Rachel Reeves is to lift the two-child benefit limit in the forthcoming Budget, a key demand of Labour MPs and anti-poverty campaigners, with officials exploring options for a tapered system. The Chancellor and Sir Keir Starmer have indicated they will respond to the child poverty taskforce recommendations, which are expected to identify scrapping the cap as one of the most effective measures.
The cap, introduced under the Conservatives, prevents parents from claiming child tax credit or universal credit for more than two children. It affected 1.7 million children in Great Britain last year, and fully abolishing it would cost about £3.5 billion a year. However, no final decision has been made on the form of the change, with Treasury officials wary of escalating costs for very large families.
Options under consideration include limiting additional benefits to three or four children, introducing a tapered rate that gives the most for the first child and less for subsequent children, or lifting the cap only for working parents on universal credit to encourage employment. The Resolution Foundation has warned that a three-child limit or tapered system would leave between 120,000 and 350,000 more children in poverty than a full repeal, while saving £900 million to £2.3 billion annually.
The End Child Poverty Coalition insisted the policy “must be scrapped in full for all”, warning that partial action would leave families in poverty. Education Secretary Bridget Phillipson has previously labelled the cap a “spiteful policy”. In his conference speech, the Prime Minister said extending free school meals to those on universal credit was the “first step” in ending child poverty.
Ms Reeves told The Times that she wanted to reduce child poverty and would respond to the taskforce at the Budget. Government sources said they expected action in November. The former prime minister Gordon Brown has called the limit “cruel” and proposed higher taxes on the gambling industry to fund its abolition, though Treasury sources indicated those taxes are already factored into its calculations.
