Shadow Treasury Minister Gareth Davies has warned the Government faces a £7billion financial shortfall following its U-turns on benefits reform, warning "higher taxes" are likely to follow.

The comments come after Labour was forced into significant concessions on its benefits bill, effectively scrapping planned changes to Personal Independence Payment (PIP) eligibility.

The changes have been postponed until the Timms Review reports back in autumn 2026.

The concessions came due to pressure from MPs, disability groups and campaigners concerned about the impact on vulnerable people.

Davies said: “Ironically, I think this could actually end up costing the Government a bit more, because in the bill last night, there was a series of provisions that would have saved about £5billion, which is a positive step to reducing the overall welfare budget, which is needed, but it also actually upgraded the standard rate of Universal Credit.

Gareth Davies warned that higher taxes are coming

“And so what they've done is now U-turned on the revenue raises and kept the increase in Universal Credit and so the punchline is that actually, ironically, the bill may cost the exchequer more money.

“What this means is that Rachel Reeves, the Chancellor, now has to find an additional £3billion to £7billion.

"If you look at the winter fuel U-turn, the U-turns last night, and there's a raging debate in the Labour Party at the moment about the two child cap.

“If you add all that up, it's about £7billion she's going to have to find.

"We’re clear that this is probably going to come from additional taxation in the autumn and we're trying to warn the public about that right now.”

Davies outlined the scale of the welfare budget crisis, noting that health and disability benefits have "completely ballooned" since the pandemic.

"The OBR are now saying that it's going to cost about £100billion by 2030 just in health and disability benefits alone," he said.

He explained this means "for one pound in every four collected through income tax, that's going to go to health and disability benefits."

When asked whether Keir Starmer had lost control of his party, Davies was unequivocal.

Keir Starmer has "completely lost control" of his party

"Yes, absolutely. He's got a super majority, he's got, I think, the largest majority in history, or one of the largest majorities in history. And yet, last night, he had to essentially pull the bill," he said.

The benefits bill ultimately passed through the House of Commons with 335 votes in favour and 260 against, despite the significant Labour rebellion.

Forty-nine Labour MPs voted against their own Government's bill. An amendment to reject the Government's welfare bill also failed, with 149 MPs voting in favour and 328 against.