Keir Starmer has offered Labour MPs “massive concessions” on his controversial welfare bill in a move that has won over key rebels and is likely to have saved the prime minister from a damaging Commons defeat next week.
Leading MPs told the Guardian they had been promised significant changes, which will cost the government several billion pounds over the next few years but would shore up the prime minister’s precarious authority.
The compromises on the planned cuts, which are understood to include applying the changes only to new claimants and further consultation on the most controversial cuts to disability benefits, were offered during a tense day of talks with Downing Street.
They mark a major U-turn from Starmer, who had insisted for weeks he would not change course, but was forced to back down after more than 120 Labour MPs threatened to kill the bill. One frontbencher had already quit over the plans, while others were understood to be prepared to do so if agreement had not been reached.
One of those leading the opposition to the bill said: “They’ve offered massive concessions, which should be enough to get the bill over the line at second reading.”
Another added: “We always wanted to protect the most vulnerable, not to destroy the bill or cause the government trouble. We always hoped there would be an off-ramp, and that’s what we have now.”
More hardline rebels were urging their centrist colleagues not to drop their objections, but with ministers insisting they would hold the vote on Tuesday, more moderate MPs were understood to be backing the government’s proposals. Sources said all select committee chairs were now supporting the prime minister.
Downing Street declined to comment.
Starmer sent his chief of staff, Morgan McSweeney, to lead the negotiations for much of Wednesday night and throughout Thursday, alongside the deputy prime minister, Angela Rayner, and her chief of staff, Nick Parrott.
The prime minister and his chancellor, Rachel Reeves, authorised those officials on Wednesday night to offer significant concessions in an attempt to rescue the welfare reform agenda, even though it will leave Reeves having to find more money at the budget.
The chancellor is already thought to be considering tax rises, having promised to reverse cuts to winter fuel payments at a cost of over £1bn. This latest reversal is likely to leave her with several billions extra to find.
The compromise solution would mean the cuts being applied only to new claimants, while those who already get disability payments will continue to do so.
Ministers have also agreed to expand and bring forward a package of employment support measures so that £1bn will now be available for them this year, and several billion across the whole of the parliament. The government had previously promised just £1bn in this parliament, to be voted on at a later date.
Liz Kendall, the welfare secretary, will also promise next week to launch a consultation on the disability benefit cuts, which make up most of the £5bn savings the bill was supposed to generate. Ministers have promised rebels they will make any changes recommended as a result of that process after it passes second reading at committee stage next week.
Rebels have also pushed to unfreeze the health-related element of universal credit, which is paid to those with severe long-term conditions such as a terminal illness. A House of Commons analysis seen by the Guardian shows that those claiming that benefit will lose nearly £250 by the end of the parliament as a result of the decision not to raise them in line with inflation.
The plans to cut the escalating welfare budget were first announced by Kendall earlier this year, and were expected to save the government £4.8bn – money that is vital for Reeves to hit her fiscal targets.
In recent days, however, Downing Street has accepted the need to make changes after more than 120 MPs signed an amendment that would have paused it indefinitely.
Starmer said on Thursday morning: “I recognise there is a consensus across the house on the urgent need for reform of our welfare system, because the British people deserve protection and dignity when they are unable to work, and support into work when they can.
“I know colleagues across the house are eager to start fixing that, and so am I, and that all colleagues want to get this right, and so do I … That conversation will continue in the coming days, so we can begin making change together on Tuesday.”
Just a day earlier the prime minister had described the growing rebellion as “noises off”, adding: “I’m comfortable reading the room and delivering the change the country needs. We’ve got a strong Labour government with a huge majority to deliver on our manifesto commitments.”
The protracted row with the parliamentary Labour party has damaged the prime minister and his chancellor, and has renewed complaints among some MPs about the influence of McSweeney in particular.
Downing Street officials admit they handled the communication of the bill badly, saying they should have focused on the moral case for changing the benefit system rather than the savings it was expected to generate.
Rayner’s role over the past few days highlights how important she has become as a link between Downing Street and Labour backbenchers, many of whom say they have lost trust in Reeves and Kendall.
Starmer will now face a difficult rebuilding operation with many of his colleagues, having come close to a parliamentary defeat less than a year after winning a landslide election victory.
The decision is the latest in a series of U-turns the prime minister has made in recent weeks, including his mid-air decision to order a national inquiry into grooming gangs and his reversal on large cuts to winter fuel payments.
The prime minister’s favourability rating has fallen to -36 since the election as he has enacted a number of controversial policies. The recent reversals are designed to bolster his flagging popularity, but some in his party worry they will end up sapping his authority instead.
Labour MPs are now likely to step up their campaign to end the two-child benefits limit, something Starmer has said he wants to do but which the government has so far said is unaffordable. Estimates suggest ending it could cost the government more than £3bn a year.