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Good morning. The comprehensive spending review this week will set the government’s trajectory and direction for much of the rest of the parliament. Some thoughts on one of the challenges facing Labour, on child poverty, and how it illustrates their broader difficulties.
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Means to an end
The Institute for Public Policy Research and Changing Realities, a collaboration between parents on low incomes, social researchers and charities, have produced a new report on how to get a child poverty strategy that works. It argues for the removal of the benefit cap (that limits total social security entitlement) and two-child limit policies.
The report matters because, as discussed in previous newsletters, the IPPR is one of a constellation of think-tanks that are influential on the Labour government’s direction and strategy. Second, it is a handy illustration of one challenge facing the government.
The two-child benefit limit is a popular policy: in a YouGov poll last summer, it had majority support among essentially every group other than 18-to-24-year-olds.
As longtime readers will know, where possible I like to use an Ipsos poll because it is the UK’s oldest existing pollster and I like a long dataset where possible. They too found something similar last summer.
But the problem is that if you have a commitment to reduce child poverty in the UK, scrapping the limit really is very high up on the list of things you can do. (I am indebted to Harvey Nriapia for the chart. Readers on the FT website can hover over the circles to see the exact amounts).
Given the Labour government’s self-imposed restraints on raising taxes, ending the limit would cost a lot of money — potentially leaving a £3bn hole in the autumn Budget. However, there is no other cheaper measure that has anything like the same impact. (One cheaper measure recently announced was the expansion of free school meals to all children from households in England receiving universal credit. The policy is set to cost some £1bn over the three years between 2026 and 2028.)
The fact that scrapping the two-child benefit limit is unpopular is besides the point — Labour has made the promise to drive down child poverty, Keir Starmer has reiterated its importance, it therefore must find the means and not just focus on the ends.
Across too much of the government’s agenda, it is stuck on “can I have the ends without the means?” The FT leader in today’s paper is a good example of that: part of the government’s growth agenda involves turning around London’s faltering stock market. Again there is a policy that would help for a similar cost (£3bn). The government could end or at least reduce the 0.5 per cent stamp duty reserve tax on the purchase of shares in UK companies, which is levied at a higher rate than our peers.
While there is no polling on this policy, I would be very surprised, given everything I have heard and learnt travelling the country covering politics for the past 12 years, if “cutting taxes on buying shares” was popular. But ultimately Labour has an aim — driving growth — and it is a goal with costs. Individual measures such as scrapping the two-child limit or tax reform are decisions that belong in Budgets. But that Sadiq Khan’s team in City Hall fear that London will not secure any extra infrastructure spending and that the capital’s mayor will also be denied further abilities to raise revenue himself via a tourist tax is not an encouraging sign. (Tristram Hunt wrote a good piece on the case for such a levy.)
Another linking feature is that in my view, both ending the two-child limit and tax reform save more than they cost in the long run: lifting children out of poverty is cheaper than letting them grow up in poverty. Having a higher tax on purchasing shares than peers costs more than it raises over the long run.
But a recurring trait of the government over the first year of its life has been a tendency to will ends, but to be unwilling to bear the political cost of embracing means. While the comprehensive spending review is not a budget and will therefore not have the same level of policy detail as we would see at a fiscal event, it will give us a sense of whether that is changing, or if Labour plans to spend its second and third year in office in a similar way to its first.
Now try this
I saw The Phoenician Scheme at the cinemas. I was quite nervous about this one as while I love everything Wes Anderson has done for a long time, nothing he has done since 2014 has quite worked for me. This was a terrific return to form. Here’s Danny Leigh’s review.
