How much of the government’s Welfare Reform Bill will survive the mauling of backbench Labour MPs? If this bill even achieves £5 billion worth of savings by the time it becomes law, it will be something of a miracle. Once again, Rachel Reeves’ claim to be an ‘Iron Chancellor’ is about to be tested. No-one should be surprised if she folds.
This week, the wobbling began. In her post-spending review interview with the Today programme, Reeves initially said that she would not be reviewing the proposed changes to the criteria for claiming Personal Independence Payments (Pips), which are supposed to mean that hundreds of thousands of people are no longer eligible. Then she hinted that she would be listening to objections from within her party. Finally, she was almost boastful when she said: ‘Even with these changes we will substantially be increasing the amount of money we are paying in sickness and disability benefits during the course of this parliament.’ So these are ‘cuts’ which are not really cuts at all; rather an attempt to moderate the rate of growth in welfare spending.
If Reeves thinks she is going to save the public finances that way she can think again. Moreover, Liz Kendall is trying to reassure backbenchers – over a hundred of whom are reported to be prepared to rebel, enough to wipe out Labour’s enormous majority – that she will write into the bill more protections for disabled people most in need of help.
That is unlikely to placate a large number of Labour MPs, however. The backdrop to this bill is that it is being introduced by a party which, in opposition, lost no opportunity to accuse the Conservatives of trampling on the poor and unfortunate. Labour MPs have been brought up on the mythical narrative of evil ‘Tory austerity’ (austerity is a strange word for a government which continued to spend considerably more than it raised in revenue every year it was in power). They will find it emotionally difficult to accept a single bean being cut from any welfare benefit. Still they will troupe through the ‘ayes’ lobby and support the Welfare Bill.
Labour backbenchers and investors in government bonds live in very different worlds
Regardless of the form in which the government gets its Welfare Bill through the Commons, Britain will continue down the road to bankruptcy. Against a deficit of £150 billion, what good are £5 billion worth of cuts? The amount the government proposes to save from restricting Pips would hardly pay the interest bill on government debt for a fortnight. That illustrates the gulf which lies between the Labour party and fiscal reality.
We are going to learn over the next few years – if it doesn’t become obvious sooner – that Labour backbenchers and investors in government bonds live in very different worlds, and that unfortunately it is the latter whose views are more important. If the backbenchers do succeed in forcing Reeves to fold on welfare plans they will eye it as a famous victory. That is not how it will seem to bond investors who will eventually lose all patience in the ability of the UK government to cover its debts.
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