I published this video this morning. In it, I argue that the row over the two-child poverty cap has revealed just how shallow the new Labour government's moral leadership really is. If it continues in this way, the next five years will be agonising.
The audio version of this video is here:
The transcript is:
The row over Labour and the two-child benefit cap is exposing so many flaws within its thinking.
It's had nearly 10 years to develop policy on this issue because we've had that cap for nearly that long and yet they've arrived in office and apparently need to hold an inquiry to work out what they should think. Really? Are these politicians so unaware of the briefs that they are meant to be following whilst in shadow cabinet as MPs that they don't know what they think about them? Of course, Labour knows what it thinks about the two-child benefit cap. It's either in favour of it or it isn't. There's really not much other place where it could be.
So, what is going on here? Well, it's obviously not a debate about the two-child benefit cap that is happening right now in the Labour Party. There is a virility test going on, and that virility test is between Keir Starmer, Rachel Reeves, and the rest of the Labour Party.
Keir and Reeves are united in their desire to make sure that the books balance. And their claim is that those books must balance on a figure which was pre-ordained by the Tories, because they've accepted the current Tory financial settlement for this country and the Tories' fiscal rule, under which Rachel Reeves says she must work. That means she believes she cannot increase government spending, and, as a matter of fact, relieving child poverty in this country by removing the two-child benefit cap would cost a figure of between £1.7 billion and £3.2 billion, depending on which authority you talk to. Charities tend to think it's the smaller number, the Institute for Fiscal Studies tend to think it's the larger number, Labour has, for its own reasons, chosen the larger number for this purpose, but whatever it is, the figure in question is small.
It's particularly small when put in the context of the number of children who are impacted by this. 330,000 children are in extreme poverty as a consequence of that cap. That means they're living in households with less than 60 percent of median earnings. Another 400,000 children are potentially living in poverty, which means they're living on well below median earnings, but not in extreme poverty in their households.
So those children are suffering. And let's not beat around the bush, that's what this means. They have adults in their household - parents, carers, whoever they might be - who cannot provide those children with what they would wish. That may be a meal. It might be the bed that they require. It will almost certainly mean it's not the accommodation that they need, because by and large low earnings go with poor quality accommodation.
And they may well be missing out on other essentials. Sleep, because the house that they live in is not good enough. Or clothing, including school uniforms, which may not be available to them and will bring them under pressure. These things really matter, and Labour could change this. The point I'm making is that this is a moral choice.
To pretend that this is a financial choice is quite absurd. Governments can create money whenever they wish. We know that. As a matter of fact, that's the way that all government spending takes place. The government decides it will spend on something. It tells the Bank of England to pay it. The Bank of England doesn't look in the government's bank account and says, “Hey, you haven't got any money in here today, so you can't spend.” Quite simply, the Bank of England extends the money to the government on what is, in effect, an overdraft, and the government makes the payment. That can happen ad infinitum because, of course, the government owns its own bank. So, the government can make these payments.
To pretend there's some limit on what it can spend is totally untrue. Artificial. A lie, if you like, because that's what it is. It really is a misrepresentation of the truth, and that's what I would call a lie.
So, therefore, Labour is making a moral choice.
A moral choice about telling the truth.
A moral choice about relieving poverty.
And a moral choice when it comes to its MPs.
Seven of them have now been suspended just three weeks after they were elected as Labour MPs, because they've had the temerity to say Labour should get rid of this two-child benefit cap. That's extraordinary. It's an assault on democracy as far as I can see. Just three weeks ago, people in those MP's constituencies voted for a Labour Member of Parliament and now they haven't got one because of the whim of Keir Starmer.
Should he have that power? That's a separate question. But it's another moral one.
But the reality is, Labour could, even if it insists on balancing its books - which it doesn't need to - but even if it does insist on that, it could do so. The money could be raised from taxation to make these payments.
Where could the money come from? Look in the Taxing Wealth Report, which I wrote over the last year or so. I have explained where up to £97 billion pounds of additional taxes could come from, all being levied on those with higher incomes or what we might call significant wealth in the UK.
Let me give a few examples now. Most capital gains in the UK are unsurprisingly made by those people with wealth because you've got to have some significant asset value invested in something to ever make a capital gain in the first place.
