the Fed.”

Source: Polymarket Money

Related: Crypto-friendly Trump adviser Hassett top pick for Fed chair: Report

Kevin Hassett’s crypto credentials

Hassett is a long-time Republican policy economist who returned to Washington as Trump’s top economic adviser and has now emerged as the market-implied frontrunner to lead the Fed.

His financial disclosure reveals at least a seven‑figure Coinbase stake and compensation for serving on the exchange’s Academic and Regulatory Advisory Council, placing him unusually close to the crypto industry for a potential Fed chair.​

Still, crypto has been burned before by reading too much into “crypto‑literate” resumes. Gary Gensler arrived at the Securities and Exchange Commission with MIT blockchain courses under his belt, but went on to preside over a wave of high‑profile enforcement actions, some of which critics branded as “Operation Chokepoint 2.0.”

A Hassett-led Fed might be more open to experimentation and less reflexively hostile to bank‑crypto activity. Still, the institution’s mandate on financial stability means markets should not assume a one‑way bet on deregulation.​

Related: Caitlin Long’s crypto bank loses appeal over Fed master account

Supervision pushback inside the Fed

The Hassett odds have jumped just as the Fed’s own approach to bank supervision has received pushback from veterans like Fed Governor Michael Barr, who earned his reputation as one of Operation Chokepoint 2.0’s key architects.

According to Caitlin Long, while he Barr “was Vice Chairman of Supervision & Regulation he did Warren’s bidding,” and he “has made it clear he will oppose changes made by Trump & his appointees.”

On Nov. 18, the Fed released new Supervisory Operating Principles that shift examiners toward a “risk‑first” framework, directing staff to focus on material safety‑and‑soundness risks rather than procedural or documentation issues.

In a speech the same day, Barr warned that narrowing oversight, weakening ratings frameworks and making it harder to issue enforcement actions or matters requiring attention could leave supervisors slower to act on emerging risks, arguing that gutting those tools may repeat pre‑crisis mistakes.​

Days later, in Consumer Affairs Letter 25‑1, the Fed clarified that the new Supervisory Operating Principles do not apply to its Consumer Affairs supervision program (an area under Barr’s committee as a governor).

If prediction markets are right and a crypto‑friendly Hassett inherits this landscape, his Fed would not be writing on a blank slate but stepping into an institution already mid‑pivot on how hard (and where) it leans on banks.