Pity Rachel Reeves. Having hailed herself as the glass-smashing first female chancellor of the UK, the proud comprehensive school girl once derided as “boring, snoring” by a Newsnight editor is now tasked with disappointing party faithfuls over as many fiscal measures as possible before the next reckoning with the electorate.
This of course is the strategy that put Labour into Number 10 last year, a commitment to thrift being the key principle of the Keir Starmer premiership — perhaps its only principle. For her sins Reeves has spent the last few years refining her George Osborne impersonation, even making an example of the £28bn Green Prosperity Plan by slashing the annual commitment to £4.8bn.
Now off-the-record briefings from government ministers suggest the Treasury will retain the symbolic two-child benefit cap as it mulls its child poverty strategy due out in June. “The cap is popular with key voters, who see it as a matter of fairness,” according to a source who spoke to the Guardian.
The spirit of fairness means that usually only a family’s first two children are entitled to child tax credit or Universal Credit. (Confusingly, the cap does not apply to the benefit called Child Benefit). As you might expect, the wheeze came from Osborne in the wake of the 2015 general election, taking effect from April 2017.
Left and right miss the elephant in the maternity ward: Britain is not having enough babies
While the measure was touted on cost-saving grounds — removing the cap would eventually cost £2.5bn a year, according to the Institute for Fiscal Studies (IFS) — it is hard not to detect the whiff of old conservative disdain for subsidising feckless parents. In the seedier comment sections of certain newspapers, this is combined with suspicions that it is not white British families who would be the chief beneficiaries of a change in policy.
Certainly, it would be costly. But equally certain is that the cap contributes to child poverty, which continues to rise, much to the horror of many of the people who voted for Labour last year. The Child Poverty Action Group has estimated on the current trajectory that the number of children in poverty will increase from 4.5 million today to 4.8 million by 2029.
But both left and right rather miss the elephant in the maternity ward: however you look at it, Britain is not having enough babies. In 2023, the most recent year for which data is available, the total fertility rate in England and Wales dropped to 1.44 children per woman. It has not been at the replacement level of 2.1 since the early 1970s, with immigration the only reason our population has not declined.
Worrying about birth rates has thus far been confined to the fringe right and autistic-seeming men with Substack newsletters. Yet any wonk with a spreadsheet should realise there is a relationship between the long-term viability of the state and the existence of adults in 20 years time who might pay taxes to fund it.
It is hardly as if the problem is unique to Britain. South Korea and Japan are only the most extreme cases of what happens when you eschew the short-term costs of child-rearing and later find you’re struggling to pay for an ageing population. And the two-child cap isn’t the only way we are robbing Maddie to pay Margaret.
There are of course the stagnant wages that millennials and zoomers have enjoyed since the financial crash. According to the IFS, median incomes grew by only 6 per cent between 2009 and 2022, about a fifth of what you’d expect over a similar period pre-recession. You can combine that with rental or mortgage costs, which many on middling salaries struggle to pay in some urban areas, as well as money that must be spent on childcare for families with two working parents.
It would take a longer piece than this to entangle how much of this was intentional, but had recent governments been aiming to bring down the birth rate it’s a difficult policy stack to improve on. Many couples considering parenthood understandably feel they are working against how our economy is structured.
As everyone knows at this point, these cracks have been partially painted over with mass immigration. Certainly they have kept hospitals staffed and Deliveroo in business. But where newcomers integrate they either adopt the birth rates of natives, at which point you are back at square one, or they form insular diaspora communities.
Pulling the migration lever will probably become harder anyway, as birth rates fall around the world which signals that culture and technology are as much behind this trend as anything financial. In the case of the West, our cultural focus on individual success, coupled with the widespread availability of contraception, was always likely to reduce birth rates — and it should be added that there have been many upsides to this.
Abolishing the two-child benefit cap is unlikely to radically change things, not least because it overlaps with a household benefit cap. In other countries, doling out benefits has not had a significant effect on how many people choose to have kids. South Korea has spent more than $270bn trying to convince its citizens to have kids, and its total fertility rate has now fallen to a historic low of 0.72 per woman.
The reason it matters is symbolic. The British government should not be telling its citizens to be two and through with having kids. For one, the replacement rate is 2.1 per woman. More fundamentally, children should not be conceived of as fiscal liabilities who must be merely tolerated before they can enjoy the fruits of self-actualisation.
If we believe we’ve built a country worth living in, we must surely think it better that children are brought into existence to enjoy it with us. If we retain the two-child benefit cap, we might as well accept our fate as a glorified care home with a country attached.