Therefore, capital gains and wealth are intimately related subjects, but for reasons that make no economic sense at all, capital gains are charged at rates almost invariably half of those charged on income. Let's ignore the utter injustice of that at present and why work should be taxed so much more heavily than income from savings. Let's just point out, if the rates were the same, that Labour could raise at least £12 billion extra a year in tax, and therefore have enough to relieve child poverty and have £9 billion left over to get rid of the bedroom tax, to solve the problems with carer's allowance, oh, and chuck in the wages settlement for NHS staff.
We could, therefore, solve a whole pile of problems by doing that.
Alternatively, some of the benefits that the wealthy get in the UK could be removed. What benefits do the wealthy get? Well, about £70bn a year is spent on subsidising pensions in the UK, and I reckon that £14bn of that is represented by the additional rates of pension tax relief given to those who are on higher levels of earning in the UK – those, in other words, who pay 40 and 45 per cent income tax rates. Now by definition, you are well off if you're earning over £50,000 a year in this country. You're earning well above average earnings. If that isn't a reasonable definition of what is being well off, I don't know what is.
Why should those people get a subsidy for their savings that is double that of those people who are on average earnings - less than £50,000 a year. I don't know. I can't morally justify that. But the cost is a staggering £14 billion at a saving to each person on average of something like £4, 500 a year or more.
Now that's crazy. Why subsidise the wealthy by £4,500 a year and leave 730,000 children in poverty? Does that make any sense to anyone? Could anyone sleep at night knowing that they could relieve that poverty simply by making this one change to the pension tax relief system, with the wealthy still getting more subsidy than anybody else for their pension contributions, simply because they contribute more to pensions than anyone else.
I couldn't sleep at night knowing that I could make that difference. I don't know how Keir Starmer does. I don't know how Rachel Reeves does. And I don't know how they can justify sacking Labour MPs who voted with their consciences to relieve poverty in the families in their constituencies where those children live when in many cases, up to 45 percent of children in their constituencies might actually be living in poverty because those Labour members represent poor constituencies.
I'm sorry, but I can't see any way of looking at this except as a moral issue. And it's one where Labour has revealed it has no moral substance at present.
If they know they're going to get rid of the two-child benefit cap, as some people say they do, but they're just posturing on the way, well, that's immoral, too. Get on with it. This is ridiculous.
I am very angry about this, and I think anybody of right mind should be. We have a government who's making the lives of people in this country, the most vulnerable people, those with least protection, children, worse as a consequence of not making a decision that they could literally make overnight and change the well-being of those children and their families. It's unjustifiable that Labour won't do this. It's against every tradition that I think Labour used to ever hold dear.
What have we got now? It's certainly not a Labour Party in the form that we used to recognise it. Some people call it LINO – ‘Labour in name only', and I've a lot of sympathy with that.
But if this is the way in which the next five years are going, Keir Starmer's in for a rough ride. He got in on a very shallow base of support, like a big puddle that was only two inches deep. It's going to evaporate very rapidly if this is the sort of thing he's going to do, then he's going to be facing a lot of public opposition, and he'll deserve it. He has to find his moral compass, or he's in trouble.
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“To pretend there’s some limit on what it can spend is totally untrue. Artificial. A lie, if you like, because that’s what it is. It really is a misrepresentation of the truth, and that’s what I would call a lie.”
Clearly as far as the Labour Party is concerned there’s a Missing Monetary System Understanding. This effectively turns the party in to a Shills for the Rich Party and especially because they fail to acknowledge the taxation system is biased in the interests of the rich.
Spot on
Are you a Shill for the Rich and still believe the taxation system isn’t biased towards the rich then how come the following?
https://www.theguardian.com/business/article/2024/jul/25/super-rich-being-advised-how-to-avoid-labour-tax-clampdown-undercover-investigation-suggests
Of course highly unlikely the Shills for the Rich Party (Labour Party) is really going to scare the rich that’s what it’s there for!
Where also is the Shills for the Rich Party in regard to poverty being created by an out of control Bank of England?
https://www.theguardian.com/society/article/2024/jul/25/soaring-uk-mortgage-rates-have-pushed-320000-adults-into-poverty-thinktank-says
HI Richard,
I wouldn’t confine the lack of morality to just Starmer and Reeves. You can add Cooper, Streeting, McFadden, Phillipson and the rest of the front bench, as well.
Labour knew they were going to be in power when an election was called, because the Tories were so bad. That was why Starmer was getting rid if MPs who might retain some morals, and replacing them with automatons. On that basis, they could easily have pronounced a load of policies that would benefit the country, and they would still have won. They made a choice not to.
