Universal Credit (Removal of Two Child Limit) Bill

Baroness Stedman-Scott Excerpts

2nd reading & Committee negatived & 3rd reading
Thursday 12th March 2026 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, I too am pleased to contribute to this important debate and look forward to the maiden speeches of the noble Baronesses, Lady Antrobus and Lady Teather, and the noble Lord Walker of Broxton. We welcome these wonderful people to our House and look forward to their contributions.

I feel I must set the scene and set it out very clearly. I say from the outset that we on the Opposition Benches do not support this Bill; in fact, we oppose it. That does not mean in any way that we do not care about children and families—quite the contrary. We believe there are other ways to support them that mean that money can be used differently to achieve the objective of improving their lives. I state publicly that I respect the consistency and tenacity of the Minister and, indeed, the noble Baroness, Lady Lister, in their campaigning in this area. We respect it. We may not agree with it, but we give credit where it is due.

We are far from alone in opposing the Bill. On this question, we stand with a clear majority of the British public. Polling consistently shows that more than 60% of people in this country support retaining the two-child benefit cap, with that support stretching across voters of all major political parties. What this debate increasingly appears to be about is not responsible public policy but political party management. As events over the past year have made clear, this measure is not being brought forward because the public have demanded it. Indeed, they are clearly opposed to it. We should all pause and consider why hard-working taxpayers are being asked to shoulder the financial consequences of the Government’s inability to manage their parliamentary party. That is not responsible government; it is a deeply troubling response from the Government to unrest.

Many across this Chamber will have their own principles and reasons for opposing this policy, but I begin with a simple illustration of what this policy and this debate mean in practice. Let us take the London Borough of Hackney. There, 29% of children live in households affected by the two-child limit without an exemption—the highest proportion anywhere in the country. As of August last year, there were 92 households in Hackney on universal credit with five or more children where the youngest child was born after the 2017 cut-off date. Unless they qualify for one of the limited exemptions, those households fall within the scope of the two-child limit. In other words, they already receive less than the maximum universal credit they would otherwise be entitled to. Yet even with the cap in place, these households receive on average £5,152 per month in universal credit. That is more than the take-home pay of someone earning around £88,000 a year. Across the country, the welfare bill for five-child households within the scope of the cap is already around £720 million per year. That is with the two-child limit still in place.

Set that against the reality faced by many working families. In Hackney and communities across the country, there are parents in work earning far less than that level of take-home pay who would love nothing more than to have a third child. But they sit down at the kitchen table, look at the household finances and make the heartbreaking decision that they simply cannot afford it. At the very same time, their taxes are funding households down the road who receive an income from universal credit that, in effect, exceeds their own. If this cap is removed, those households will not face the same choices about how many children they can afford.

I ask the Minister a simple question: how can that possibly be fair? How can it be right that working people supporting our economy and paying the taxes that fund the system must carefully limit the size of their own families while being asked to fund a system in which those not in work face no such constraint? That is the fundamental question of fairness at the heart of this debate, and it is why a clear majority of the public vehemently support the cap.

There is a wider point about economic development. More than this, what separates us on these Benches from the Minister and her Back Benches is our view that a handout is not the same as a hand up. The evidence is clear that the most effective way to tackle poverty is to provide people with the means and the incentives to provide for themselves. The single biggest factor in a child’s life chances is whether parents work, and removing the cap reduces the incentives to work altogether. That is clearly not a route out of poverty. Of course support should be targeted at those who need it—we have no argument with that—but it should not create a model where households on benefits are rewarded in a way no working family ever would be. That undermines both fairness and the incentive to work. As I have said, work is the only meaningful way that we will solve the problem of child poverty in the medium and long term.

When the incentive in place is to get more on benefits than working, why would you go to work? I am concerned by the view expressed by Labour Back-Benchers and the Government that increasing the generosity of the welfare offer in some way solves the issue of poverty. This approach does nothing but provide a sticking plaster to mask the fact that a dramatically increasing number of people rely solely on the state for their subsistence. This comes at a major and increasing cost to those who work and contribute, as the Spring Statement disturbingly underscored when it revealed that welfare spending will rise by 5.8% this year to an absolutely staggering £330 billion—around 11% of GDP.

My party has been clear. We would reinstate the two-child cap. Only last week my right honourable friend, Kemi Badenoch, the leader of our party, set out why. The savings from this policy could be redirected toward one of the more fundamental responsibilities of any Government—the protection and defence of the realm. Again, I stress that it does not mean that we do not care about children and families, but those savings would allow the recruitment of 20,000 additional soldiers and fund the accommodation, equipment and support they need to do their jobs properly at a time when the demands on our Armed Forces are growing and the world is becoming more uncertain. That is a central priority.

After the extraordinary spectacle of recent weeks, when the world has seen the Government unable and unwilling to defend British sovereign territory, the case for properly funding our Armed Forces has become more urgent than ever. Our defence should not be an afterthought. It should be the first duty of the state.

That is why it is so troubling that money that could be strengthening our national defence is instead being spent to manage the Government’s internal policies and politics. The country is being asked to foot the bill not because the policy case has been won but because the Government and the Chancellor have chosen not to pursue the welfare reforms they themselves once supported because they are too weak to get them past their own MPs. Do His Majesty’s Government have any plans to review the welfare state and to change it to a system that incentivises people to work, rather than live permanently on benefits? The defence of the nation should always come before the management of the governing party but, unfortunately, the policy we are discussing today is a manifestation of just that.

