LABOUR’S claim there is “no money left” to end a hated benefits cap blamed for pushing children into poverty has infuriated economists.
A member of Keir Starmer’s shadow cabinet made the extraordinary claim that a future Labour government would not be able to “afford” ending the two-child cap on benefits when speaking to ITV News on Tuesday.
Shadow culture secretary Lucy Powell blamed the “harsh economic reality” faced by the UK caused by Covid, the war in Ukraine, and the “disastrous” Liz Truss budget when challenged on her party’s social security policy.
It came after Starmer sparked outrage among allies and opponents of the Labour Party when he told Laura Kuenssberg’s Sunday show he would not reverse the two-child cap if he became prime minister.
'There just, frankly, is no money left' Shadow culture secretary Lucy Powell says the Labour Party can't make promises it 'can't afford to keep' as she defends Keir Starmer's plan to keep the two-child benefit cap in place pic.twitter.com/SoT5rK2ttR
— ITV News Politics (@ITVNewsPolitics) July 18, 2023
Powell said: “There are lots of things that [Starmer] would like to do, there are lots of things that he would like to reverse, but the economic reality means that we just can’t.
"To coin a phrase, there just, frankly, is no money left.
“The costs of government borrowing, as inflation and interest rates rise, the costs of government borrowing is going up and up and up all the time.
“We’ve had Covid, Ukraine, the disastrous mini-budget of Liz Truss last year and so now we face this harsh economic reality that we’re in today that means that we just can’t make promises that we can’t afford to keep and that means some difficult choices, some difficult issues and some difficult policies that we would otherwise like to do.”
Stephanie Kelton, an economist who advised Bernie Sanders’ US presidential campaign, rubbished the MP’s comments on Twitter.
She wrote: “Wrote a book called The Deficit Myth. It explains why this learned helplessness is completely wrong.”
Richard Murphy, professor of accounting practice at Sheffield University, added: “It staggers me that someone supposedly capable of being a minister in the next government can say something as stupid as ‘there is no money left’.
“Doesn’t she know that one of the most fundamental jobs of government is to create the money we need? It can never run out, ever.”
Murphy and Kelton are both proponents of the economic school of thought called Modern Monetary Theory, which holds that countries like the UK who issue their own currency need only worry about rising levels of inflation and can create more money to finance public spending as required.
The comments echoed those made in a jokey note left by a treasury minister during the handover of power from Gordon Brown’s government to the Conservative and LibDem coalition in 2010.
Liam Byrne, then the outgoing chief secretary to the Treasury, left a note for his successor which read: “I’m afraid there is no money.”
The two-child limit refers to a cap on benefits for parents meaning they cannot claim child tax credit or universal credit for any third or subsequent child born after April 2017.
It made an exception for children who were conceived as a result of sexual assault – the so-called rape clause – but required mothers to state this was the case on official documents.