This is the most unpopular government to run the country in 100 years. It has no democratic mandate, and no legitimacy. As a number of commenters have suggested over the last few days, Starmer’s party are paving the way for Farage – I would even suggest that Starmer stood down his candidate in Clacton (who was polling well by all accounts) to facilitate Farage getting into the HoC. In return, Farage stood candidates in Conservative constituencies to make sure Starmer won the marginals and hence seats.
Starmer is not looking past 5 years. He will happily move on to another lucrative job after PM, along with many of his chums, meanwhile, we will be left with Farage.
The only way out of this now, is for more Labour MPs, to defy the whip, and lose it. Then those independents need to form some sort of coalition, as the French Left have done, and start to attack Starmer at every opportunity. Every person who has an MP that could be part of that coalition, needs to support them, as one commenter did thanking Richard Burgon for his stance.
79 more Labour MPs not following the party line, ends Starmers majority, and power. We need to support these MPs do it
Regards
I can only agree with your reasoning for anger.
Reflecting on the parliamentary reporting I saw yesterday, all I saw were a group of highly paid, poorly qualified people telling jokes and having a good laugh whilst misery reigns elsewhere in the country.
As well as the two child benefit cap, there is also the bedroom tax which is adding misery on top of misery – most LA’s I know are experiencing stasis in their property turnover so even moving down to a smaller property is nigh impossible for existing tenants who are being penalised in what must seem something akin to being in a Kafka story.
The Tories have double, triple locked even – poverty through accommodation and child benefit systems.
And all I keep hearing in my head Neil Kinnock’s speech of 7th June 1983. Here he refers to Margaret the person ( was she ever thus?) in the speech, but on this occasion lets just call that ‘Thatcherism, because that’s what we seem to have a version of now:
“If Margaret Thatcher is re-elected as prime minister on Thursday, I warn you.
I warn you that you will have pain–when healing and relief depend upon payment.
I warn you that you will have ignorance–when talents are untended and wits are wasted, when learning is a privilege and not a right.
I warn you that you will have poverty–when pensions slip and benefits are whittled away by a government that won’t pay in an economy that can’t pay.
I warn you that you will be cold–when fuel charges are used as a tax system that the rich don’t notice and the poor can’t afford.
I warn you that you must not expect work–when many cannot spend, more will not be able to earn. When they don’t earn, they don’t spend. When they don’t spend, work dies.
I warn you not to go into the streets alone after dark or into the streets in large crowds of protest in the light.
I warn you that you will be quiet–when the curfew of fear and the gibbet of unemployment make you obedient.
I warn you that you will have defence of a sort–with a risk and at a price that passes all understanding.
I warn you that you will be home-bound–when fares and transport bills kill leisure and lock you up.
I warn you that you will borrow less–when credit, loans, mortgages and easy payments are refused to people on your melting income.
If Margaret Thatcher wins on Thursday–
– I warn you not to be ordinary
– I warn you not to be young
– I warn you not to fall ill
– I warn you not to get old.”
Prophetic.
Thanks
Many years ago I was on a ship as we sailed in circles off Portishead while the Compass Adjuster did his stuff. We had to get it done quickly so we could get locked back into Bristol, lets hope that the Labour Party can manage it as quickly or they face being locked out of Government for a long time
The fiscal rules are self-imposed – and the idea that “there is no money” or “we cannot afford it” is false – but there will be political and economic consequences if the government breaks the so-called “rules” it sets for itself, or if they turn on the spending taps without understanding the implications (on inflation, on exchange rates, etc) and taking steps to address them.
Thank you for putting out this excellent video on such an important subject, Richard. I share your anger. As Owen Jones put it yesterday, it is “prioritising factional score-settling over the hungry bellies of little children”.
https://www.theguardian.com/commentisfree/article/2024/jul/24/disciplining-mps-voting-children-poverty-keir-starmer?CMP=Share_iOSApp_Other
Thanks
Doing the right thing means being bold.
Instead we have a government that is craven in the face of its own self perpetuating economic myths.
The right-wing press, and those in control of television – including the BBC, would have screamed if what you recommend had been done already, and they will scream when any of your proposals are implemented.
The ‘freedom of the press’ must be subject to some form of democracy rather than to the greed instincts of callous and irresponsible billionaires.
