Labour is inching towards scrapping the two-child benefit cap in another spending splurge – despite fears Brits face huge new tax rises at the Budget.
Rumours are swirling at Westminster that Keir Starmer could signal a shift on the policy at party conference next week, as he desperately tries to placate mutinous MPs.
Government sources are stressing that no final decisions will be made before the child poverty task force reports – expected in time for the Chancellor Rachel Reeves‘ package on November 26.
Work and Pensions Secretary Pat McFadden said this morning that any announcement on easing the cap would spell out how the £3billion a year cost would be met. Bridget Phillipson – Downing Street‘s de facto candidate for Labour deputy leader – has said the move is ‘on the table’.
Nigel Farage has already promised to ditch the limit on benefits claims as he woos Labour voters, but the Tories have insisted making handouts more generous is wrong.
Rachel Reeves was pictured out running this morning – going past a homeless man on a bench
It could be particularly controversial as Ms Reeves is said to be drawing up £30billion of tax increases for the Budget.
Pensioners, ordinary workers and even chocolate-lovers could be in the crosshairs after insiders admitted the Office for Budget Responsibility is set to downgrade productivity estimates.
That will effectively take a sledgehammer to the Chancellor’s plans, requiring her to take major action to balance the books.
Officials are said to be working on the basis that £30billion of extra revenue might be needed – although sources stressed the numbers are uncertain and could still change.
Together with last year’s eye-watering Budget, it means Ms Reeves faces imposing an unprecedented £70billion increase in the tax burden in barely 13 months.
Brits and businesses are already struggling to cope with surging prices and a stalling economy. The OECD forecast yesterday that the UK will have the highest inflation in the G7 this year.
Labour MPs and unions have been clamouring for changes to the two-child cap, which the respected IFS think-tank has estimated could lift 500,000 children out of absolute poverty.
Work and Pensions Secretary Pat McFadden said this morning that any announcement on easing the cap would spell out how the £3billion a year cost would be met
Mr McFadden told BBC Breakfast: ‘We’ve already taken some action on this, we have extended free school meals to all families on universal credit…
‘In terms of other policies, like everything else in terms of the discussion we just had a moment ago, everything has to be paid for, everything has to be budgeted. We’re committed to financial stability.
‘So any demand for more spending, we have to say where that’s come from and how it’s going to be paid for.’
The potential boost to benefits came as businesses warned of an increasingly gloomy outlook, with higher costs from Ms Reeves’ national insurance raid and more red tape in the pipeline from workers’ rights reforms.
John Roberts, founder of electricals specialist AO World, told BBC Radio 4 firms must not be ‘disadvantaged’ by the government.
‘Fundamentally, at the end of the day, we have inflation coming through, and we are now feeling that in the costs across businesses, business leaders that I speak to right across the piece are looking at how they can take people out,’ he said.
‘One of my phrases that I use a lot is that costs walk into businesses on legs. Those legs have got a lot more expensive. It is much more difficult to recruit people. It’s much less flexible than it has ever been to recruit people.
‘We should be talking about job creation, not enforcing things that make business leaders think twice about recruiting people… ‘
