If you listen to Keir Starmer and Rachel Reeves, you'll hear that they lead a very serious government committed to duty, change, and the national interest. Alas, the gross intergenerational imbalance in Britain’s welfare system seems intact under the new Labour government. After all, how can a nation be taken seriously if it doesn't keep its children starving and downtrodden? The Prime Minister is committed to the two-child cap on benefits and is prepared to expel anyone who defies him. The justification is that we can't afford to scrap the cap, given the dire state of public finances. But if the government is short of cash, it should look to the state pension for savings.
The truth is that there's an age-based unfairness at the heart of Britain's welfare system. Benefits for families are means-tested to the bone; for retirees, on the other hand, there are no such limits. Whether you spend your retirement in a sun-dappled conservatory or a sink estate, the monthly government handout remains the same. Exacerbating this is the triple lock, which ensures the state pension rises by the highest of average wages, inflation, or 2.5% each year. This triple lock component alone has inflated the pension bill by £11 billion annually. The government is doling out billions to the richest generation in history without means testing—a monthly windfall for the 25% of pensioners who are millionaires.
In stark contrast, the plight of Britain's children couldn't be more dire. Child poverty has recently hit a record high, with 4.3 million children now living in relative deprivation. Many go to school hungry, their childhoods marred by damp and mould in run-down rental houses, while their parents struggle as wages lag behind the cost of living. The two-child cap on benefits goes beyond adding insult to injury; it bars parents from claiming the same support for their third and subsequent children that they receive for their first two. For many families with three or more children, this cap marks the difference between poverty and barely scraping by. Scrapping the cap would lift nearly half a million children out of poverty almost overnight, while mitigating the worst effects of poverty for many more. It stands as the single most immediate action a government could take to address childhood deprivation.
Starmer faces two main obstacles: public opinion and cost. While attitudes can shift in response to a compelling argument, especially from a newly elected government with high approval ratings, the £3.6 billion price tag is a tougher sell. However, this needn't result in increased net spending. Instead, Starmer and Reeves should turn to means-testing the state pension, providing it only to pensioners with assets below £1 million. This approach could save an estimated £25 billion annually, more than enough to end the two-child limit and have funds left over. Such a move would also mark a significant step towards rebalancing the benefits system towards the young, after decades of favouring the old.
This isn't to suggest that older people don't deserve retirement security, nor that the state pension shouldn't be generous. Rather, it should be generous to those in need, not a blanket handout to those who don't require it. Universal pensions made sense half a century ago when nearly half of pensioners lived in poverty; now, a pensioner is more likely to be a millionaire than to fall below the poverty line. This bold restructuring could even benefit struggling retirees. Why not use some of the substantial savings from means-testing to boost payments for those who truly need them?
Some argue that any serious government must uphold the sanctity of the King's speech. The recent motion that resulted in seven Labour MPs losing the whip was largely symbolic. Rumours circulate that the government plans to abolish the cap when the time is right—perhaps during Rachel Reeves' first budget in October, or sometime later. However, while in opposition, Labour criticised the Tories for adopting a similar 'wait and see' approach to supporting the vulnerable. To enter government and then mimic the tactics of their predecessors is unacceptable, especially when a clear funding solution exists.
Undoubtedly, a credible government can't allow its MPs to defy it on what amounts to a vote of confidence. However, a truly serious government wouldn't force its MPs to endorse what amounts to benefit sanctions for children who happen to have two older siblings. Starmer has made much of his ability to reform his own party and restore Labour's credibility. But it's far easier to discipline MPs when you have a landslide majority than it is to advocate for change in the face of public scepticism or to rectify a long-standing intergenerational imbalance in the welfare system.
The two-child cap represents the first genuine test of whether Starmer's pledge for change is substantive or merely for show. So far, his response has been woefully inadequate. It's time for Labour to match its actions to its rhetoric—or more precisely, to allocate funds where they're most urgently needed. That would truly be a government worthy of serious consideration.
Image: HM Treasury via X
Comments