The two-child benefit cap, introduced by the Conservatives in 2017, prevents parents from claiming child tax credit or universal credit for any third or subsequent child born after April 2017, affecting around 1.7 million children. Scrapping the cap would lift an estimated 330,000 children out of poverty immediately and another 150,000 by 2030, costing approximately £3.5 billion annually.
Despite Labour’s previous commitment to abolishing the cap, with Education Secretary Bridget Phillipson describing its “devastating impact,” Chancellor Rachel Reeves is expected to stop short of full abolition in the upcoming budget. Reports indicate Reeves will instead adopt smaller measures to blunt the cap’s effect, citing a “candid” assessment of the fiscal challenges ahead.
Alex Clegg, an economist at the Resolution Foundation, argues that this approach is shortsighted. “We have a big red button that says ‘reduce child poverty’ – and the government is choosing not to press it,” he said, highlighting the cap’s failure to achieve its stated goals of encouraging work or limiting family size.
The decision comes amid growing pressure from left-leaning voters and ahead of the publication of the government’s child poverty strategy. However, with Reeves preparing to lay the groundwork for inevitable tax rises, the option of scrapping the cap appears to have been set aside for now.
