Budget 2025: Sir Keir Starmer hints two-child benefit cap could be scrapped
Sir Keir Starmer has hinted the two-child benefit cap could be lifted in the Budget, saying the Government would be taking “a number of measures” to “drive child poverty down”.
The Prime Minister’s comments follow Chancellor Rachel Reeves’ signal that she was open to scrapping the limit on November 26, in a move that could cost more than £3bn just as taxes are expected to rise.
Sir Keir told ITV’s Lorraine programme yesterday: “I can tell you in no uncertain terms I’m determined to drive child poverty down.
“It is what the last Labour government did, and it’s one of the things we were proudest of.
“You won’t have to wait much longer to see what the measures are.”
The Government is under increasing pressure from anti-poverty campaigners and from within Labour to end the controversial policy, which restricts child tax credit and universal credit to the first two children in most households.
Ms Reeves on Monday said she did not think children should be “penalised” for being part of large families, in the clearest signal so far that she could be open to scrapping the cap entirely.
It comes with the Chancellor expected to break Labour’s manifesto commitment and raise at least one of income tax, employer’s national insurance or VAT to fill the multi-billion hole in the public finances.
The Institute for Fiscal Studies warned recently that Ms Reeves could need to find £22bn of tax rises or spending cuts if she is to restore the £10bn of headroom she left herself against her debt targets in the spring.
The Institute for Public Policy Research (IPPR) said today that the Government must make the cost of living its “defining mission” for the rest of the Parliament.
It said Labour should reduce energy bills by subsidising electricity costs, and force companies to add “shrinkflation” labels to products.
Ms Reeves was handed more bad news yesterday as the UK’s unemployment rate hit its highest level outside the pandemic era for nearly a decade.
Official figures showed the rate of unemployment surged to 5 per cent in the three months to September, up from 4.8 per cent in the three months to August.
The Office for National Statistics said that, with the skewed levels seen during the Covid-19 years stripped out, this was the highest seen since August 2016.
Experts said the weaker-than-expected figures reinforced the case for the Bank of England to cut interest rates next month.
Martin Beck, WPI Strategy chief economist, said: “With pay growth slowing further, the data strengthen the case for the Bank of England to cut interest rates next month.”
He warned that the “prospect of new tax rises in the upcoming Budget poses further risks to employment, particularly if the Chancellor again looks to raise taxes on businesses”.
However, grocery price inflation has slowed in some good news for the Chancellor.
Supermarket prices were still 4.7 per cent higher than a year ago in October, but this was down from September’s 5.2 per cent, according to market research firm Worldpanel by Numerator, formerly Kantar.