Sir Keir Starmer is risking another fight with the Labour Left after plans to scrap the two-child benefits cap were described as being ‘dead in the water’.
The Prime Minister this week caved to rebel MPs over proposed welfare cuts as he performed yet another U-turn following his previous reversal on winter fuel payments.
The Government’s original plans to restrict access to Personal Independence Payment (PIP) had been part of a package that ministers expected would save up to £5billion a year.
But, following the chaotic shelving of the PIP plans in the face of a major Labour revolt, Chancellor Rachel Reeves now faces having to plug another huge hole in the public finances.
Economists are warning that fresh tax rises are likely when Ms Reeves announces her next Budget in the autumn.
And a Cabinet minister this morning said that future spending decisions – such as axing the two-child benefits cap at a cost of £3.4billion a year – were now ‘harder’.
Education Secretary Bridget Phllipson told the BBC: ‘The decisions that have been taken in the last week do make decisions, future decisions harder.’
It came after a No10 source told the Sunday Times that plans to axe the benefits limit are ‘now dead in the water’.
Ms Reeves this weekend said it is impossible for her to rule out tax rises in the autumn, as she warned ‘there are costs’ to the watering down of the welfare bill.
And a No 11 source told the newspaper: ‘MPs will need to acknowledge that there is a financial cost to not approving the welfare changes, whether that’s tax rises or not scrapping the two-child benefit cap.
‘They need to understand the trade-offs.’
The two-child benefit cap, introduced by Tory chancellor George Osborne, prevents parents from claiming Universal Credit or child tax credit for a third or additional child born after April 2017.
Soon after Labour’s general election victory last year, Sir Keir suspended seven Labour MPs who supported an amendment to scrap the two-child limit in a show of force to his party.
But Downing Street did not rule out axing the cap at a later date, as part of a strategy to tackle child poverty.
Ms Phillipson told the BBC on Sunday that ministers are ‘looking at every lever and we’ll continue to look at every lever to lift children out of poverty’.
Pushed on whether the chances of the benefit cap going are now slimmer, following the U-turn on PIP, the Education Secretary said: ‘The decisions that have been taken in the last week do make decisions, future decisions harder.
‘But all of that said, we will look at this collectively in terms of all of the ways that we can lift children out of poverty.’