Labour’s rebel MPs are rubbish at maths

Public finances are in a parlous state. Tough choices are inevitable. When will the PLP learn this lesson?

This evening, Labour MPs will have to decide whether to support the government in a Second Reading debate. This would not normally be a moment of much significance. Big rebellions happen later in the legislative process. Not since April 1986, with the attempt to liberalise Sunday trading laws, has a Bill being defeated at Second Reading, whether in form of a “reasoned amendment” being passed or otherwise.

It is a record that would have been broken with the Universal Credit and Personal Independence Bill, until the government announced a series of concessions late last week. Scores of Labour MPs had signed a “reasoned amendment” that would have wrecked the Bill, which sought to reduce the cost to the taxpayer of disability benefits. In an attempt to salvage some of the savings, the government conceded that those currently receiving benefits will not see them cut. The less generous regime will apply to new claimants only, reducing savings by £3bn a year. A rebellion is still expected tonight, but the Bill should survive.

It has, however, been a deeply uncomfortable time for the government. The scale of the rebellion appears to have taken government by surprise, which reflects very badly on its political operation. Keir Starmer has been accused of being out of touch with his parliamentary party; Rachel Reeves is portrayed as being politically tin-eared and insensitive; Morgan McSweeney is described as arrogant. Just as commentators write their assessment of Starmer’s first year in office, the Prime Minister is forced into making humiliating concessions.

There is plenty of blame to be distributed over this shambles, and the lion’s share of it will go to Starmer, Reeves and McSweeney. There is a lack of a clear and convincing explanation for what the government is doing. The argument that this is all about encouraging work is unconvincing when talking about Personal Independence Payments paid to those in-work. But the narrative that this is all about plucky MPs defeating heartless ministers deserves to be challenged.

The starting point is that the cost of health benefits for those of working age is rising at an extraordinary rate. Adjusting for inflation, this cost was projected to rise from £36bn in 2019/20 to £66bn in 2029/30. To put this in context, the cost of the increase (£30bn) is not far short of the budgets of the Home Office (excluding asylum costs) and the Ministry of Justice combined.

According to the leading health survey, the increase in cost (and the increase in the number of people saying they are unfit for work) is not happening at a time when there is a commensurate deterioration in the health of the working-age population. What is driving the increase in claims for health-related benefits (and, presumably, people claiming to be unfit for work) is the gap in generosity between the value of those benefits compared to unemployment benefits and the lack of stringency in accessing those benefits.

If we want to reduce the numbers claiming health-related benefits, the options are to spend more on health (expensive, and there appears to be no clear relationship between waiting times and increases in health-related benefit claims), increase unemployment benefits (unpopular and also expensive), reduce health-related benefits, and make the requirements to access to these benefits more stringent. The government is perfectly entitled to ask its critics how they would address the issue.

What is not an option is to ignore it. Or, to be more exact, to ignore it without acknowledging that taxes will have to rise to pay for it. It is a familiar theme in these columns that the public finances are in a parlous state and that we are vulnerable to the bond markets moving against us. We are not prevented from spending more on welfare by the rigidity of Reeves’ fiscal rules, or McSweeney’s desire to appeal to Reform voters, but by fiscal reality.

It is not a reality that the Labour rebels appear to be willing to accept. For 14 years, Labour activists had the luxury of blaming every tough and unpopular decision on the callousness of the Tories. It was a lengthy holiday from responsibility, which enabled them to ignore the inconvenient truth that the global financial crisis had made us poorer than we thought we were. Unless and until economic growth returned, whoever was in government was going to continue to make tough and unpopular decisions.

To be fair to Starmer and Reeves, there was some attempt to persuade their party and the country of the situation, albeit unaccompanied by specific policies and tempered by unwarranted optimism that higher economic growth would result from a change in government.

Perhaps Labour MPs never believed the rhetoric about tough choices. They are certainly not prepared to make them over welfare matters (see also winter fuel payments). They are likely to be in for a shock in the autumn when, contrary to their manifesto commitments, Labour may well be forced to put up one or more of the big taxes (and no, wealth taxes won’t raise the money that is needed). If Labour MPs are worried about poll ratings now, wait until the winter.

This rebellion has diminished the Prime Minister, left the public finances vulnerable to a bond market reaction, made higher taxes all but inevitable and left the Labour Party looking ungovernable. For all the talk of rebellious backbench Labour MPs holding their heads up high, this breakdown in discipline is no way to convince the country to give the party a second chance.