Rachel Reeves has used her second Budget to scrap the two-child benefit cap, in a huge moment for the Labour party after a long internal battle over the issue. “It’s finally going to happen,” a Labour MP who has been privately campaigning for it all year said to me. Then she burst into tears.
This is emotional for so many people in the Labour movement. “What are we in government for, if not to lift children out of poverty?” that MP said, echoing the argument made to me – and to Keir Starmer and Rachel Reeves – by so many people in Labour over the past year, from party grandees to cabinet ministers.
Scrapping the cap, which currently limits child benefit payments to two children per household, is the most effective lever to lift children out of poverty, the evidence overwhelmingly suggests. But the move has been resisted for the first 18 months of the Labour government. Why? And, crucially, what has changed?
Starmer faced pressure to reverse the cap from the second he entered Downing Street. After only three weeks in power, he suspended the whip from seven MPs from the left of the party who voted against the government and supported an amendment tabled by the SNP to scrap it. At the time, one Labour aide memorably described the vote to me as a “virility test” of the government.
Rather than give in to the pressure, the government delayed a decision on the cap by announcing a consultation on a broader child poverty strategy. Morgan McSweeney, Starmer’s chief of staff, urged the prime minister at that time to rule out scrapping the limit, according to people familiar with the conversations. Starmer pushed back, however. Removing the cap has remained an option under consideration by the government ever since.
McSweeney’s argument at the time was that voters view the two-child benefit cap as fair – and indeed, polling supports that view, including this YouGov poll from two weeks ago. The chief of staff would happily acknowledge that he represents an uncommon view in the Labour party – but one that places him on the same side as most of the country. George Osborne introduced the cap, arguing it wasn’t fair for families on benefits to be subsidised for more children when families in work don’t get the same privilege, often making hard choices about whether they can afford more children.
Even hearing arguments like the above sends many Labour figures into a rage. They stress that many parents of these children in poverty are in work, as well as on benefits. Many people’s life circumstances change. Why should a government punish children for the sins of the parents? And as for the polling, they would argue polling also shows that voters support and expect a Labour government to tackle child poverty.
The internal debate has raged for much of the past year. Starmer’s support for removing it became well known inside government. Rachel Reeves and Liz Kendall, then works and pensions secretary, discussed scrapping it in the spring statement in March, before concluding there wasn’t enough money to fund it. It would have taken £2.5bn , and Reeves was already facing huge pressures around balancing the books. The political arguments against it remained, too.
As Reeves and Starmer stuttered, facing bruising defeats in local elections and a backlash over the winter fuel cut, the issue of the two-child cap again reared its head. In May, Gordon Brown made a strident case for scrapping it in the pages of the New Statesman. It was a reminder, if one were needed, that this isn’t a pet project of the Labour left, but the desire of Blairites, Brownites and most of the rest of the right of the party, too. Labour figures of all traditions talk about how reducing child poverty was a uniting mission for the party in the “Tony and Gordon” days.
This time, as pressure grew, both Reeves and Starmer made it clear that they would like to tackle the cap if money allowed. The deputy leadership contest, in which Bridget Phillipson and Lucy Powell both made the case for its removal, made the decision feel almost inevitable.
Yet arguments have persisted internally in recent weeks about whether it should be scrapped altogether, or merely tapered, paying less for a third child, fourth child, and so on. Some made the argument that this would be seen as fairer.
Some have made an even more sensitive argument: that tapering would avoid the racial sensitivities of scrapping it altogether. The two-child cap disproportionately impacts Muslim families (55 per cent of Muslim children are living in families with three or more kids, nearly double the 29 per cent average for the overall population, according to the Muslim Council of Britain.) Nigel Farage and co would have a field day, goes the quiet case against scrapping the cap. This argument is galling to other parts of the Labour party. “It’s the worst of Blue Labour, thinking that it’s okay to leave some children to go hungry if they’re brown,” one Blairite put it bluntly.
After 18 months, the argument is now settled. Rachel Reeves has announced the cap will be scrapped. As she announced the change in the chamber today, she said: “I don’t intend to preside over a status quo that punishes children for the circumstances of their birth.” Indeed, 350,000 children will be lifted out of poverty, and a further 700,000 out of deep poverty. Labour MPs are delighted, thinking of the kids they know in their own patches who will see their lives change for the better. Will voters react as warmly? After over a year of internal debate, it is time to see who has been right in Labour’s big internal debate. For most of the Labour party though, they won’t care. They just think it was the right thing to do.
[Further reading: Rachel Reeves’ risky sequel]
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