Could Liz Kendall turn out to be the most significant figure of Keir Starmer’s government, and a Chancellor in the making? When I wrote on the Work and Pensions Secretary’s proposed reforms here in November, I was sceptical that Labour really had much intention of pushing through benefits cuts, not least because the party had spent the past 14 years shouting ‘austerity’ every time the Tories so much as proposed to cut a bean from the benefits bill. Starmer himself has accused the previous government of “turning on the poorest in our society” when it proposed to end the temporary £20 weekly bonus added to benefits during Covid.
Kendall has gained a very keen supporter in her quest for rapid cuts to the benefits bill: Rachel Reeves
Yet Kendall does seem to be quite determined. It is reported today that she is preparing a package of welfare reforms to be published over the next fortnight which could see claimants losing up to £5,000 a year in benefits. In particular, she is proposing that a category known as “limited capability for work or work-related activity” be abolished, which would make it far harder for people to claim that mental illness makes it difficult for them to find work.
The political ground is certainly shifting as the sheer scale of the growth in benefits claims becomes apparent. In January, the House of Lords Economic Affairs Committee published a report dismissing the idea that the number of people on sickness benefits is being driven by a genuine rise in sickness, perhaps related to post-Covid conditions, or by long NHS waiting lists. Rather it suggested that people who are out of work have a financial incentive to claim additional sickness benefits, and that once they are on them they have little incentive to seek work – they find themselves in a benefits trap. The committee is formed of three Labour peers, three Conservatives, three crossbench and two Lib Dems, so is a genuine cross-party voice.
Moreover, Kendall has gained a very keen supporter in her quest for rapid cuts to the benefits bill. Rachel Reeves is desperate to avoid an emergency tax-raising Budget in March. When she delivered her first Budget, just three months ago, not only did she tell us that she had no further need for a second round of tax rises on the scale of those delivered in October, she also said that the Budget would return to being a once-a-year affair. To go back on that now would be a huge humiliation which could well fatally undermine her authority and hasten her political demise.
Now that the Chancellor is in breach of her fiscal rules, no further borrowing is really possible. The only way to avoid tax rises, therefore, is spending cuts, and pretty sharp ones at that. And if you want to cut a significant amount of spending in a hurry, the Department for Work and Pensions is the only practical place to look. That means either cutting the state pension – and, of course, the winter fuel payment has already landed Reeves in trouble – or the benefits bill which, at £65 billion a year, now exceeds the defence budget.
Kendall, then, is a key figure who very likely holds the fate of the Chancellor in her hands. She is certainly going to face a very tough challenge from the Labour types who have a gut reaction always to support benefit claimants, as well as from opportunistic opposition MPs. There are many Conservatives who were happy to support benefits cuts when in government, but who were among the loudest to protest when Reeves cut the winter fuel payment.
Kendall should certainly be able to take the latter in her stride (no pun on the shadow chancellor intended). Welfare reform was one of the Conservatives’ big ideas when they came to office as the dominant half of the coalition in 2010. Iain Duncan Smith’s crusade was to end the benefits trap and make work pay. He made a good start, but like much else it all went to the wall after the ructions caused by Brexit after 2016. From 2018 onwards, when the number on out of work benefits bottomed out and began to rise sharply (all before Covid), the Tories’ record on welfare was abysmal. Kendall should lose no opportunity to remind them of it.
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