Keir Starmer accused of creating new welfare trap by scrapping two-child benefit cap

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Sir Keir Starmer has been accused of giving large families an incentive to claim sickness benefits despite insisting on Monday that he wanted to reform the system to stop “trapping people” on social care.

The UK Prime Minister used a speech in London to promise changes to the “broken status quo” as Labor faces accusations of raising taxes to spend more on benefit payments.

However, analysts said the decision to scrap the two-child benefit cap in last week’s Budget gave larger families a “significant” incentive to claim sickness benefits in order to take full advantage of the change.

Labor MPs were delighted when Rachel Reeves, the chancellor, scrapped a rule that meant families could not claim £292.81 a month per child from Universal Credit for third or subsequent children born after 6 April 2017. The move is estimated to lift nearly half a million children out of poverty.

However, households also have a cap on the amount they can receive in benefit payments overall, capped at £1,835 a month, or £2,110.25 in London.

Analysis by consultancy policy in Practice suggests that around 10 per cent of families affected by the removal of the two-child benefit cap would not see a financial gain because they would then reach the maximum family benefit. She said another 10 percent would see their earnings limited due to the household benefit cap.

Families can escape the maximum family benefit through work but also by claiming incapacity or incapacity benefits.

“with [household benefit] While the cap is currently set at lower levels than when it was first introduced, it gives people struggling with their health a real and substantive reason to apply for health-related benefits, especially if they are struggling to commute to work, said Devin Ghailani, the practice’s policy director.

He added that the cap on household benefits “may have had more of an effect in getting people to take disability benefits than in encouraging them to work, and that does nothing for people’s long-term prospects.”

“Getting an exemption from the overall benefit cap has been described as a ‘golden ticket’ and there is a real risk now that the system incentivises more sickness claims as a result,” said Joe Challam, policy director at the Center for Social Justice think tank and a former social care adviser under the last Conservative government.

Campaigners are now pressing for action on the cap on family benefits in a child poverty strategy due soon. Alison Garnham, chief executive of the Child Poverty Action Group, said: “The government has taken major action on child poverty by scrapping the two-child limit. With record levels of child poverty in the UK, there is more to do to ensure all children get the best start in life.”

Last week, Debbie Abrahams, chair of the Commons work and pensions committee, said: “Many families will very quickly face the benefits cap, which puts a cap on the benefits a family can receive at working age. Cash support through the social security system is essential to alleviating poverty, but a comprehensive child poverty strategy needs to go much further and on a larger scale.”

A government spokesman said: “Nearly three-quarters of poor children live in working families, so raising the two-child ceiling will benefit families who are already struggling.

“We also know that the vast majority of families who would benefit from lifting the cap have three or four children.”