Sir Keir Starmer will use a speech backing the Budget to signal a fresh push on welfare reform, as a row simmers on about whether Rachel Reeves misled the public over the state of the public finances.
The Prime Minister will say an overhaul of the welfare system is needed after he was forced to abandon cuts planned earlier this year in the face of a major backbench rebellion.
âWe have to confront the reality that our welfare state is trapping people, not just in poverty, but out of work,â the Labour leader will say on Monday, arguing reforms are not aimed at making him âlook somehow politically âtoughââ, but at reversing low productivity.
His summer U-turn saw changes to personal independence payment (Pip) eligibility stripped out of the Governmentâs welfare legislation, amid warnings from rebel MPs of the impact on disabled claimants.
The climbdown blew a hole of ÂŁ4.8 billion in the Chancellorâs preparations for the Budget, removing expected savings.
Ms Reeves has been forced to defend herself against claims she misled voters by talking up the scale of the fiscal challenge in the run-up to last weekâs Budget, in which she announced ÂŁ26 billion worth of tax rises.
She said an Office for Budget Responsibility (OBR) forecast showing a ÂŁ4.2 billion surplus against her borrowing rules did not take into account the welfare reform U-turn or the abolition of the two-child benefit cap.
Sir Keir is on Monday set to highlight the scrapping of the two-child limit â expected to take 450,000 children out of poverty â a decision which appears to have calmed discontented Labour backbenchers.
The Prime Minister will now focus renewed attention on tackling other problems in the welfare system, according to Downing Street.
In an apparent bid to discourage backbenchers from further revolts over a welfare shake-up, the Prime Minister will say: âWe have to confront the reality that our welfare state is trapping people, not just in poverty, but out of work. Young people especially. And that is a poverty of ambition.
âAnd so while we will invest in apprenticeships and make sure every young person without a job has a guaranteed offer of training or work, we must also reform the welfare state itself â that is what renewal demands.
âNow â this is not about propping up a broken status quo. Nor is it because we want to look somehow politically âtoughâ. The Tories played that game and the welfare bill went up by ÂŁ88 billion. They left children too poor to eat and young people too ill to work. A total failure.
âNo, this is about potential. Because if you are ignored that early in your career, if youâre not given the support you need to overcome your mental health issues, or if you are simply written off because youâre neurodivergent or disabled, then it can trap you in a cycle of worklessness and dependency for decades.
âWhich costs the country money, is bad for our productivity but, most importantly of all, costs the country opportunity and potential.
âAnd any Labour Party worthy of the name cannot ignore that.
âThat is why we have asked Alan Milburn on the whole issue of young people, inactivity and work. We need to remove the incentives which hold back the potential of our young people.â
The review led by former Labour health secretary Mr Milburn into âNeetsâ â 16-24-year-olds who are not in education, employment or training â is expected to report next summer.
Sir Keir will also say âeconomic growth is beating the forecastsâ but the Government must go âfurther and fasterâ to encourage it.
He will make the case for slashing regulation, saying: âRooting out excessive costs in every corner of the economy is an essential step to lower the cost of living for good, as well as promoting more dynamic markets for business.â
Business Secretary Peter Kyle will be tasked with applying the same deregulatory approach to major infrastructure schemes and to give monthly updates on accelerating Labourâs industrial strategy.
The Prime Minister wrote in the Guardian that his economic plans will take years to deliver in full, saying: âBy delivering a big, bold long-term plan, not a set of quick fixes, we will renew Britain.â
He added that âwe will deliver the change we promised and then be judged on it at the next electionâ.
Sir Keir will also use his speech to endorse the decisions taken by Ms Reeves in the Budget, including on energy bills, rail fares and prescriptions, and on creating a greater headroom and protecting investment and public services.
But pressure on Ms Reeves continues from opposition politicians over claims she deceived voters over the size of the fiscal repair job she faced.
The Conservatives on Sunday wrote to Sir Keir demanding the Chancellor come before MPs on Monday to âexplain the extent to which she misled the publicâ.
The Tories and the Scottish National Party have asked the Financial Conduct Authority to investigate policy leaks ahead of the Budget and the Chancellorâs own comments.
Reform UK leader Nigel Farage has urged the Prime Ministerâs independent standards adviser Sir Laurie Magnus to look into potential breaches of the ministerial code.
And members of Sir Keirâs top team reportedly accused him and Ms Reeves of misleading the Cabinet, with The Times quoting an unnamed minister as describing the handling of the Budget as âa disaster from start to finishâ.
âAt no point were the Cabinet told about the reality of the OBR forecasts,â they told the newspaper.
