Keir Starmer faces a cabinet rebellion over planned welfare cuts, but the PM remains firm, refusing to loosen fiscal rules despite pressure from his own party

Labour’s internal tensions have erupted into open conflict, with Prime Minister Keir Starmer facing a fierce cabinet backlash over his rigid fiscal policies and plans for deep welfare cuts. As pressure mounts ahead of the Spring Statement on March 26, Starmer and Chancellor Rachel Reeves are standing firm on their economic strategy, despite growing discontent within their own ranks.

At a recent cabinet meeting, ministers voiced their frustration over Starmer’s refusal to ease spending rules while pressing ahead with a £6bn cut to welfare. Several ministers openly challenged the Prime Minister, warning that such austerity-style measures would be politically disastrous.

Labour MPs are particularly enraged at the move, which they see as a betrayal of the party’s core values. One MP summed up the fury within the ranks: “Cutting welfare is the toughest thing Labour MPs have been asked to swallow.” The discontent is boiling over, with some warning that Starmer risks a major rupture in party unity.

Despite the growing internal unrest, Reeves remains resolute. Determined to maintain credibility with financial markets, she is pushing ahead with reforms designed to curb welfare spending and save £6bn a year. The Chancellor insists that Labour must stick to its strict fiscal rules to avoid triggering a market panic that could send borrowing costs spiralling.

However, critics within the party argue that Reeves’ obsession with market approval is driving Labour towards unnecessary and harmful cuts. With debt interest costs rising and economic pressures mounting, MPs are demanding a shift in strategy—but so far, their pleas have fallen on deaf ears.

The row comes as Germany, often seen as a benchmark for fiscal discipline, has decided to relax its borrowing rules to stimulate investment. This has intensified the pressure on Labour to rethink its own approach, with many questioning why Britain should cling to rigid fiscal targets while European counterparts take a more flexible stance.

Yet Starmer and Reeves remain defiant. They argue that Britain’s economic situation is too precarious to risk any deviation from their carefully crafted fiscal plans. Any move to relax borrowing, they warn, could send shockwaves through the markets and drive up the UK’s already high debt interest costs.

With the Spring Statement looming, Reeves is running out of options. The need to control rising debt costs means that further spending cuts—or even tax hikes—are almost inevitable. But as resistance within Labour grows, the risk of a full-blown crisis is becoming harder to ignore.

For many within the party, the battle over welfare spending is a defining moment. Labour’s traditional support base is already uneasy over Starmer’s economic stance, and the prospect of austerity-style policies could deepen that disillusionment.

As one MP put it: “We didn’t get elected to make the poorest in society pay for economic stability.” If Starmer and Reeves continue down this path, they may soon find themselves facing not just a cabinet revolt—but a party on the brink of rebellion.