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Sir Keir Starmer was forced to abandon a key plank of his welfare reform agenda to get the legislation through its first Commons test.
In a late climbdown as MPs prepared to vote, the Government shelved plans to restrict eligibility for the personal independence payment (Pip), with any changes now only coming after a review of the benefit.
The move will cause a headache for Chancellor Rachel Reeves, who has seen a forecast £4.8 billion saving from the welfare budget whittled away through a series of concessions, leaving her to seek extra money through spending cuts, tax hikes or borrowing to balance the books.
The Resolution Foundation’s chief executive Ruth Curtice said the concessions meant the reforms would now make no “net savings” in 2029/30 – a key year for Ms Reeves’s fiscal targets – even if they did reduce costs in the longer term.
The decision to remove the Pip changes from the Universal Credit and Personal Independence Payment Bill was announced just 90 minutes before MPs voted on Tuesday night.
The legislation cleared its first hurdle by 335 votes to 260, majority 75.
Despite the late concession, there were 49 Labour rebels, the largest revolt so far of Sir Keir’s premiership.
Work and Pensions Secretary Liz Kendall insisted the Labour Party was “100%” behind the Prime Minister, but acknowledged there were “lessons to be learned” after the rebellion.
She also appeared to express regret over the handling of the issue, saying: “I wish we had got to this point in a different way.”
But Ms Kendall also insisted it was “really important we passed this Bill”, saying: “We need to make changes, because too many people have been written off, are left to a life on benefits, when being in good work is so important.”
The decision to remove key parts of the Bill is remarkable for a Government with a working majority of 165 and after just under a year in office.
Tory leader Kemi Badenoch accused ministers of “utter capitulation” and said the legislation was now “pointless”.
She said: “They should bin it, do their homework, and come back with something serious. Starmer cannot govern.”
Earlier, a Labour rebel attempt to halt the legislation was defeated by 179 votes.
A total of 44 Labour MPs including two tellers backed the bid by rebel ringleader Rachael Maskell, who described the Bill as “unravelling” and “a complete farce”.
A previous effort to kill the Bill had attracted more than 120 Labour supporters, but was dropped after the first partial U-turn on the legislation last week, which restricted the Pip changes to new claimants from November 2026.
That date has now been abandoned in the latest climbdown, with any changes now only coming after disability minister Sir Stephen Timms’ review of the Pip assessment process.
Sir Stephen announced the climbdown in the middle of the debate on the legislation.
He acknowledged “concerns that the changes to Pip are coming ahead of the conclusions of the review of the assessment that I will be leading”.
He said the Government would now “only make changes to Pip eligibility activities and descriptors following that review”, which is due to conclude in the autumn of 2026.
The concession came after frantic behind-the-scenes negotiations in Westminster involving the Prime Minister, his Cabinet and wavering Labour MPs.
Charlotte Gill, head of campaigns and public affairs at the MS Society, said: “We thought last week’s so-called concessions were last minute. But these panicked 11th hour changes still don’t fix a rushed, poorly thought-out Bill.”
But Jon Sparkes, chief executive of learning disability charity Mencap, said: “The last-minute change relating to the review Sir Stephen Timms is leading sounds positive and we are pleased that the Government has listened.”
He added: “Disabled people should not have to pay to fix black holes in the public finances.”
The Government’s concessions have gutted the reforms, leaving only parts of the current Bill still on the table.
Proposals to cut the health element of universal credit by almost 50% for most new claimants from April 2026 remain in place, along with an above-inflation increase in the benefit’s standard allowance.
In an earlier climbdown, Work and Pensions Secretary Ms Kendall said existing recipients of the health element of universal credit, and new claimants with the most severe conditions, would have their incomes “fully protected in real terms”.
