26-05-2025
Mike Dailly: Scrapping the two-child benefit cap makes sense
We await the policy details, but over the weekend, another U-turn emerged.
The UK government is now looking at scrapping the two-child benefit cap at a cost of £3.5bn per annum as a means to reduce child poverty.
It appears the reality of the disastrous English council elections and looming backbench rebellions for Labour has been a 'wake-up and smell the coffee' moment for Keir Starmer.
The WFP cut was said to have saved £1.4bn, so the benefit cap U-turn would be a significant fiscal event.
READ MORE: Mike Dailly: Are the sands shifting on the Winter Fuel Payment cut?
We may have to await the chancellor's autumn budget in October for the details of this latest U-turn; while Deputy Prime Minister, Angela Rayner, said yesterday the WFP U-turn details may be announced as early as June 11 in the chancellor's spending review statement.
Mike Dailly: Scrapping the two-child benefit cap makes sense. (Image: Sourced) The two-child benefit cap was introduced in 2017 by then-Tory Chancellor George Osborne. It prevents parents from claiming the child tax credit or universal credit for more than two children.
Analysis by the End Child Poverty Coalition shows that removing the cap would lift 250,000 children across the UK out of poverty.
The Child Poverty Action Group claims the economic and societal effects of child poverty, including spending on public services, cost the UK £39 billion each year.
If that is so, spending to save public money makes sense. Scrapping the two-child cap is a cost-effective way to reduce child poverty. It would lift 250,000 children out of poverty and mean 850,000 children were in less deep poverty.
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A 2023 report by the Commons Education Select Committee found mental health problems and cost-of-living pressures on families are among the complex reasons for increased school absenteeism.
Former Labour prime minister (PM) Gordon Brown made an intervention last week by urging the government to scrap the two-child benefit cap.
The former PM described the policy as 'cruel' and said it treated third children as 'second-class citizens'.
Mr Brown proposed raising £9 billion through a package of levies on the gambling industry, commercial banks, corporate philanthropy and changes to gift aid rules for higher rate taxpayers to fund a 'Child Fairness Guarantee'.
All of this could help the Scottish government, which has pledged to mitigate the two-child benefit cap by April 2026.
Last December, the Scottish government said the cost of mitigation would be around £150 million.
That seems unlikely considering that the loss of Scottish Barnett consequentials – money to Holyrood – from the WFP was around £150m, from an overall £1.4bn saving.
If the benefit cap U-turn has an overall cost of £3.5bn, the Scottish per capita share must be higher than £150m. Then you've the administrative and technical costs.
As the Scottish government conceded in its consultation on mitigation this year: 'Mitigation of the two-child cap is not a straightforward task. It will require significant policy and technical work to develop and implement an appropriate solution. This includes co-operation from the UK Government around systems development, data sharing and legislation."
U-turns on the WFP and benefit cap would help people in Scotland greatly by providing a simple technical solution for universal credit payments and additional funding to fully reinstate the Scottish WFP instead of the proposed £100 payment this winter.
