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Two-child benefits policy targets the strivers

in low-paid jobs
Analysis: Iain Duncan Smith is trying to save 10bn, using the rhetoric of scroungers to slice the
benefits bill

Iain Duncan Smith, who appears to be planning to limit welfare paid to parents, at the 2012
Conservative party conference. Photograph: Richard Sellers/Allstar/Sportsphoto

Randeep Ramesh

Thursday 25 October 2012 21.33 BST First published on Thursday 25 October 2012 21.33 BST




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Iain Duncan Smith, the welfare secretary, appears to be undertaking a bold demographic
experiment to reduce the growth in state spending by limiting the amount of welfare that couples
can receive.
At present, poor families get child benefit and child tax credits for every child they have. In the
future it appears such payments will be restricted to just the first couple of children. Call it the
coalition's two-child policy.

Duncan Smith, in comments leaked before a speech on Thursday in Cambridge, asked: "Should
families expect never-ending amounts of money for every child when working households must
make tough choices about what they can afford?" arguing that parts of the benefits system
promoted "destructive" behaviour.

Duncan Smith appears to be conflating the idea of worklessness with payments for children. If
that is the case then he will not be saving much money with this measure: just 4% of families on
jobseeker's allowance have more than two children. Say each child gets roughly 65 a week
about 50 from child tax credits and the rest in child benefits then the savings are about 300m
a year. In fact they would be much lower, as half the people on jobseeker's allowance get work
within six months.

Now consider that Duncan Smith is trying to save 10bn a year. To make this magnitude of
savings the government would have to look at the 2 million children in the 584,000 working
families with more than two children who get child tax credits. These are people who are in low-
paid jobs struggling to make ends meet. There are another 880,000 working families with more
than two children receiving child benefit, with around 2.9 million children affected.

Child tax credits are means-tested but the Children's Society calculates that the saving on them,
if they were restricted to taking a maximum of two children into account, would be about 3.5bn
a year. Savings on child benefit, if reshaped in a similar way, would yield up to 1bn. This is big
money.

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However, such calculations expose the government to the charge that it is targeting strivers
rather than the much-touted slackers of modern-day Britain. As Karen Buck, Labour MP and
parliamentary welfare expert, points out: "Just 1.5% of the benefit population have never
worked." Targeting such families would yield little cash for the Treasury.

Instead the government is using the rhetoric of scroungers to slice benefits from low-paid
working families. The result is many more are forced to rely on welfare just look at predictions
that a million earners will be dependent on welfare to keep a roof over their heads by the next
election, more than double the number before the recession began.

To his credit Duncan Smith has faced down more radical calls to prune welfare. However, he
appears to divide people into the lifetime poor and the striving, working classes and claims that
people's vitality has been sapped by the social programmes meant to save them. Like Mitt
Romney's inaccurate description of America's 47% an entitlement society dependent upon
government the welfare secretary's words suggest he too has bought into the idea that the poor
are not victims of circumstance but of their own actions.
This article was amended on 26 October 2012 to update figures supplied by the Children's
Society for savings that would be made on child tax credits and child benefit if they were
restricted to two children. The original figures of 8bn and 5bn respectively were estimates
which the Children's Society revised after publication.

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