Politics Weekly Westminster: cabinet fears over benefit cuts
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It's a spectrum, right? But you do think it's overdiagnosis. I think there's definitely an overdiagnosis, but also there are too many people being written off. The next general election will be fought not on foreign policy, but on what's happening domestically. And there are so many people, as the years go on, who will look at the cuts we've made to welfare, look at the cuts we've made to the fuel allowance, and think, is this my Labour Party?

I'm Pippa Carrera. And I'm Kieran Stacey. You're listening to Politics Weekly Westminster for The Guardian.

Well, hello. We're back in the broom cupboard at Westminster after a couple of weeks in our plush studio in Guardian HQ. And it feels a bit like back to normal business after a couple of weeks where the prime minister has actually kind of been an ascendant for the first time in his premiership. His handling of the Ukraine crisis, that trip to the US, the sort of shuttle diplomacy, trying to sort of reach a...

an agreement in this really, really difficult, complex geopolitical situation has seen him bolstered in the polls at home. I've kind of witnessed this collective sigh of relief amongst ministers and those in Downing Street that look, Keir Starmer's actually really good at something after a really difficult time. But this week we have major decisions about to be announced on benefits cards and Downing Street is taking a hammering, isn't it, Kieran? Yeah, do you think it feels more claustrophobic

Being here in this broom cupboard. Or in this one metre by two metre room. Exactly. With four of us squeezed in. Or in the number 10 bunker right now, trying to figure out how on earth they get the communications right on the big policy announcement of the week, which, as you say, is this benefits green paper, which we're expecting on Tuesday.

It was funny, over the weekend, our colleague Jess Elgort was working on Sunday and she said that she was picking up quite a bit of irritation from Downing Street about the way that these proposals have been presented and misunderstood by the press. Yeah. Look, at some point, guys, this isn't the press's fault. No, exactly. They're very much in defensive posture. And right after this recording, Kieran, I'm off to Downing Street for the morning briefing to hear the spin. I mean, sorry, the official line on Downing Street

how they're going to approach what has already proven to be a hugely controversial decision with Liz Kendall, the Work and Pensions Secretary, setting out details of the unofficially, I should say, briefed cuts to benefits. And a number of cabinet ministers are amongst those who've expressed deep concern, along with loads of Labour backbenchers.

Do you think the government could U-turn on the policy before it's even announced? Well, I think they have, by all accounts, they seem to have done so. I mean, it depends whether you believe their current spin. You know what? Let's go back a stage. So about a week ago, we thought that there were going to be around £5 to £6 billion worth of welfare cuts announced at this week's Green Paper. In fact, we talked to Ed Miliband about it this time last week.

As you say, it was fairly widely reported at the time that the centerpiece of this would be a freeze in the rate of personal independence payments, PIPs. These are payments made to people with disabilities to allow them to live normal lives.

And a freeze means that they don't rise with inflation. So that would be a real terms cut for quite a lot of people. This triggered massive, massive unease on the Labour benches and not just from the usual suspects. We have both been talking to a lot of Labour MPs over the last few days who just said, "Look, our inboxes are absolutely chock-a-block full of constituents saying, 'If you do this, my life will be materially made worse.'"

So then over the weekend we start hearing, "Oh well no, they're not going to freeze pips after all. Instead they're going to change the eligibility. So who can get these payments will change and they'll save the money in that way."

And alongside that, there are people claiming that this isn't a U-turn at all. It's just people didn't really get it right in the first place. Well, I'm sorry. I don't believe that. Usually, you know what it's like. If there are reports out there on a major government policy that are incorrect, Downing Street is very quick to go around telling everybody they're incorrect. That did not happen last week.

