Rachel Reeves, the UK Labour Party’s Shadow Chancellor of the Exchequer, has committed to scrapping the two-child benefit cap. She hopes to make this shift as part of this year’s November budget. This action has the potential to raise 350,000 kids above the poverty line. At the same time, it can have a major financial impact, costing the government more than £3 billion.
In a recent interview with the BBC, Reeves emphasized the pressing need to address child poverty, stating that merely adhering to last year’s manifesto could jeopardize the economy. She expressed sympathy with working families who are struggling. She noted children across the country are hurt by conditions beyond their control.
“I don’t think we can lose sight of the costs to our economy in allowing child poverty to go unchecked. In the end, a child should not be penalised because their parents don’t have very much money.” – Rachel Reeves
Reeves’s comments are a clear indication that things have changed markedly from the previous election. Unlike today, she and then-Labour leader Keir Starmer failed to commit to scrapping the cap in their party’s election manifesto. At the time, they were making the case not to make these “unfunded promises” because there was no money in the budget. Yet, the forthcoming budget seems to indicate the UK government is finally ready to take more positive action to tackle child poverty.
The benefit cap’s proposed removal would come at the same time as initiatives to raise income tax and national insurance contributions. Specifically, Reeves is proposing to raise income tax rates by 2 pence while at the same time cutting national insurance by 2 pence. Taken together, this dual approach will bring in an estimated £6 billion in new revenue. This projected new revenue will allow removal of cap and fund additional prioritized expenditures.
This proposal would mainly shield the bulk of the working population while hitting pensioners and buy-to-let landlords harder. Reeves has stated that maintaining the current manifesto commitments could lead to severe cuts in capital spending, further complicating the budgetary landscape.
“It would of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending.” – Rachel Reeves
Reeves’s proposal would be significant on its own, but it’s just one of many commitments that Starmer and Labour have made. They have promised to end child poverty before the next election. Starmer’s evidently keen to avoid any mixed signals to voters. A Labour government will put an end to child poverty improving the long-term conditions for families decimated by poverty and inequality across the UK.
Reeves’s plan displays a clear recognition that there are many reasons that families might be struggling. She noted that families with multiple children might be struggling due to chronic illness or other unforeseen circumstances that alter their financial stability.
“In many cases you might have a mum and dad who were both in work, but perhaps one of them has developed a chronic illness or one of them has passed away.” – Rachel Reeves
She is convinced that every child should follow the money. No child should be punished due to their family size or situations outside of their control.
“I don’t think that it’s right that a child is penalised because they are in a bigger family, through no fault of their own.” – Rachel Reeves
Child Poverty Action Group Chief Executive Alison Garnham echoed those sentiments and applauded Reeves’s commitment. In this new episode, she shines a light on how the two-child limit is exacerbating increasing child poverty rates. She concluded by saying that ending this policy would give millions of children a fairer shot at life.
“The two-child limit is the biggest driver of rising child poverty in the UK and scrapping it in full is the right thing to do. All children are equally deserving of a good childhood and abolishing this cruel policy would give millions more kids a better start in life.” – Alison Garnham
With November just around the corner, everyone’s eyes will be on Reeves as she puts the finishing touches on her announcement to implement these game-changing reforms. The implications of her proposals could reshape not only the Labour Party’s platform but the lives of countless families across the country.