Ultimately, this debate comes down to three simple principles: fairness, responsibility and the Government’s priorities. It is about fairness, because it cannot be right that working families who get up every day, pay their taxes and carefully weigh what they can and cannot afford for their own children, are asked to fund a system in which those same choices do not apply. A welfare system that loses sight of that basic sense of fairness will quickly lose the confidence of the people who sustain it. It is about responsibility, because tackling poverty cannot mean simply writing even larger checks from the state. Real and lasting progress comes from helping people into work, strengthening incentives and ensuring that welfare is a safety net, not a substitute for independence. A system that blurs that distinction ultimately fails the very people it claims to help. It is about priorities, because every £1 spent by the state is a £1 taken from taxpayers and other priorities. At a time of enormous pressure on the public finances and growing threats in the world around us, the Government must be honest about where those resources should go.

This Bill fails on all three counts. It weakens fairness, it risks entrenching dependency rather than tackling its causes and it diverts scarce resources away from the fundamental duties of government. For those reasons, and in the interest of fairness and sound policy, these Benches cannot support the Bill. We urge the Government to keep the cap; it is what the country wants and what the country needs. I know the Benches opposite will not agree with me one little bit—I am under no illusions about that. I remind the whole House that you cannot make a poor man rich by making a rich man poor and you cannot help the wage earner by punishing the wage payer.

--- Later in debate ---

[Baroness Sherlock (Lab)]

Indeed, and that probation officer clearly did a very good job: look where the noble Lord has ended up. Would that they were all that successful. I suppose that that is quite a high bar at which to set them, but I commend it. That is a really great point, and I am now violently agreeing with the noble Lord; but I will move on.

I want the social security system to do its job, and for most people its job is to support them into work, and in work, and to develop them in work. That is very much what this Government are seeking to do.

One of the challenges with universal credit is about assumptions. It was designed to move people into and out of work—to work in and out of work—and when it works it does so very well. All we are doing is making sure that the system works even better than it does. But the assumption that this Government are doing the wrong thing by spending money on tackling child poverty is fundamentally mistaken. My noble friend Lord Walker talked about the need to make sure we tackle NEETs, for example. We have one in eight of our young people not in employment, education or training. They did not start at 16.

[Baroness Stedman-Scott (Con)]

Will the Minister give way?

[Baroness Sherlock (Lab)]

Okay; it is going to be a long day.

[Baroness Stedman-Scott (Con)]

We are not saying that the Government should not spend money. It is about what you spend it on, and how it is spent to get the best outcome from what you are trying to do.

[Baroness Sherlock (Lab)]

My Lords, I understand that, but I have looked at what the last Government spent the money on and at the results, and I do not like them, so we are going to do something different.

My simple view is that if we will the end of tackling child poverty, we have to will the means. We believe that removing this barrier is fundamental. Those young people who were NEETs at 16 did not start at 16: they started without the opportunities, without the education, and without the start in life they should have had. The evidence shows quite clearly that children who grow up in poverty are likely to have poorer mental health, fewer opportunities and less chance to do all those things we want them to do. What we are doing is enabling those people to have opportunities, giving them the start they need. If we can get that in place, the whole country benefits. Instead of supporting people not to work, we are giving them the chance to flourish as individuals and to make the contribution to our society that they will not get the chance to make otherwise.

Before I get myself into any more flights of rhetoric, I should answer some of the questions that have been asked. My noble friend Lady Lister asked about council tax reduction. I think she knows this, but just for the record, local councils are of course responsible for designing and reviewing their own council tax reduction schemes. My department has been working with the MHCLG to communicate the change to local authorities, and they have been encouraged to consider the impact of their schemes in the light of the removal of the two-child limit. In 2029-30 an estimated 560,000 families will see an increase in their universal credit award, with these families gaining, on average, £440 a month. The impact of transitional protection is included in the impact assessment, but not on the numbers of households.

The benefit cap was raised by my noble friend Lady Lister, and by the noble Baronesses, Lady Teather and Lady Bennett, and by my noble friend Lord Davies and a few others. This Government want to preserve the fundamental principle that work is the best route out of poverty. We believe that leaving the overall benefit cap in place encourages personal responsibility while maintaining the incentive to work. Where possible, it is in the best interests of children to be in working households. Being in work substantially reduces the chance of poverty: the poverty rate of children living in households where all adults are in work is 17%, compared to 65% for children who live in households where no adults work. We will continue to protect the most vulnerable—those who are unable to work because of a disability or a caring responsibility are protected and exempted from that.

The noble Baroness, Lady Bennett, asked about numbers. When I answered her Written Question, the impact assessment had not been published at that point. I can say that among households in scope to gain from the removal of the two-child limit in 2029-2030, approximately 50,000 are estimated to be capped before the policy change, and a further 10,000 households will be capped afterwards. In contrast, 550,000 households in Great Britain will gain in full from the removal of the two-child limit in 2029-30, as will an estimated 2 million children in the United Kingdom.

The noble Baroness, Lady Janke, and my noble friend Lady Shah raised the impact of poverty on children and schools—