Lucy Powell: keep tax pledge, scrap two-child cap

You’re going to hear a lot about “working people” in the next three weeks. With the Budget set for Wednesday 26 November, Labour’s new deputy leader Lucy Powell says ministers should keep the election promise not to raise Income Tax, National Insurance or VAT - and she wants the two‑child benefit cap lifted in full. Speaking on BBC Radio 5 Live on Thursday 6 November, Powell said trust rests on doing what was promised and argued that every extra year the cap remains pushes “another 40,000” children into deep poverty, as reported by the Guardian.

First, the promise we all need to understand. Labour’s 2024 manifesto says the party will “not increase taxes on working people,” spelling out no rises to National Insurance, the basic, higher or additional rates of Income Tax, or VAT. Full Fact points out that the wording is ambiguous - especially around whether “working people” covers only what appears on your payslip - which is why some argue the rise in employer National Insurance last year broke the spirit of the pledge and others insist it did not. What this means: when you hear politicians claim the promise is safe or broken, check whose taxes they’re talking about and whether it’s the rate or the threshold.

Here’s the second piece of vocabulary you’ll hear a lot: fiscal rules. The chancellor, Rachel Reeves, has set two. The stability rule says day‑to‑day spending must be paid for from tax receipts, with the current budget moving into balance by 2029–30. The investment rule says public debt should be on a falling path by the final year of the forecast. Reeves has also signalled a change to how debt is measured - using a broader net financial liabilities test so that assets as well as liabilities are counted.

Why are tax rises even being discussed? Because those rules bite when growth is weak and borrowing costs are high. The National Institute of Economic and Social Research says Reeves should build about £30bn of headroom to meet the rules with a margin, and the CBI has urged her to consider breaking the no‑tax‑rises pledge to do so. Ministers have not ruled out income tax changes ahead of 26 November. Media literacy tip: separate what’s confirmed from what’s floated - the Budget is where rumours meet arithmetic.

Now, the two‑child cap - a policy your students will ask about. Brought in by the Conservatives in 2017, it restricts Universal Credit and child tax credit to the first two children in most families. By April 2025, almost 1.7 million children were in families affected and the total rises each year as more younger siblings are covered by the rule. Charities including Save the Children and the Child Poverty Action Group say the cap pushes hundreds of thousands into poverty or deeper poverty.

What would lifting the cap cost - and what would it achieve? Estimates vary by timing and what else changes. The Institute for Fiscal Studies says full abolition would eventually cost around £2.5bn a year and lift roughly 540,000 children above the absolute poverty line. The Resolution Foundation finds the long‑run cost could rise towards £3.6bn as the policy fully rolls out, but still argues that scrapping it is the single most cost‑effective way to cut child poverty.

Are there halfway options if the Treasury won’t go all the way? Yes - and each has trade‑offs you can test in class. Ideas explored include moving to a three‑child limit, paying a lower amount for third and later children, or exemptions linked to work. Resolution Foundation modelling suggests a three‑child limit would save around £1bn compared with full abolition but leave nearly 200,000 more children in poverty than scrapping the policy entirely. What this means: cheaper isn’t always better if your aim is to reduce poverty quickly.

The politics matter. Powell won the deputy leadership on 25 October after leaving the cabinet in September, pitching herself as a voice for members and a link between the grassroots and the leadership. She does not serve as deputy prime minister - that role went to David Lammy in a September reshuffle, alongside his job as justice secretary. Understanding who sits where helps you track who can shape Budget‑week calls.

What should you watch for on tax on 26 November? Even if the headline rates of Income Tax, employee National Insurance and VAT stay still, a continued freeze on Income Tax thresholds pulls more people into higher bands as pay rises - a classic example of fiscal drag. Analysts also expect the Treasury to look at changes to inheritance tax, capital gains, gambling duties or bank profits. Your classroom question: if a measure raises money without changing a rate, is it still a “tax rise” for working people?

Finally, be precise with dates and definitions when you teach this. The Budget is on Wednesday 26 November 2025. The pledge covers Income Tax, National Insurance and VAT, and the argument is over what counts as “on working people”. The rules the chancellor must meet are to balance day‑to‑day spending over the period and get debt falling in the forecast’s final year. If you can explain those three sentences, you and your students can fact‑check the post‑Budget claims like pros.

We’ll update this explainer after the statement so you can take the latest numbers into lessons, tutorials and department briefings. Until then, keep the key questions in mind: What was promised? What changed? Who pays - and when? And does the plan actually meet the rules the government set itself? That’s how we learn - together - to read Budgets with care.