Chancellor Rachel Reeves is expected to lift the two-child benefit limit in the upcoming November budget, responding to a key demand from Labour MPs and child poverty campaigners. The policy, introduced under the Conservatives, currently prevents parents from claiming child tax credit or universal credit for more than two children, affecting 1.7 million children in Great Britain last year.
Officials are exploring options for a tapered system rather than a full removal, wary of escalating costs for extremely large families. Alternatives under consideration include limiting additional benefits to three or four children, introducing a tapered rate where parents receive the most for their first child and less for subsequent ones, or lifting the cap only for working parents on universal credit to encourage workforce participation.
Prime Minister Keir Starmer hinted at the change in his Labour party conference speech, stating the government's aim is the 'basic, ordinary hope of a better future for our children'. Education Secretary Bridget Phillipson, a known advocate, called the cap a 'spiteful policy'. The government has already extended free school meals to those on universal credit as a first step.
Scrapping the cap entirely would cost about £3.5 billion a year, while a restricted system could save between £900 million and £2.3 billion annually. The Resolution Foundation estimates that a three-child limit or tapered system would leave 120,000 to 350,000 more children in poverty than full removal. About 59% of affected families have someone in work.
Former Prime Minister Gordon Brown has called the cap 'cruel' and suggested higher taxes on the gambling industry to fund its removal. However, Treasury sources indicate those taxes are already factored into calculations for filling an expected fiscal shortfall. Reeves faces a difficult budget on 26 November, with no final decision yet on the form of the change.