What has very clearly happened is they've had to change course and they've had to change course, it seems, immediately after what seems to have been the stormiest, most tense cabinet meeting of this entire government last week. Yeah. And we spoke, as you say, to multiple Labour MPs at all levels about their own discomfort at this move as the week progressed. Downing Street started having in groups of backbenchers and I was told that they were actually taken aback by...

by the strength of feeling not just among, as you say, the usual suspects, as they often disparagingly get called by government, but also by the new 2024 intake of younger, very ambitious, very loyal thus far MPs because of the impact in their constituencies. Now, just a couple of other things to mention. The idea to freeze PIP, which is obviously not linked to work,

free some of those payments next year would have required a vote. And that would have created a moment for all that unrest on the backbenches to bubble over. By saying that actually they will rise with inflation after all, as we're now expecting, potentially means they avoid a vote. There is some speculation that the other bit of the plan for PIP, which is to sort of tighten the gateway, the eligibility criteria to make it harder for people

to get that support from PIP. They would raise the threshold to deny PIP in some cases to people, for example, who needed help with washing for the waste down, who couldn't cook, weren't able to cook, but could prepare food in a microwave, who can remember to use the toilet, but might not actually be able to do it themselves. Those people would no longer be eligible for some of those payments. And that is really, really difficult. These are potentially some of the most vulnerable people in the country. And MPs were really angry and upset about it. And as well as the

PIP changes the other big thing they were looking at is raising the basic universal credit rate for those looking for or in work but at the same time cutting it for those judged as unfit for work the idea being that that would act as an incentive for people including disabled people to get into work but some of those disabled people might not actually be able to so that's proved very controversial too and the one

The last thing I just mentioned is that Downing Street has started talking about making the moral case, the fact that there's so many young people in particular, one in eight, I think it's 18 to 25-year-olds, not in work, education or employment, the moral case for helping those people and supporting those people into jobs. But it's also talking about the economic case and the need to save money, that £5 billion, £6 billion that you mentioned.

And the same, you know, you can't argue both at once, right? You can't both make the moral case for transforming the system, which, I mean, I think anybody would agree is not fit for purpose and needs to be radically transformed. But also say, well, actually, we're doing it because we need to save money. And that really is kind of like stuck in the crawl with a lot of Labour MPs and led to the situation about where we are now. I mean, I think that last point is absolutely key, because from what I'm told, these groups of backbenchers who've been going into Number 10 have been given this presentation to

whereby they are shown something that is very, you know, really true and very interesting about British politics and something that really needs tackling, which is the fact that our benefit payments and particularly, you know, incapacity benefit payments

went up during the pandemic as they did in other Western countries. But in other Western countries, they then came down. And in the UK, they have not come down. So there's something unusual happening in Britain. And that's what the government has kind of led people to believe that it is trying to correct.

The problem is, on top of that, as you say, they've got this immediate problem of, oh my God, our borrowing costs have gone up. Therefore, we need to save several billion to make sure we don't break our fiscal rules. And I completely agree. That's what's really irritating a lot of Labour MPs, that they're being told, look, there's a serious administrative problem we need to sort out. Oh, but also we need to cut five or six billion right now because of Rachel Reeves' fiscal rules. And then we'll talk a bit about

fiscal rules in a bit. But one thing that I think a lot of backbenchers are okay with is the thing that you mentioned of the two different rates of incapacity benefit. There's a lower rate for people, as you say, who are assessed as being able to get back into work and a higher rate for people who can't.

And the problem I'm told is that that has incentivized people working in job centers to put people up to the higher rate, even when they're not quite sure. Because they think that the lower rate is too low, what they do is they say, oh, well, you know what? I'm going to assess you as being incapable of work and therefore you'll get more money. That's a very humane thing.

compassionate thing to do, but it also means those people aren't then encouraged to try and get back into the workplace. So trying to iron out that kind of anomaly in the system is exactly, I think, where Labour MPs want to be. Trying to save five billion in time for this year is definitely not where they want to be. And what all-standing issues is also flagging is the number of people...