So far they can’t stop me saying it though
And I even got in Times Radio last night, discussing this issue
Thank you for your videos. I look forward to them and always find them interesting and educational.
We got the measure of Starmer when he said Israel was justified in cutting off water, food, medicine and power and gave his full support to the murders of men, women and children in the most horrific of ways. Lies just trip off his tongue including denying he said any of the above – we all saw the video. He is a clear example of the worst of humanity.
He has ignored the ICJ ruling. Should the ICC issue arrest warrants, for Netanyahu and others, we will see him withdrawing his support for Israel but that will not be because he has a moral compass – I don’t believe he has one – it will be because it has been forced upon him since he himself risks an arrest warrant should he not comply.
Reeves looks like some sort of automaton, programmed to give certain responses, take a certain direction and not veer off the course that’s been set for her by the Tory party.
As far as I’m concerned the very worst of politicians has floated to the top. Labour are seat warmers for the Tory party or the Reform/Tory party in 2029.
Hello Richard,yesterday I made a comment about QE and inflation but got no reply. Basically am I correct in thinking that MMT uses taxation to reduce inflation which can be targeted unlike interest rates which targets everyone. So would I be correct in thinking that by ending tax relief on higher rate pensions,as you’ve suggested we could pay for scraping the two child benefit cap. If this is the case we would killing two birds with one stone,ending child poverty and making society more equal.
I answered this two hours go
Hello Richard, I’ve just left a comment but you’ve failed to put it up and was wondering why! I am quite new to MMT and are still getting my head around it,but it seems quite an obvious thing to do if you really want to change society.
Sincerely Derek
Give me a chance!
I have a day job to do around all this. It can take hours for me to get to comments.
I will when I can
Apologises Richard but I can’t find your comment,and sorry for being on your case,
Sincerely Derek
It should follow yours
Derek, Richard’s reply is here: https://www.taxresearch.org.uk/Blog/2024/07/24/will-reeves-remove-pension-tax-reliefs-for-the-wealthiest/#comment-977054
Richard,
may I make a business proposition.
I have a UK Seamans Record of Service Book and Boatmans License (lapsed) so how about
Murphy and Boxall
Moral Compass Adjusters
🙂
It seems obvious that tax and morality should be central in any so called democracy. Apologies if you have already done this as part of your work on taxes, but I think it would be worthwhile to show the various ways in which taxes could be changed, sorted in the order that most people would agree was fair. Not sorted by the additional amount generated but based solely on a general sense of overall morality/fairness. The amounts would take second place to that. Maybe taxing capital gains the same as income would be first? One thing is clear, it’d make very interesting reading and help place taxation most strongly within the matter of morality and not just within the control of the usual financial lies (with lobbyists pulling the political strings) and self interest of the wealthy. And boy does the UK need political morality now before it turns it into a complete basket case, with the likes of Freeports and SEZ’s looking to do the very opposite of what is moral or financially beneficial to anyone except the very wealthy and their political lackeys.
I sort of do that in the Taxing Wealth Report 2024
https://taxingwealth.uk/
When Keir Starmer stood for leadership of labour he promised to scrap the two child cap. During the Rutherglen by-election Labour candidate Michael Shanks said he would vote to abolish the cap. He voted to retain it. In the Daily Record, Labour champion elder statesman Gordon Brown backed what he called Starmers Moral Mission to end child poverty. Torsten Bell m.p. described the cap as immoral. He voted to retain it. Although abolishing child poverty was main labour platform in Scotland, it appears that every labour m.p. from Scotland voted to retain the cap.
Spot on
Some of them even worked for charities prior to their election such as:
Melanie Ward, Labour MP for Cowdenbeath & Kirkcaldy, previously CEO of Medical Aid for Palestinians. Voted to keep the cap.
Kirsty McNeill Labour MP for Midlothian. Prior to being elected, McNeill was Executive Director of Policy, Advocacy and Campaigns at Save the Children. From her maiden speech in the Commons: “We are all of us products of the investments made in us as children so it is to Midlothian’s children and young people I make my most solemn undertakings in my maiden speech.” She then went on to vote to keep the cap.
There was another high level ex charity employee – Jess Asato, Labour MP for Lowestoft. She worked for Barnardo’s as Head of Public Affairs & Policy. She also voted to keep the cap.
They may have worked for charities but they are not very charitable themselves.
