Chancellor won't deny axing two-child benefit cap

Ms Reeves was asked directly about a report she would lift the cap and did not deny it (Stefan Rousseau/PA) Peter Byrne

Chancellor Rachel Reeves appears set to lift the controversial two-child benefit limit in her upcoming Budget. When asked directly about reports suggesting she will make such an announcement in her November statement, the Chancellor notably did not deny the move.

Charities, campaigners and many within the Labour Party have long called for the policy to be scrapped. Critics argue it drags children into poverty and have mounted sustained pressure for its removal.

Asked about a Guardian report that she will lift the cap at the Budget, Reeves told a fringe event at the Labour conference: "Keir said in his speech today that we will reduce child poverty in this Parliament, but we will set out the policies in the Budget." She added: "I think we've been pretty clear this week that we can't commit to policies without us explaining where the money is coming from."

Chancellor's Budget position

The Chancellor highlighted significant financial constraints facing the government due to persistent inflation, tariffs, global conflicts and increased borrowing costs. She said: "I would be the first person to want to find some money down the back of the sofa to pay for lots of different things. But I have to be Chancellor in the world as it is, not in the world as I might like it to be."

The two-child cap was first announced by the Conservatives in 2015 and came into effect in 2017. It restricts child tax credit and universal credit to the first two children in most households.

Campaigners argue that 109 children across the UK are pulled into poverty by the policy every day. In his conference speech on Tuesday, Sir Keir Starmer (Labour) said Labour had lifted 100,000 children out of poverty by extending free school meals, describing this as a "first step" on the "journey to end child poverty".

Treasury options and costs

The Guardian reported that the Treasury was looking at different options including whether additional benefits might be limited to three or four children. Alternatively, there could be a taper rate meaning parents would receive the most benefits for their first child and less for subsequent children.

The Resolution Foundation think tank previously estimated that easing the two-child limit so families received support for the first three children would cost £2.4 billion in 2029/30 and would lift 280,000 children out of poverty. The organisation said abolishing the limit completely would be the most cost-effective way to reduce child poverty.

Estimates for scrapping the policy completely vary between £3 billion and £3.5 billion by the end of this Parliament. The Resolution Foundation estimates around £3.5 billion by 2029/30, while the Child Poverty Action Group and Joseph Rowntree Foundation calculate around £3 billion.

Political party positions

Reform UK leader Nigel Farage has previously said his party believed lifting the two-child benefit cap was "the right thing to do". Meanwhile, Conservative leader Kemi Badenoch has insisted the policy remains right even though it "may not be popular", and said she would reinstate it if it was scrapped.

Shadow chancellor Sir Mel Stride said: "Scrapping the two-child benefit isn't just irresponsible - it's unfair. Rachel Reeves must come clean: where's the money coming from? Will it be more and more debt, or even higher taxes? The UK is in the grip of Labour's cost-of-living crisis and the public deserve the truth. With both Reform and Labour committing to the spiralling welfare bill, only the Conservative Party is committed to Britain living within its means."

Campaigner response

Campaigners welcomed the news the limit might be lifted, but insisted the cap must be scrapped entirely. Lord John Bird, Big Issue founder and crossbench peer, said: "We must build on this bold first step to smash the systems that entrench children in poverty and rob them of their potential - which means scrapping the cap in full. Tapered versions of the cap will not be enough to deliver Labour's ambitious promise to reduce child poverty. We need proper, measurable targets to keep up this promising momentum and propel further action that can truly shift this malignant poverty crisis."

A spokesperson for the Children's Charities Coalition said: "Removing the two-child limit entirely would immediately benefit hundreds of thousands of children and be a huge step forward in tackling the shameful levels of child poverty in this country."

Sources used: "PA Media" Note: This article has been edited with the help of Artificial Intelligence.