Welfare U-turn will cost £2.5bn by 2030, Liz Kendall tells MPs

The Government’s U-turn on welfare cuts will cost taxpayers around £2.5 billion by 2030, the Work and Pensions Secretary has told MPs as she laid out concessions to Labour rebels.

Liz Kendall said the costs and savings of the Government’s revised welfare package would be confirmed by the Office for Budget Responsibility at the budget in the autumn.

But her statement to MPs on Monday suggested the measures would save less than half the £4.8 billion the Government had expected from its initial proposals.

Ms Kendall’s statement confirmed the concessions announced last week in an effort to head off a major rebellion by Labour backbenchers, including protecting people who claim personal independence payments from new eligibility criteria.

Responding to claims this would create a “two-tier” benefits system, Ms Kendall said: “I would say to the House, including members opposite, that our benefits system often protects existing claimants from new rates or new rules, because lives have been built around that support, and it’s often very hard for people to adjust.”

Earlier, modelling from the Department for Work and Pensions (DWP) suggested the Government’s proposals would push 150,000 more people into poverty by 2030.

The figure is down from the 250,000 extra people estimated to have been facing relative poverty after housing costs under the original proposals.

Modelling published by the DWP said the estimate does not include any “potential positive impact” from extra funding and measures to support people with disabilities and long-term health conditions into work.

Speaking in the Commons on Monday afternoon, Ms Kendall insisted that changes to her proposals on Pip and universal credit would “ensure no existing claimants are put into poverty”.

A Number 10 spokesman also said that the DWP’s poverty modelling was “subject to uncertainty” and did not “reflect the full picture”, including investment in the health service to help people get back to work.

Ministers hope the concessions will be enough to avert defeat when MPs vote on the reforms on Tuesday, although Downing Street remains braced for a substantial revolt.

A “reasoned amendment” proposed by senior Labour backbencher Dame Meg Hillier had received support from 126 Labour MPs, enough to overturn Sir Keir Starmer’s majority.

On Friday, Dame Meg had described the concessions as a “workable compromise”.

But Labour MP Debbie Abrahams, who negotiated the concessions alongside Dame Meg, told ITV News on Monday that the Government had rowed back on what had been negotiated.

Although she described the concessions as “good”, Ms Abrahams said the rebels were “not quite there yet” on a deal with the Government.

She added: “The actual offer that was put to one of the negotiating team wasn’t actually what we thought we had negotiated on Wednesday and Thursday. There are some issues around that.”

In the Commons, both Dame Meg and Ms Abrahams raised concerns that a review of Pip, to be conducted by disabilities minister Sir Stephen Timms, would report too late to have an effect on the changes scheduled for November 2026.

Meanwhile, Conservative shadow work and pensions secretary Helen Whately accused the Government of making “unfunded U-turns costing billions and welfare plans that are not worth the paper that they are written on”.

She said: “Their latest idea is a two-tier welfare system to trap people in a lifetime on benefits and deny them the dignity of work while leaving the taxpayer to pick up the ever-growing bill.”

The U-turn will also cause problems for Chancellor Rachel Reeves, who will now have to find a way to cover the shortfall between the amount the Government had expected to save, and the new, lower figure.

And that figure could be even higher, with economists at the Institute for Fiscal Studies and the Resolution Foundation suggesting last week the U-turn could cost in the region of £3 billion, raising the prospect of further tax rises.