Rachel Reeves is preparing to announce changes to the two-child benefit cap in November’s budget, with officials exploring a number of alternatives short of full abolition. The policy, introduced under the Conservatives, restricts families from claiming child tax credit or universal credit for more than two children. Critics, including Labour MPs and anti-poverty campaigners, have long argued that it entrenches inequality, while supporters claim it helps manage welfare costs.
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Labour sources have hinted that Reeves and the prime minister, Sir Keir Starmer, are likely to respond to recommendations from the child poverty taskforce, which is expected to call for the limit to be scrapped entirely. Starmer stopped short of confirming the change in his conference speech but underlined his determination to tackle child poverty, saying: “A Britain where no child is hungry, when no child is held back by poverty, that’s a Britain built for all.” Reeves also stressed that she wanted to reduce child poverty and would address the taskforce’s findings in the budget.
Officials are understood to be weighing up options including a tapered system – offering higher payments for the first child and gradually less for subsequent children – or lifting the cap only for working families in receipt of universal credit. Treasury insiders are said to be concerned about the potential costs, particularly for larger families, and are examining ways to balance support for households with the government’s financial constraints. Campaigners, however, argue that anything less than full abolition risks leaving hundreds of thousands of children in hardship.
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According to government figures, 1.7 million children across England, Wales and Scotland were affected by the cap last year. The Resolution Foundation estimates that partial reform could leave up to 350,000 more children in poverty compared with full abolition, though it would reduce the annual cost of the policy change from £3.5bn to between £900m and £2.3bn. Save the Children, the End Child Poverty Coalition and former prime minister Gordon Brown have all called for the policy to be scrapped outright. The Conservatives have vowed to oppose such a move, with shadow chancellor Mel Stride describing it as “unfair” and questioning how Labour would fund it.
