Pat McFadden says lifting two-child benefit cap must be budgeted
Work and pensions secretary Pat McFadden has conceded that any plans to lift the two-child benefit cap must be “budgeted” amid growing calls from key Labour figures for the Tory-era policy to be scrapped.
McFadden warned Labour backbenchers that any commitment to lift the cap would have to be funded by higher government revenue.
“Everything has to be paid for,” McFadden told BBC Breakfast. “Everything has to be budgeted. We are committed to financial stability.
“Any demand for more spending, we have to see where that’s coming from and how it’s going to be paid for.”
Calculations by the left-wing think tank IPPR have suggested it would cost an extra £3bn a year, with Chancellor Rachel Reeves already likely to fill costs worth around £30bn at this year’s Budget due to lower growth forecasts, higher borrowing costs and policy U-turns.
McFadden’s comments on Wednesday morning give a clearer sign that the government will raise taxes later this year as fresh spending commitments become more likely.
Soaring benefits bill
It has also been reported by LBC that an announcement on the cap’s lifting could come at the Labour Party’s conference this week.
Senior Labour figures have spoken against the cap, with deputy leadership contender education secretary Bridget Phillipson calling it “spiteful”.
Several Labour backbenchers have called for the benefit cap to be abolished in order to tackle child poverty.
A report by the Institute for Fiscal Studies said the cap did not affect children’s development or school readiness by the age of five, though it said the limit “clearly contributes to higher rates of child poverty”.
The reform would undermine a key part of McFadden’s task to reduce spending on welfare in his new brief, with the Department for Work and Pensions now overseeing skills and training policies to get inactive Brits into the national workforce.
McFadden has insisted that welfare reform “must happen” but he may face a challenge to persuade nervy Labour backbenchers to back changes to disability payments and other benefits.
The government could push for welfare savings before the Budget, according to several reports, posing another challenge to Keir Starmer’s leadership after more than 130 Labour MPs rebelled against £5bn savings earlier this year.
Projections by the Office for Budget Responsibility (OBR) have said benefits for working age people could rise from around £48.5bn to over £75bn by 2030, highlighting the pressures faced by the government in higher spending levels.