Starmer Addresses Labour MPs Amid Concerns Over Spending Cuts
As Sir Keir Starmer prepares to address Labour MPs during the behind-closed-doors weekly meeting of the Parliamentary Labour Party next Monday evening, he will confront head-on the rising unease among his colleagues regarding significant reductions in foreign aid and welfare benefits. The atmosphere within the Labour Party at Westminster is currently tense, particularly following Starmer’s recent decision to slash the aid budget to finance an increase in defense spending. This has left many MPs feeling disoriented, as their long-standing progressive principles appear to be at risk of being overshadowed.
With Chancellor Rachel Reeves now proposing several billion pounds in draft spending cuts to the welfare budget, the frustration among Labour MPs has intensified. “There are knots of MPs who are feeling awful,” one Labour MP shared with The i Paper. “People are saying they don’t want to be ministers because they feel powerless with no money to spend. While some of it is just grumbling, there’s a genuine sense of frustration in the party—people are asking, ‘What do we stand for?’”
Restive Labour MPs, deeply concerned about sweeping cuts to welfare and other unprotected departments, are actively brainstorming suggestions for Reeves as she approaches her fiscal statement later this month. Some are advocating for increased borrowing to support higher defense spending, arguing that this could shield other government areas from cuts.
- Several Labour MPs are closely observing developments in Germany, where chancellor-to-be Friedrich Merz has reached an agreement with potential coalition partners to borrow billions for military funding in response to Donald Trump’s threats against European security guarantees. Merz is set to seek approval from the German parliament for these plans next week.
- If successful, this would enable a relaxation of strict limits on defense spending. However, this announcement has led to a significant surge in German government borrowing costs—marking the largest increase in 28 years. Unlike the UK, Germany’s debt stands at 63% of GDP, which provides them with greater flexibility for borrowing.
“If Germany can adjust their debt targets, why can’t we?” questioned a second Labour MP, expressing frustration. “If I were Rachel, I’d consider borrowing even more to avoid cutting welfare. What was it that Tony Blair said? You’ve only got one shot.”
In recent changes announced in October, Reeves has committed to borrowing solely for investment purposes, avoiding funding for day-to-day government expenses, and aims to ensure that debt decreases as a share of GDP. Nevertheless, the political climate in Europe is shifting, with European Commission President Ursula von der Leyen proposing to borrow up to €150bn (£126bn) to support EU governments in their rearmament efforts.
A third Labour MP highlighted Japan’s staggering debt, which was reported at 263% of GDP in January. “Rachel is going to have to do something—anything—to prevent these cuts from being devastating. Just look at Japan’s debt-to-GDP ratio; they manage it,” the MP suggested.
A fourth Labour MP acknowledged the possibility of borrowing more to finance defense but warned that international money markets would be unyielding if the government attempted to borrow for welfare spending. “There’s a real opportunity for Rachel to borrow more for defense, especially with backing from European partners. You’d need to present the idea carefully to the bond markets, but it could be done. I doubt Rachel will pursue it, though,” the MP noted.
Starmer himself has emphasized the importance of the government’s decision to increase defense spending to 2.5% of GDP, arguing that it should be leveraged to boost the British economy. Some within Labour hope that additional borrowing for domestic defense projects could stimulate economic growth.
While the majority of Labour MPs anticipate that their calls for increased borrowing will largely go unanswered—and refrain from speaking out publicly to avoid appearing disloyal to Reeves, whom they respect—the mere discussion of her fiscal direction in private reflects a broader frustration within the party regarding their current predicament.
One Labour MP remarked that Starmer’s central goal of achieving the highest sustained economic growth in the G7 nations is challenging to convey to constituents. “Promoting growth is such a tough message for the public. They struggle to grasp what ‘growth’ really means. The dilemma is that we can’t shift our messaging to focus solely on job creation due to national insurance contribution increases. So, we find ourselves in a difficult position,” the MP explained.
“I genuinely believe we will need to allocate more funds to defense than currently suggested, so we must explore alternative funding methods in the future. Will we have to make even deeper cuts to aid? That’s not why I entered politics,” a sixth Labour MP expressed.
“I can certainly see the rationale for welfare reform, but I’m worried we might mismanage it and end up implementing a blanket crackdown reminiscent of past blunders, such as those we faced regarding winter fuel payments or the Waspi women,” they added.
As of January 2025, the UK’s public sector net debt was reported at 95.3% of GDP. Reeves is understood to be reluctant to incur new borrowing without a clear strategy for repayment.
In response to concerns, Reeves stated on The Electoral Dysfunction podcast, “You can’t simply borrow to accommodate this additional spending, as it’s not a one-off situation. We will need to sustain elevated spending levels. Therefore, we made the decision to reduce development spending and allocate that money to our defense budget.”
However, not all Labour MPs agree with the idea of expanding UK debt. A seventh Labour MP concurred with the necessity of increased defense spending but argued that additional borrowing is not the appropriate approach to funding it.
Number 10 is acutely aware of the sentiments within the party. On Thursday morning, Starmer wrapped up his final strategy session for all MPs, having met with various groups to share his insights on a broad array of policies. The Prime Minister also convened with frontbench colleagues this week to reassure them that there are numerous examples of Labour values that they can communicate to their constituents, ranging from increased NHS appointments to raising the National Minimum Wage, alongside initiatives like breakfast clubs and the introduction of VAT on private school fees.
Moreover, he reassured concerned colleagues that there exists a compelling progressive case for welfare reform and for creating good job opportunities for all who are able to work. When Starmer stands before his colleagues at the closed-door meeting on Monday, this is a message he will have refined repeatedly.
