Three weeks ago, Sir Keir Starmer’s successful conference performance appeared to have settled some nerves within the Labour Party, and renewed MPs’ hopes that it might avoid heading straight for any more squalls in the immediate future.
Yet if the waters look calmer now, there are still undercurrents. Backbench MPs are compiling a list of complaints to take to No 10.
“There are several barnacles that are stopping the ship from moving forward properly. One is digital IDs, one is the two-child benefit cap, one is the farmers’ inheritance tax, and the other is the plan to slash affordable housing,” a Labour MP told The i Paper.
On Thursday, Housing Secretary Steve Reed is expected to host a Zoom call with Labour MPs to explain why the requirement for developers to provide affordable housing in London is set to be cut by more than half, in a bid to save the Government’s overall target to build 1.5 million new homes. He can expect a frosty reception. “The London MPs are up in arms about it,” a London Labour MP said.
Over the last couple of months, No 10 has invited in batches of anxious Labour MPs. Some Labour MPs enjoy evening drinks, and some have breakfast with Starmer. No 10 has even installed a new toaster to cater for the demand, with the premier said to favour butter and jam as toppings. The aim is to reassure a fractious party that their leader is in listening mode and appears to have had a positive, if limited, effect.
In contrast to the affordable housing snafu, the matter of Chancellor Rachel Reeves’ potential removal of the two-child benefit cap in the forthcoming Budget is nearing a decision.
The Child Poverty Taskforce, co-chaired by Work and Pensions Secretary Pat McFadden and Education Secretary Bridget Phillipson, has been examining how to bring around 500,000 children out of poverty.
Amid concerns that any increase in child benefit could prove extremely costly because larger families could claim for multiple children, a system of tapering had been under consideration. Under the proposals, parents would receive the most benefits for their first child and less for subsequent children. Other, earlier suggestions included limiting the extension in benefits to those in work, or extending how much parents can claim for children up to an overall benefits cap.
The i Paper understands the child poverty report is now ready for imminent publication, but the Government is deciding whether to release it ahead of – or simultaneously with – the Budget on 26 November.
While some officials have warned axing the limit would see larger families pocket vast sums the Treasury can’t afford, one senior source working on the plans said scrapping the two-child limit should not be contingent on tapering.
“Yes, it would be expensive overall [if each child received the same amount] but it’s also more complicated and therefore costly to taper rather than go for an overall cap on benefits,” the source said.
Reeves and No 10 must decide how big a priority the policy change is and whether to set an overall cap on household benefit claims in an already expanding welfare budget. No final decisions have been made.
The then-Conservative government introduced the policy in 2017, and it is estimated to affect 1.6 million children. Its aim was to stop families on benefits from receiving more than working families.
According to the Institute for Fiscal Studies, eliminating the two-child limit would incur an annual cost of approximately £2.5 billion, which is projected to increase to around £3.5 billion by 2030. The Resolution Foundation puts the cost of scrapping the two-child limit and the overall benefit cap at £4.5 billion.
Both think-tanks favour lifting the two-child cap, as the policy has been unsuccessful in other respects. It’s had a negligible effect both on birth rates and in driving low-earning households into work.
Dr Steffan Evans, chief executive of the Bevan Foundation think-tank in Wales, told The i Paper that scrapping the two-child cap is the “cheapest and easiest way to reduce child poverty”.
Most Labour MPs now think it is a given Reeves will announce the scrapping of the cap at the budget, but don’t think it will move the electoral needle in Labour’s favour.
“I don’t think it’ll have any electoral impact in any direction because it’s not high enough salience to move anyone’s vote, but sometimes things are the right thing to do because they speak to who you are as a person. I’m really, really proud we are going to manage to do this,” another Labour backbencher said.
“For colleagues in Lib Dem or Green-facing marginals it will make more of a difference electorally, but I don’t think it’ll have that much impact overall,” a second Labour MP added.
Some Labour MPs with rural constituencies have resigned themselves to only serving a single term in Parliament given Reeves’ controversial inheritance tax reforms on farmland and agricultural assets last year. That hasn’t stopped them lobbying the Treasury to soften the blow this time around before the measures come into effect.
On digital ID, one senior party staffer acknowledged Labour MPs’ “correct” concerns that the Government had managed to “f**k up” its announcement because Starmer attempted to link the plan to a migration crackdown, rather than explaining to the public how it would make their lives easier.
“In mid-summer, our polling showed the public were pretty much in favour of digital IDs. But No 10 allowed a leak that gave Nigel Farage a 24-hour headstart to say he was against. And because he’s incredibly agile he swung the argument against us,” the strategist said.
Nevertheless, Government insiders think they can rescue the plan from its inauspicious start.
On Wednesday, a Cabinet minister pointed out that Starmer had been making the case for digital ID at Prime Minister’s Questions. “It is totally recoverable; we just need to make the argument to the public,” the minister said, adding that they though “the backbenches are much happier now than they were before conference” in late September.
That’s not a universal interpretation. One party manager likened the relationship between Starmer and his backbenchers to the breakdown of a relationship.
“Even as recently as a few months ago, every time there was another f**k-up, I had people come and see me and ask: ‘just how has No 10 managed to screw this up again?’
“They don’t do that anymore; they don’t even ask what’s gone wrong. They’ve basically stopped caring. It’s like they’ve reached that stage of a break-up where they can’t be bothered to argue anymore. They’ve just applied for the divorce papers,” the source added.
Reeves received a welcome boost this week because of a sharp fall in UK Government borrowing costs, which has potentially saved her billions of pounds and given her more wriggle room for spending on removing “barnacles” next month. There is no shortage of suggestions.
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