As the furore about Peter Mandelson consumed attention, the legislative agenda carries on. Last week we dealt with the second reading of the Bill which will implement the Chancellor’s recent decision to lift the cap on additional Universal Credit payments for children, which is currently capped after the second child.
When Keir Starmer was campaigning for the leadership of his party he pledged to scrap the two-child limit. Nevertheless, when he became Leader of the Opposition, he dropped the commitment and it was not in Labour’s election manifesto. Rachel Reeves, as Chancellor made it clear that the policy would be unaffordable and the Government suspended the whip from seven Labour MPs when they voted for a motion calling for the cap to be lifted.
Yet now it is the official Government policy.
What has brought about this change.?
The cost remains at some £14 billion over five-year forecast period and the fiscal outlook, which determines the affordability of the policy, has got worse. So, it is even less affordable than it was when the Chancellor said it was unaffordable.
The reality is that this is an expedient to try and shore-up the Prime Minister’s support within his own party. It is to undo the damage of the Mandelson debacle. The policy is popular amongst Labour MPs (though polling indicates that the current cap is regarded as fair by a majority of voters). The bill we debated last week is a measure of the Government’s desperation.
This expediency is deeply damaging economically.
The benefits bill is rising and uncontrolled -the Government has abandoned its attempts to restrain its growth. Over than half of us are in receipt of more from state benefits than we contribute. Health and disability benefits alone are set to reach £100 billion in short order—that’s more than we spend on defence, education, or policing.
The debate in Parliament was dominated by the terrible ;cruelty’ of the current policy. This begs the question, if they believed it to be so cruel, then why did they let it persist for eighteen months and only seek to end it only now?
Merely seven MPs were brave enough to vote to end the cruelty earlier, and were suspended for doing so. The rest were sitting on their hands. As I asked in the debate, how do they sleep at night?
The cap is fair. If you have another child your salary doesn’t increase as a consequence. Why should it be different for those living on benefits?
Lifting the cap will be another damaging means of disincentivising work by making life on benefits the rational choice -where it pays more to be on welfare than in work.
When the cap is lifted, benefits for affected individual households will rise substantially. Nearly half a million households will receive around £5,000 more on average. A single parent on universal credit with five children could get an extra £10,000, taking the household income to more than £45,000 without it being taxed — someone in work, and taxed, would have to earn about £60,000 to be as well off.
The Government has made a choice. It has chosen to increase the rewards for those on benefits by increasing the taxes for everyone else. That is the cost of the Prime Minister’s political weakness – a cost of Mandelson.