with mental health conditions who are claiming benefits, health and disability related benefits. Whereas Streeting was on the broadcast round over the weekend and he said that too many people are being over-diagnosed with mental health conditions. I mean, sparking an immediate backlash, of course, from lots of clinicians to say, what the hell does he know? He's not a medic or an expert. But it is the case that 1.3 million people of working age are now claiming disability benefits for conditions like

depression and anxiety, which is twice as many as a decade ago. Now, obviously, there's a broader context here. The pandemic is, I think, probably at the heart of a lot of this. But there's also trends in the rise of social media. And we could spend a whole podcast on that, Kieran, thinking about how young people communicate with one another, the pressure that comes from different aspects of social media, and generational unfairness is another bit of it. Young people are pushed for money in a way that, frankly, 20 years ago, when I was

I'm not saying I was well off, but...

I could afford my rent on my income. And many, many young people now struggle with that. So the government wants to deal with the fact that many mental health conditions now account for 44% of disability benefit claims. But I would argue that despite that extraordinary rise, you're not going to be able to do that just by pretending the problem isn't happening. The only way you can transform that part of the benefit system is if you put in really serious support for

probably through the NHS, for mental health. And for many years, we've heard talk of the NHS being told they have to regard mental and physical health with parity. And that just hasn't happened. So again, massive transformative changes needed to the system. And we don't hear of any sort of inclination, any sort of suggestion that that's coming. Now, it's not just Labour backbenchers we know are very upset by some of these moves.

We had Diane Abbott on the Today programme this morning saying that this is not a move that the Labour Party should make. Andy Burnham, the Mayor of Greater Manchester, was writing in the papers today. He said, and to be clear, there's no case in any scenario for cutting the support available to disabled people who are unable to work. We've also spoken privately to some frontbenchers who are really upset about this. And there are reports online.

of some cabinet ministers, Ed Miliband, Angela Rayner, Lucy Powell, Shabana Mahmood, all feeling uneasy about some of these changes in private. All of that is true.

But, Pippa, when you're talking about things like the crisis in mental health and social media and generational unfairness, a lot of those trends also exist in other Western countries around Europe, for example. The problem I think this government has is that nobody's quite sure why Britain is an outlier. And there are a couple of possible explanations. The most convincing one I've heard is that our benefit system is just designed in a very different way from most other Western countries. Most other Western, especially Northern European countries,

have a much more contributory system. So what happens is if you fall out of the workplace, you actually get a much higher level of support than you do in our system, but for less time. And you get that maybe for a couple of years and then it starts to tail off very quickly. Presumably because the longer you're out of work, the less likely you are to get

back into it so that the incentive is there longer term to keep people in jobs. And that's the entire logic behind those systems. You know, you've worked for a while, you've paid in, that buys you a certain amount of almost insurance. It's almost like a national insurance scheme that buys you a certain amount of support for a certain amount of time. But after that, the state starts to withdraw it. We have a much lower level, but almost permanently. But this is the kind of change that would take years to enact, not, you know,

one spring statement. Yeah, absolutely. And I mean, the government is in a tricky bind, right? If they're committed to sticking to their fiscal rules, then they have to make savings. You mentioned spending cuts earlier, Kieran. We know that other departments as well as the Department for Work and Pensions are also facing the prospect of having to make really eye-watering decisions

changes to the size of their budget. What's the mood like in Cabinet and the top of government at the moment? I mean, we've both spoken to Cabinet Ministers, haven't we, who are feeling pretty bleak about some of this stuff? Well, we've got two crunch moments coming up in the next few weeks. First of all, we've got the spring statement next Wednesday, where Rachel Reeves will go into detail about some of these cuts and how she's going to hit her fiscal targets. Then we've got the spending review in June, where we'll find out line by line how much each department is going to cut. And I think it's actually that process which is causing

as much, if not more angst in cabinet as the welfare cuts.

