UK’s Controversial Child Benefit Cap Hits 30,000 More Families

(Bloomberg) -- The number of families hit by the UK’s two-child benefit cap rose 7% over the past year, adding to pressure on the country’s new Labour Prime Minister, Keir Starmer, to reverse limits imposed seven years ago by the Conservatives.

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Some 450,000 families are now impacted by the restriction, up from 420,000 a year ago, according to figures published by the Department for Work and Pensions. Introduced by the Tories in 2017, the cap means families cannot claim child tax credits and universal credit – worth about £3,200 ($4,120) per year per child – for their third and subsequent children. The number of impacted families will continue to rise into the 2030s, since the cap applies to all children born after April 2017.

The data is likely to increase pressure on Starmer and Chancellor of the Exchequer Rachel Reeves to scrap a Tory policy that’s particularly unpopular within the Labour Party: Deputy Leader Angela Rayner in the past called it “obscene and inhumane,” while former Labour Prime Minister Gordon Brown said it “condemns children to poverty.” On Wednesday Scottish Labour leader Anas Sarwar described the cap as “wrong” and said opponents are “pushing at an open door” with the new government.

But during the election campaign, Starmer pushed back against a move that the Resolution Foundation estimates would cost £2.5 billion this tax year, rising to £3.6 billion a year later. “We are not going to be able to afford to scrap it because of the damage the Tories have done,” he told STV during the campaign.

Labour’s position is to abolish the cap when the public finances allow, but in a bid to lower expectations on how much the party can do straight away, Reeves on Monday said she’d been given the worst economic inheritance since World War II, including debt at near 100% of GDP, sluggish growth and productivity that lags that of big European neighbors. Starmer, for his part, has repeatedly said he won’t make unfunded promises.

Nevertheless, Reeves plans a budget in the autumn, and scrapping the policy would be a popular move that would shore up support among elements of the Labour left who are unhappy with a perceived lack of ambition in the party’s electoral promises. While that’s not necessary — Starmer has a working majority of 180 in the house of Commons — it would be a signal that he’s prepared to go further than promised during the campaign.

The two-child benefit cap has been criticized by poverty campaigners for having a disproportionate impact on the poorest families. The End Child Poverty Coalition estimates that scrapping the policy would lift 300,000 children out of poverty, and reduce the hardship experienced by an extra 800,000. The cap was designed to encourage parents to work, but the ECPC highlighted that over 80% of two-parent families impacted by the cap are already in work.

Women’s charities have also criticized the so-called rape clause, which requires women to verify that a child was conceived non-consensually to qualify for an exemption.

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