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Labour MPs “smell blood” and will not allow Sir Keir Starmer to get a grip on Britain’s spiralling welfare bill, Conservative leader Kemi Badenoch has warned. The Prime Minister was last week forced to water down plans to restrict sickness disability benefits. This has fuelled expectations Chancellor Rachel Reeves will keep income tax thresholds frozen so more people will be dragged into paying higher rates.

Mrs Badenoch will use a speech in Liverpool on Wednesday to accuse Sir Keir of being “too weak” to push through “limited reforms that would have made modest reductions to the ballooning welfare bill.”

Warning he may make more concessions to Labour MPs, she will say: “Now that his backbenchers smell blood, there’s almost certainly another climbdown on the two-child benefit cap in the offing.”

Shadow Chancellor Sir Mel Stride accused Sir Keir of blowing a “£4.5billion hole” in the nation’s finances.

Sir Mel said: “Starmer has made another unfunded u-turn to stave off a defeat at the hands of his own MPs. This and the winter fuel debacle creates a £4.5bn hole in the finances.

“That means either more borrowing or more taxes come the autumn – and the country can’t afford either. Labour’s failure to get a grip of the welfare bill will cost us all.”

Daniel Herring of the Centre for Policy Studies shared his concerns, saying: “Even in its original state, this reform was never going to save the Government much money – it would only slow the rate of increase in health and disability benefits. But the fact that the Parliamentary Labour Party cannot fathom even minor cuts to welfare means we – and markets – can have little confidence in this government’s ability to rein in spending.”

Sebastian Charleton of the Adam Smith Institute was also alarmed by the decision to apply stricter criteria only to new claimants of Personal Independence Payments.

He said: “If ministers don’t have the mettle to see through even modest reforms, Britain’s finances will continue to crumble, making further tax rises and more borrowing inevitable.”

He added: “With disability spending soaring in the wake of the pandemic, any meaningful drive for reform must be retroactive. Ring-fencing existing claimants locks in unsustainable commitments for decades to come.”

A Treasury spokesperson defended the Government’s handling of the national finances, saying: “The fiscal rules are non-negotiable, and we will set out our fiscal plans, including how we will fund today’s announcement with no permanent increase in borrowing, in the autumn. We remain committed to growing the economy – we showed in spring that we can rebuild the public finances through the proceeds of growth, not just tax and spending.”