You mentioned kind of what the mood is like. And I said earlier, there'd been this very tense cabinet meeting last week at which several people spoke up. And you mentioned Ed Miliband, Angela Rayner, Lucy Powell, Shobana Mahmood. Yvette Cooper is also one of those who's understood to have spoken out. But what we're told is they weren't necessarily speaking out about the welfare cuts. They were much more concerned about the departmental cuts that they're having to enact as part of the spending review. Now, remember, these departments have been told that

To model, I mean, I don't think this will actually be enacted, but to model cuts of up to 20% of their day-to-day budgets. One person told me that the department they work in, that would mean them doing nothing apart from just their basic statutory duty. They would just be able to carry out their legal functions and not a lot else. That's almost the position we're in with a lot of these bankrupt councils. And that's how Whitehall departments are feeling right now, which I think is why there is as much anxiety

angst as there is. And it's right across Whitehall, of course, isn't it? Because the protected departments are health, schools, education and defence, which is obviously seeing a big uplift given everything that's going on in Ukraine. We used to add international development to that list. And of course, now, because they've cut international development by almost half, in order to pay for that defence uplift, we can no longer include that in the list. But that means that departments like the Ministry of Justice, which already is facing a huge courts backlog,

overcrowded prisons, crumbling estate, local councils, MHCLG, which is supposed to deliver this big housing pledge, which has responsibility for local councils and we know has strapped for cash they have been over the last decade and a half. Department for Transport, which is

apparently going to provide all these big infrastructure projects which we need as a country to get that growth which Rachel Reeves talks about. I mean these are all unprotected departments which are facing incredibly steep cuts. And also the thing to remember is that so Rachel Reeves has this fiscal rule which basically separates between capital spending so that's

spending on big infrastructure projects, which will kind of pay back over time, and then day-to-day spending on just running your department. The problem is to build anything also requires day-to-day spending. You need people in there running these projects. You need people doing the building and then running them once they're built. So I was talking to a kind of senior Whitehall official last week who said,

You can't just say the capital spending is protected and therefore we're going to do all of these projects. They also require departmental spending and if you're absolutely slashing departmental spending,

you can't run the capital projects that you want to pay for. And there's a lot of frustration amongst Labour MPs, and we talk about Labour MPs, but of course this goes wider than that across the Labour movement and indeed amongst voters, about the fact that she sort of boxed herself in ahead of the election by saying, no, we're not going to do any more tax rises. And then again, obviously they did national insurance for employers at the budget and

repeatedly after that budget in the autumn saying, you know, that was the big moment. That was the moment that we got economic stability back, as she put it, and, you know, hinting very strongly or suggesting very strongly that there wouldn't be any further tax rises. She's also repeatedly said that the fiscal rules will not be broken. I mean, maybe she would say that right up until the

point that they were, but there's nothing that we've heard at all to suggest that they're willing to break that rule to increase borrowing, for example, which is something a lot of economists say at this point, looking at the British economy, as sluggish as it is, might be quite a sensible thing to do. But they think it's more important, given Labour's reputation over the years, shall we say fairly mixed reputation for economic credibility, they think that's more important to look tough on the economy than some of, you

to boost the economy and put more money into it. And it really feels if she's ruled out tax rises, if she's ruled out more borrowing, the only thing that's left is austerity mark two. And they sort of balk at that and say, that's not austerity. Keir Starmer says, I'm not going to do austerity. But where else is the money going to come from? I do think that actually they...

have more political capital here, more political space than they perhaps realise. I mean, the picture has shifted dramatically with just take, for example, Ukraine and defence spending. That was not something they could have anticipated happening pre-election necessarily, that they'd have to put so much more into defence. And the 2.5% is just a start. I mean, let's face it, it's going to have to go up further than that in years to come. Is there not

Yeah.

