‘Lift the two-child cap and enable every child to fulfil their potential’

In my role as Chair of the Treasury Select Committee I attend a number of events at the Mansion House. The setting is opulent, the silverware sparkling, and the conversations are about how the financial sector can grow. I chat with bank chief executives, Government ministers and royalty. A high percentage of those present will be earning at least a six-figure salary.

But just 10 minutes away from the grandeur of the Mansion House and the buzzing financial capital of the City of London is my own constituency which is a world apart. In Hackney one in two children live in poverty after housing costs are taken into account. And every week I visit families living in severely overcrowded conditions –  teenage boys sharing a bed with their mothers, five people in one bedroom, and toddlers with no place to walk. Private rents are unaffordable for these families (many of whom have at least one working adult) and, for the even unluckier families, home is a hostel room or a five year private tenancy outside London, far away from family, friends, and schools.

READ MORE: Scrapping two child benefit cap could be debated at Conference after appeal

When Labour was elected in July 2024 one of the first actions of the new Government was to establish a child poverty taskforce. Like most Labour MPs I am impatient about the need to tackle poverty in my constituency. I also know, from my near decade as Chair of Parliament’s public spending watchdog, the Public Accounts Committee, that a plan with laudable aims that is rushed or badly executed can cause problems. So I was prepared to be patient and trust that my colleagues Liz Kendall (then Secretary of State for Work and Pensions) and Bridget Phillipson, Secretary of State for Education would be thoughtful and thorough as Chairs of the taskforce and deliver a long term, sustainable approach to child poverty.

I was also willing to consider all options for tackling the issue. While the cap on benefits which meant that third and subsequent children did not receive additional benefits (other than child benefit) was much discussed I wasn’t wedded to what that solution would be. Since the taskforce was set up we have seen some welcome steps.

Bridget Phillipson has delivered free school meals for every family claiming universal credit (over half of these are working) and is rolling out government-funded breakfast clubs (something already happening in most schools in my constituency because hungry children don’t learn well). 

But there is much more to do. The Children’s Commissioner has highlighted “Dickensian levels of poverty” and the distress of homeless children. Former Prime Minister Gordon Brown is also highlighting the plight of the poorest young people and harnessing partners, including Amazon, for the charity Multibank, which works to provide the basics for families with nothing.

These are welcome measures but there are still 1.6m children in 450,000 households who receive less money because they are a third or subsequent child.  I have looked in detail at the options and the evidence is clear that in order to get help to the most children the quickest, lifting the cap is the best option. It immediately lifts 350,000 children out of poverty and a further 700,000 children out of deep poverty. It is also by far most cost-effective way to reduce child poverty.

The estimated costs to public services of child poverty amount to £40 billion per year. And the impact of poverty on children is long term. It is still the case that family income is the strongest indicator of how well a child will succeed at school, four times more so than the place where that child lives.

I remember vividly Tony Blair’s conference speech in September 1999. As I sat cradling my three-week-old son he said

“There is no more powerful symbol of our politics than the experience of being on a maternity ward. Seeing two babies side by side. Delivered by the same doctors and midwives. Yet two totally different lives ahead of them. One returns with his mother to a bed and breakfast that is cold, damp, cramped…. her life and her baby’s life is a long hard struggle. For this child individual potential hangs by a thread.

“The second child returns to a prosperous home, … a father with a decent income and an even larger sense of pride… expectations are sky high, opportunities truly limitless.”

Blair and Brown were clear from day one that equality of opportunity was a cornerstone for a Labour Government and they delivered. Under the last Labour government 1.4 million children were lifted out of poverty according to the Resolution Foundation.

At those Mansion House events there is a lot of talk about certainty around how the regulators and the Government act and enable business, and this extends to the stewardship of the public finances. But the people I speak to are also aware of the wider society in which they work. Take UBS Bank which has offices in Hackney South and Shoreditch and has long provided support to young people in Hackney – including its active involvement in sponsoring and supporting a secondary academy. Or the couple who set up their own fund after one of them worked in the City for over 30 years. They now donate to projects across the country – including Hackney youth groups. As one of them told me last weekend, “All those years I lived in a bubble”. And now he is supporting young people on the doorstep of that bubble.

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But for anyone not convinced that supporting opportunity for young people is the right thing to do on its own merits let’s look at some numbers.

We have a birthrate that is 1.41 per woman in England and Wales, the lowest value on record for the third year in a row. Schools are closing in inner London because of the cost of living and lack of affordable housing driving families and young people out. We no longer have a pool of young workers from the EU able to come to the UK, and youth mobility schemes are time limited. So we need to invest in our young people for sound economic reasons – they are the future of our country.

My constituency may be poor but there is no poverty of ambition. When I visit children living in cramped conditions, in homes where there is no money to feed the electricity meter at the end of the week or month, I know that whatever their ambition their path will be harder.

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To remove the two child cap would cost up to £3bn by 2029/30, £2bn this year. Not insignificant – but not something that would spook the markets or fuel negativity at those Mansion House dinners. And not to act swiftly on this means more children continuing to live in poverty and more drawn into it. 

The divide between the two children born in the same hospital is real. Ultimately it will cost the state more if we don’t act now. We need to enable every child to fulfil their potential. Lifting the cap will make a significant difference. 

We need to enable every child to fulfil their potential. Lifting the two-child cap is the quickest, smartest, and most cost-effective way of doing this.

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