The two-child benefit cap: To scrap or not to scrap?

There is an ongoing row in the Labour Party about welfare spending and how to cut it while maintaining protections for the most vulnerable.

Those on the left are suspicious of anything that may look or smell like balancing the books on the backs of the poorest in society.

Those on the other side point to an unsustainable welfare bill that has been allowed to balloon under the Conservatives and looks set to continue under Labour.

Rachel Reeves will have to weigh up finding between £3bn and £4bn to scrap the cap, or face the wrath of Labour MPs on small majorities who believe they were elected to deliver on ‘Labour values’ like lifting this very cap.

But perhaps there is a compromise the chancellor could opt for, which may placate the left of her party while needing less cash.

For example, according to the Institute for Fiscal Studies, lifting the cap from two to three children would cost £2.6bn; or a tapered system, where parents got the full amount for the first two kids and then half the amount for any subsequent children, would cost around £1.8bn.

But Labour big beast David Blunkett – the only senior Labour figure against lifting the cap – wants to see a more nuanced approach.

Blunkett believes the cap ought to remain, but he wants there to be exemptions for disabled children and parents who have been widowed, and he would prefer the government to focus on anti-child poverty measures and improving pathways to work for parents, all paid for by a tax on gambling – something former prime minister Gordon Brown has been agitating for.

Read more:
What is the two-child benefit cap?
What tax rises could Rachel Reeves announce?

At a time when the government perpetually reminds us of how little money it has and how much strain public finances are under due to austerity, finding several billion to scrap a policy that is broadly popular with the public may seem like an unwise move.

According to the latest polling from YouGov, 59% of the public are in favour of keeping the cap in place, and only 26% thought it should be abolished.

But politically, the chancellor is aware of the strength of feeling within her party about reducing child poverty as soon as possible, and her colleague, the Education Secretary Bridget Phillipson, has stressed the party has a “moral mission” to tackle child poverty.

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Why did Labour delay their child poverty strategy?

Irrespective of what Reeves chooses, her political woes do not end there.

Taxes are set to go up in the budget later this month, and Reeves has refused to rule out breaking her manifesto promise of not raising taxes on working people.

This combined with persistently disappointing voter intention polling for Labour, could spell deep dissatisfaction among the public.

A decision to lift the two-child benefit cap may boost morale among Labour MPs, but if it’s not enough to prevent the loss of hundreds of political foot soldiers in May’s local elections, Reeves and Sir Keir Starmer will need to find more red meat to throw to their party before too long.