No 10 sources have briefed that axing Tory George Osborne’s two child benefit cap is now “dead in the water” because of the Labour Welfare Bill climbdown on cuts to Department for Work and Pensions (DWP) Personal Independence Payment (PIP). Apparently, according to a Labour government, the only people with money in the country are disabled people and children. Never mind that the richest 1% of the UK hold more wealth than 70% of the country. And definitely ignore the fact that the UK government is a sovereign currency issuer that oversees financial markets.

DWP PIP and economically illiterate “trade offs”

A source close to Chancellor Rachel Reeves added over DWP PIP:

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.

Actually No 11’s entire approach is illiterate ‘household economics’. The macroeconomics of an entire country is different. Funnelling money to the already rich is where that cash stagnates in savings as they get off on a number going up on a screen. Meanwhile, benefits go to the people with the lowest incomes in the country who must spend the money on life’s essentials with anything left over perhaps going on small luxuries.

That creates a boom for every business in the country while delivering tax receipts for the government through VAT, income tax and the rest. The redistribution of income (based on rewarding work where possible, but the number unemployed people vastly outnumbers vacancies) is actually essential to growth and maintenance of the economy as it stands.

At present, something else is booming: the number of baby banks families need. There was an 143% increase in items handed out in 2024. The number of children in poverty is also booming, at 4.5 million. And analysis from the Child Poverty Action Group (CPAG) shows inaction on the two child benefit cap will increase that to 4.8 million.

Labour minister Pat McFadden also said there’s a ‘cost’ to the DWP PIP climbdown, in more economically illiterate nonsense:

In any budgetary decision, there’s definitely a cost to what was announced… and you can’t spend the same money twice, so more money spent on that means less for some other purpose

As did education secretary Bridget Phillipson, who said:

The decisions that have been taken in the last week do make decisions, future decisions harder.

Former shadow chancellor John McDonnell, meanwhile, branded the move to keep the two child limit as “punishment” for the rebellion against PIP cuts as “disgusting”.

Labour are now using the DWP PIP U-turn as an excuse for austerity 2.0. This approach not only deprives people of the resources they need, it also shrinks the economy.

Featured image via the Canary

By James Wright

This post was originally published on Canary.