Keeping the two-child benefit cap is deeply irresponsible borrowing

The retention of the cap is being presented as fiscally responsible. It's not: the cap amounts to lending from future generations at an exorbitant interest.

We are now days away from Budget, with no signs from Labour that they’ll budge on their inexplicable decision to keep one of George Osborne’s most odious policies: the two-child cap on benefits. True, Keir Starmer has said it will be scrapped at some point in the future when fiscal conditions allow. But even with fiscal rules now rightly set to be redefined by Rachel Reeves, the cap appears to be set in stone. By allowing half a million children to remain in poverty he is building up a social policy debt. 

Poverty is traumatic for young children and is so in a predictable and evidenced way. Children born into poverty are more likely to have a low birthweight and have poor health in childhood, including higher rates of asthma and poor mental health. 

But it’s also extraordinarily expensive for the taxpayer. The cap is meant to save the UK just over 4.2 billion. But The Child-Poverty Action Group has estimated the impact of child poverty at £39 billion a year, rising to £40 billion by 2027. This number is made up not only of the costs the state will have to foot for treating the medical, mental and social issue people who were poor in childhood are likely to face throughout their lives. It’s also the lost tax earnings for the state: by not helping people out of poverty early on, the state gives on their immense potential contribution - to culture, to society, and to the economy.

Still, the worst impact is experience by the kids themselves. It is recognised that the “first 1000 days” of a child’s life are a critical phase in a child’s development. A report on the First 1000 Days of Life by MPs on the Health and Social Care committee in 2019 noted that “Exposure to stresses or adversity during this period can result in a child’s development falling behind their peers.” They go on to say: “Social stresses—poverty, poor housing and unstable employment—act against the ability of parents and families to create a safe, healthy and nurturing environment for their children.” 

Around 600,000 children are born in England and Wales each year; that roughly works out at 50,000 each month and 200,000 born since the 4th July election. If Labour waits later in its term of office, that opportunity to lift children out of poverty in the first 1000 days will be lost. 30 percent of children are growing up in poverty, so that would work out at 180,000 children born into poverty in their first year of office and up to 900,000 if they fail to take action in this parliament. In fact, 10,000 children have newly fallen beneath the poverty line since Labour took office - simply by inertia from Conservative policies, not all of which Labour appears to be equally rushing to fix.

Growing up in poverty means children are less likely to do well in school, something Labour have recognised in their push for breakfast clubs (though not universal free school meals). At pre-school stage, a child in poverty will be around 10 months behind on their language development. That grows to 15 months by age 5. By age 11 that grows to a 21 percent gap in standardised testing and a 27 percent gap at age 16 (GCSEs).

The Sutton Trust issued a ten point plan this year to close the educational attainment gap between affluent and poor students, noting in its final point that, “the education system alone cannot eradicate the attainment gap, so a true strategy would include a plan to reduce, and ultimately to end child poverty in the UK.” 

Children who do poorly in education are almost five times more likely to be in poverty in adulthood compared to those who do well in education, according to the ONS. This is a greater factor on poverty than growing up in a “workless” household. This “long shadow” of child poverty means that at age 40, those who were born into the poorest third of families earn half of those born into the richest third and are more likely to be unemployed. This, in turn, has an impact on the UK economy and on the tax collected off income to fund public services. 

Growing up in poverty also means a person is more likely to enter the criminal justice system as a young person and as an adult. The current overcrowding crisis is emblematic of failed social policy elsewhere in public services: that those serially failed by the state will often end up in the criminal justice and/or the healthcare system. Keir Starmer has pledged to simultaneously build more prisons to tackle overcrowding and to reduce the number of young people going to prison,  removing the two-child cap will help do that more effectively than schemes designed to intervene later in life. 

Labour has a choice: invest now and help turn around the lives of half a million children living in poverty, or pay ten times that figure in unemployment, in health costs and in prison places. They don’t have 1000 days to wait and neither do we. 

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Sign The Lead’s petition to Rachel Reeves to Scrap the Cap

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