What started as an attempt to avoid rebellion inside his own party has now turned into a political headache for Prime Minister Sir Keir Starmer.
His recent climbdown on welfare reforms may have saved him from defeat in Parliament—but it’s also opened the door to accusations of chaos, financial black holes, and the creation of a “two-tier” benefits system.
Labour Bows to Pressure—but at What Cost?
After facing fierce backlash from Labour MPs over proposed benefits cuts, Starmer offered major concessions to calm the storm.
The initial plan would have saved the government an estimated £5 billion a year, but now, experts say the U-turn will cost the Treasury a whopping £4.25 billion.
That includes a £1.25 billion reversal on planned changes to winter fuel payments for pensioners, plus around £3 billion from changes to reforms on disability and health-related benefits.
Critics argue that families could now be hit with new tax rises to fill the gap.
A Divided Party, a Close Call in Parliament
Starmer’s concessions appear to have won over many of the 126 Labour MPs who were planning to rebel, making it more likely the government will survive the crucial vote on Tuesday.
But reports suggest up to 50 MPs are still holding out, demanding the vote be scrapped altogether.
The reforms at the heart of the controversy centered on Personal Independence Payments (PIP) and elements of Universal Credit (UC).
Originally, both existing and future claimants were set to face stricter rules.
Now, current claimants will be shielded—but future applicants could still lose out significantly.
A ‘Two-Tier’ System on the Horizon?
That’s the warning from disability campaigners and MPs alike.
Under the revised plan, those who apply for PIP or UC health benefits after November 2026 could receive up to £4,000 less per year—despite having the same condition as someone already on the system.
Critics say this would create an unfair and unequal system, depending solely on when someone became disabled.
“These revised proposals are nowhere near good enough,” said Labour MP Nadia Whittome.
“It’s not well thought through and creates a two-tier system.”
The Resolution Foundation estimates that both the changes to PIP and UC could cost around £1.5 billion each, pushing the government further away from its original cost-saving goals.
Tax Hikes Loom in the Autumn Budget
With such a large financial hole now exposed, Chancellor Rachel Reeves is under pressure to explain how it will be covered.
Starmer remained vague during a visit to RAF Valley in Wales, saying the full funding plan will be laid out in the autumn Budget.
“We’ve listened and made adjustments,” he told reporters.
“But the changes still let us move forward with the reforms we need.”
He did not rule out the possibility of raising taxes, raising alarm bells with critics who accuse Labour of going back on promises not to increase the burden on working families.
Starmer Under Fire from Both Sides
The fallout has left Starmer politically exposed.
Tories seized on the turmoil, branding the government as indecisive and out of touch.
Kemi Badenoch, the Conservative Party leader, said Starmer had created “the worst of all worlds” with his U-turn.
“This is a government floundering,” she told reporters during a visit to North West Essex.
“They’ve lost control even with a massive majority.”
Meanwhile, Labour’s Care Minister Stephen Kinnock defended the move, saying the process was “constructive” and showed that Starmer is the kind of leader who gets involved to fix problems.
More Pressure on the Horizon
Shadow Chancellor Mel Stride joined the chorus of criticism, accusing Labour of breaking its promises and mismanaging the economy.
“Labour said they wouldn’t raise taxes on working people,” Stride said.
“But now, after their U-turns, they can’t even guarantee that taxes won’t rise this autumn.”
With tensions still simmering in the party and growing concern over what the reforms will actually mean in practice, this might be one of the most difficult balancing acts Starmer has faced as Prime Minister.