Work and Pensions Secretary Pat McFadden has declared that the UK's welfare system is failing to adequately support people into employment while facing "significantly rising costs," signalling the government's intent to pursue further reforms. His comments came as the Labour government unveiled its new child poverty strategy on Friday.
Core Pledge: Scrapping the Two-Child Limit
The flagship policy within the strategy is the government's commitment to abolish the controversial two-child limit on Universal Credit. This move, costing the Treasury an estimated £3bn, is projected to lift 450,000 children out of poverty by 2031. McFadden framed the entire strategy as a long-term investment, stating it aims to improve young lives and enhance future employment prospects for those lifted from hardship.
"This is about more than the distribution of money. It's an investment in the future of the children who are affected by poverty," McFadden said. He argued that encouraging work through welfare changes is crucial for improving children's lives, as employed parents mean better-off families and savings on the benefits bill.
A Broader Package of Support Measures
The child poverty strategy includes several additional measures designed to alleviate financial pressure on families. These encompass helping parents access cheaper baby formula, accelerating the process of moving families out of costly temporary accommodation, establishing breakfast clubs, and extending free school lunches.
The decision to scrap the two-child limit has been warmly welcomed by Labour MPs, who also secured a victory in July by forcing ministers to abandon planned cuts to disability benefits. However, McFadden cautioned against interpreting these wins as a halt to all welfare reform.
"Reform is Happening": McFadden's Warning on Welfare
"I think because of what happened in July, there's been a conclusion that no reform is happening. That's a mistake. Reform is happening. But I think we will need more in the future, too," McFadden told the Guardian during a visit to a baby bank in north London.
He emphasised that the current system requires transformation, not protection. "I don't think the right thing to do with the welfare system is just to circle the wagons around a system that is not delivering as well as it should and has such significantly rising costs," he stated. The Secretary of State believes the system must be scrutinised for its effectiveness in helping people into work, an area where he contends it currently falls short.
Chancellor Rachel Reeves has echoed this stance, stating the benefits bill cannot "remain untouched." Two major reviews are already underway: the Timms review examining disability benefits and another led by Alan Milburn focusing on youth inactivity.
While McFadden declined to specify whether future reforms might involve cutting payments or tightening eligibility, he stressed a focus on creating opportunity. He highlighted the stark lifetime cost of youth inactivity, estimating that a young person remaining on benefits could lose around £1 million in earnings and cost the state a similar amount.
"Every person that we can get into work and not have them on benefits for years is earning and paying tax. That does save money on the benefits bill and I think that's a good thing if that's the way that we save money on the benefits," he explained, framing reform as a pathway to both personal prosperity and fiscal responsibility.
McFadden also robustly rejected Conservative claims that the recent budget favoured benefit claimants over workers. He criticised the two-child limit, introduced in 2017, arguing it was "never really about saving money" but rather creating a "political dividing line with children used as the weapon of choice."
