Twelve Labour MPs, including the leading left-winger Jon Cruddas, rebelled against their own whip last night and voted against giving the welfare reform bill a second reading in a display of anger at the party's leadership. The rebels have been angered by the frontbench's unwillingness to do more to oppose changes to housing benefit and disability living allowance. The frontbench had tabled a reasoned amendment opposing many aspects of the bill, but once this was defeated they abstained on second reading.
Labour's leadership argued the party cannot be seen to be opposing welfare reform and that the central proposal of introducing universal credit – a merger of tax credits and benefits – deserves to be given a chance. The main goals of the reform are to make work pay and remove disincentives in the system to work. Liam Byrne (pictured), the shadow work and pensions secretary, has said he is willing to oppose the bill at third reading if the government does not make concessions during the detailed line-by-line scrutiny of the bill in committee.
Labour has become increasingly alarmed at what it regards as massive gaps in the bill, but the government is still negotiating internally on what are very complex proposals. On Wednesday Labour was disturbed to hear the work and pensions secretary, Iain Duncan Smith, announce that childcare credits, paid to 460,000 people, will be included in the universal credit.
Duncan Smith said: "Support for childcare costs will be provided by an additional element paid as part of the universal credit award. We will invest at least the same amount of money in childcare as in the current system, and we will aim to provide some support for those making their first moves into work, so that the support available is not restricted to those working more than 16 hours."
Stephen Timms, the shadow work and pensions minister, countered: "People will have to find not 3% of the cost of childcare out of their own pocket – which is common at the moment – but perhaps 30%. That is a tenfold rise." In what is turning into a central point of dispute over the bill, Timms put pressure on ministers to explain why someone with savings of £16,000 would be debarred from universal credit, a move that will hit as many as 100,000 people.
He said: "People who receive £80 or £100 a week in tax credits to supplement their earnings will in future receive absolutely nothing at all if they have £16,000 in the bank. They could lose perhaps £5,000 a year as a punishment for having £16,000 in savings. If they get rid of their savings, they will get their credits back. What is that about? For the crime of having £16,000 in the bank, people will lose all their childcare support as well."
Labour indicated that the bill represents a leap in the dark and flagged a number of areas that will need fleshing out in committee, including the future of free school meals, the mobility component of the disability living allowance for those in residential care, the impact of universal credit on the self-employed, the cap on welfare benefits for working people, the future of child maintenance, and council tax payments.