Staggering
Thank you
Hypocrisy in action
Which is why one should never trust the words that come out of any politician’s mouth.
Look at their voting record instead.
http://www.theyworkforyou.co.uk is an essential resource.
On this blog when they show us who they are, we believe them and in the main we won’t be fooled again. But it is THEY who have made us so cynical.
I am furious at their hypocrisy. I have emails from Melanie Ward (supposedly) thanking me for my donations to MAP.
“ …. You have done something amazing – you have helped Palestinians living under occupation and as refugees.
Your donation is helping MAP provide vital drugs and medical supplies to Palestinian healthcare providers that need them urgently to treat patients.
You really are doing something very important.”
She had the chance to do “something amazing”, “something very important”, maybe helping parents, often women, to put food on the table for their hungry children, some clothes on their backs, maybe even a little treat – but she failed miserably and put Party before children in poverty. Sickening.
Agreed
@A c Bruce
I can’t imagine why any person in Scotland thought it was a good idea to vote for this UK
‘Labour’ government.
If you want to get a flavour of how apologists for Starmer’s Labour view the vote on the benefit cap you might watch this 15 minute video by a professional YouTuber:
https://www.youtube.com/watch?v=D4qy_GuCxHw
In it in it he accuses the magnificent 7 of being either dishonest or not understanding what they were voting for. He also claims that they have made it more difficult for Starmer and Reeves to lift the cap when they can afford to as it will look like they are giving in to pressure. Well, now we all know who will be to blame if it is still in place in 5 years time.
I want to add that there is a cost if children are left in poverty because they will get sick.
Some carers may turn to crime to provide for their children.
Those children will be far less able to learn, to do well, to get good jobs. They may be anti social in damaging ways for the community.
Will the brave leftwing 7 suspended MPs plus Corbyn and others form an organised group?
I sent the following email to David Taylor the newly elected Labour MP for Hemel Hempstead:
25 July 2024
Dear Mr. Taylor,
I write to you as a concerned constituent.
According to the Wikipedia page about you:
“Prior to being elected to parliament, Taylor worked for an international charity aimed at improving wages in developing countries. In 2009, Taylor founded the Labour Campaign for International Development, and currently sits as its vice-chair.”
The LCID page states:
“Labour Campaign for International Development is a group for all those committed to a world without poverty & injustice. We are a socialist society affiliated to the Labour Party.”
Hemel Today 14th August 2023 quotes you as saying:
“All of my family is from Hemel, and I want to do everything I can to help people here struggling with the Tory cost of living crisis. As your MP, that would be my first priority.
“I have already met with a wide range of charities and community groups working on the frontline to identify ways I can support their brilliant work. I will join them in rolling up my sleeves and getting stuck into the community response to the crisis.”
But, in the end, it is not fine words either by you or about you that matter, but actions. In the case of an MP, that includes your voting record. I was somewhat disappointed to discover that you had not joined the Magnificent Seven in voting for the amendment re. the 2 child benefit cap to the Kings Speech.
I am minded to doubt both the sincerity of your words and your socialist credentials. However I am prepared to be charitable and to assume you had fallen for the propaganda about there not being enough money. If so let me refer you to Richard Murphy’s “Taxing Wealth Report 2024”: https://taxingwealth.uk/
This should convince even the most ignorant neoliberal economist that lifting the cap is eminently affordable.
I look forward to a reply at your earliest convenience.
Yours faithfully,
Bernard Hurley
Thanks, Bernard
What was the original purpose for introducing the two-child cap? Was it a deliberate effort to slow the increase of population? (I hope it did not have a colour reduction purpose!)
The whole world is overpopulated (that is our REAL problem) and compared to much of the continent we have standing-room only here. So we probably should try to discourage more than 1.2 children per couple, shouldn’t we?
Is there a better way of stopping children starving, while encouraging small families?
The supposed aim was to force non-working parents into work
Most were in work already
World population is forecast to stop increasing as birth control spreads.
In U.K. and Europe birth rate has dropped so we need more babies.
U.K. does not have ‘standing room only’ as you will see if ever go up in a plane and look down.
Last year net increase in population was I think one in 100 from immigration so that’s not too many.
If the reverse ever became the case and we needed to limit births I suppose extra contraceptive help
and/or monetary incentives could be offered to limit families but inflicting poverty on existing children is cruel and unecessary.