Couldn't they get away with it? Well, OK, well, first of all, let's just deal with the question of whether this is austerity mark two or not, because, as you say, Downing Street hates it when people say that. But let's actually look at the numbers. So I mentioned earlier that Rachel Reeves has asked departments to model 20 percent departmental cuts. That's not actually what she's going to ask them. But what she really said is, look, can you give me your 20 percent cuts?

the lowest priority projects. And then I'll have a look at what I want to cut from that. Then you get into this slightly ridiculous perennial game in Whitehall, where they put in things that they know she's not going to want to cut so that she has to look elsewhere. And they'll bring that number down. Now, the OBR at the last fiscal statement, which was the budget last year, said that Rachel Reeves' spending assumptions would mean cuts of just over 1% in real terms to unprotected departments each year. That is not

the scale of George Osborne's austerity cuts.

But, what we don't know is how much extra she's going to have to shave off because borrowing costs have gone up. So, her headroom, her fiscal headroom has gone, therefore she's likely to have to cut further. Now, let's just talk about fiscal headroom because this is where I think this argument that you do hear from some in the cabinet falls down, that you could just borrow more. Why can't we be a bit more experimental with our fiscal rules? Why don't we just drop our fiscal rules? The times have changed essentially.

The problem with it is the fiscal rules are not the thing that's actually hampering her. The fiscal rules are there to provide reassurance to the markets to make sure that our borrowing costs don't spiral. The real thing that's hampering her is the fact that our borrowing costs started to go up quite steeply after the last budget when she did go quite a long way in taxing and spending. And the markets essentially said...

well, look, we'll lend you this money, but not much more. And that's the problem she's actually dealing with. So yes, this idea of you could do a Germany, you could take out defence spending, you could. Whether people are going to lend you that money at the rates you're looking for, I think that's the real constraint here. And we were both talking to a cabinet minister last week who said...

Well, you know, things have changed. I think, you know, even Gordon Brown, the Iron Chancellor, when things changed around the time of the financial crash, did change his mind on certain key things. I think Rachel Rees has a lot more scope to change her mind on tax, actually, than she does on borrowing. If she wants to change one piece of that equation that you were just setting out,

is probably tax rises that she can do rather than borrowing more, which I just don't think the markets will wear right now. This is obviously going to be the big story of the week, welfare cuts and spending and how it's all going to be paid for. And we're back next week after the spring statement with John Harris, who will be poring over all of that then. But there's obviously other big major events going on. We've talked a lot in recent weeks about Ukraine,

And on Saturday, Keir Starmer was again playing the bridge to Ukraine. He led 29 international leaders to talk about the future of the conflict once again. This so-called coalition of the willing group met to discuss how a peacekeeping force would work, along with continuing to hold Russia's feet to the far-west sanctions. And this Thursday, we'll see military chiefs from around Europe head to London to discuss how an operational phase, including British boots on the ground, might work.

And meanwhile, I'm going to be watching Kimmy Badenock this week because she is giving two speeches, one today, this afternoon on Monday, which I'm going to go along to, and one on Tuesday, setting out more about these Tory policy reviews. Really interesting moment, this for the Tory leader. And I think this is the point at which MPs' concerns about the way she's been leading the party will either crystallise or be put to bed. So we'll see where she is by the end of the week.

And that's us for now. So thank you so much for listening. Please like and follow Politics Weekly UK to make sure you keep getting our episodes in your feed. John Harris is back on Thursday, and as I mentioned, we'll be here next Wednesday as well. You can also get in touch with us, send us your thoughts or questions by emailing politicsweeklyuk at theguardian.com. As ever, we'd love to hear from you. And just a reminder, next week, Pippa will be hosting an in-conversation event with the Health Secretary, Wes Streeting.

Anybody who would like to buy tickets to attend in person or to watch on the live stream should go to the link theguardian.com slash weststreetingevent. That's theguardian.com slash weststreetingevent. We'll put that in the description for this episode as well. That's all from us. This episode was produced by Frankie Tobey, music by Axel Kukutie. The executive producer is Phil Maynard. Goodbye. Bye-bye. This is The Guardian. The Guardian.

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