The leader of the rebel Labour MPs who forced Sir Keir Starmer to abandon his welfare reforms has called for a wealth tax to meet the £5bn cost of the U turn.
On Tuesday, the prime minister suffered the biggest blow to his leadership since coming into power a year ago after he was forced to shelve a key plank of his controversial benefit cuts in order to get them through parliament.
While his welfare reform bill passed its second reading by 335 votes to 260 – a majority of 75 – the prime minister still suffered the largest rebellion of his premiership so far, with 42 Labour MPs voting to reject the legislation.
Rachael Maskell, who led the backbench Labour rebellion which forced further changes to the reforms on Tuesday, suggested that as much as £24bn a year could be raised by increases in capital gains tax and other measures.
Speaking in the wake of the rebellion, the Labour MP for York Central said: “We need to look at those with the broader shoulders, as the prime minister said, contributing more into our system, but never pushing down on the poorest.
“And that was what the dynamic was yesterday, that we do need to look at things like a wealth tax, £24bn, or equalisation of capital gains tax.”
Ms Maskell also accused the Treasury of “fixing” the key benefits cuts, accusing them of having chosen to “find savings on the backs of disabled people”.
“That was always going to be wrong”, she said.
The MP also warned Sir Keir he had to do more “listening” to critics of his policies, saying the welfare rebellion had been a “very steep learning curve” for him.
Speaking to BBC Radio Four’s Today programme, Ms Maskell said: “We saw a change in power between the prime minister and disabled people across the country. We live in a very ableist world where disabled people are often invisible, seen and not heard until yesterday.”
Ms Maskell has been one of Sir Keir’s fiercest opponents in the welfare revolt, earlier calling the cuts “Dickensian” and “from another era”.
Fellow Labour rebel Andy McDonald also said on Wednesday morning a tax on wealth, and equalising capital gains tax with income tax, should be used to make up the shortfall and invest in public services.
He told Times Radio: “If you listen to people like the Patriotic Millionaires, who’ve campaigned for higher taxes for themselves, these are people who’ve said in no uncertain terms that this country has given me every single opportunity, I’ve benefited from health and education and the opportunities presented to go into business.
“I’ve succeeded and I’ve flourished and I can afford to pay a little bit more. They’re suggesting that a wealth tax of 2 per cent on assets over £10m will produce for the Treasury £24bn.”
And yet another Labour rebel joined the calls, with MP Cat Eccles saying “there are alternatives to just cutting money from vulnerable people”.
Speaking to LBC, she said: “There are alternatives to just cutting money from vulnerable people. HMRC wrote off £5bn in unpaid taxes, we’re still trying to recoup money from Covid contracts, and we’re still not meeting UN obligations on tax evasion…. and a possible wealth tax.”
Meanwhile former Labour MP Rosie Duffield, who quit in protest at Sir Keir’s leadership in September last year, said there was an “understanding” before the general election that the party would implement a wealth tax.
“But of course, it was all ditched pretty much in the first couple of weeks when winter fuel allowance was taken away from the elderly and it just dominoed down that route, so that people who couldn’t really afford to be, you know, cut or punished as they feel, were. And it’s just gone downhill since then,” she told Times Radio.
She insisted it “was definitely spoken about sort of in the PLP meetings and amongst veteran MPs”, adding that there was “a sort of understanding that that would be on the cards potentially, although not explicitly stated”.
MPs voted to approve the government’s watered down welfare bill after a last-ditch announcement that plans to restrict eligibility for personal independence payments (PIP) – which had been the central pillar of the government’s reforms – were being dropped until after a review of the benefit has concluded.
The latest climbdown will cause a major headache for chancellor Rachel Reeves; the welfare squeeze was intended to save £4.8bn a year, already watered down to £2.3bn last week. Postponing any changes to PIP means it is now uncertain how much the reforms will save.
Last night the Institute for Fiscal Studies warned that the reforms package could even end up costing the taxpayer £100m by 2029-30 if proposals to tighten eligibility for PIP are scrapped following the Timms review.
Amid fears that tax rises will be needed to fund the concessions, Cabinet minister Pat McFadden – one of the prime minister’s closest allies – said the revolt would lead to spending cuts in other departments.
He said: “There is a cost to the decision taken yesterday [Tuesday], there is no denying that.
“You can’t spend the same money twice so more money spent on that means less for some other purpose.”
But the chancellor of the Duchy of Lancaster refused to say if it would lead to tax rises, saying any such decision would be made at the next budget.
