Chancellor Rachel Reeves is preparing to lift the two-child benefit limit, a long-standing demand of Labour MPs and child poverty campaigners. Treasury officials are examining ways to reform the policy, which currently prevents parents from claiming child tax credit or universal credit for more than two children.
The decision is expected in November’s budget, following recommendations from the government’s child poverty taskforce. Lifting the cap is widely seen as one of the most effective measures to reduce poverty, with estimates suggesting it could help lift hundreds of thousands of children out of hardship across England, Scotland, and Wales.
Options Under Consideration
Treasury officials are exploring several options to address costs. One proposal is a tapered system, where parents would receive full benefits for the first child but reduced amounts for subsequent children. Another possibility is to extend benefits only up to a third or fourth child, or to restrict the policy change to working parents on universal credit, in order to encourage employment.
Scrapping the cap entirely could cost about £3.5 billion a year. Critics warn that partial reforms risk leaving some families behind, particularly in communities with larger households.
Labour’s Commitment to Reducing Child Poverty
Reeves has signaled her determination to act. Speaking earlier this week, she said: “I’m a Labour chancellor and I want to reduce child poverty. I don’t want to see children growing up in poverty in Britain.”
Prime Minister Keir Starmer also gave a strong hint at Labour’s conference that the government will go further, calling the extension of free school meals to families on universal credit the “first step” in a broader plan to end child poverty.
Former prime minister Gordon Brown has described the two-child limit as “cruel,” suggesting gambling industry taxes could be redirected to fund its removal. However, Treasury sources argue that revenue is already allocated to plugging a £30bn gap in public finances.
Campaigners Push for Full Reform
Campaigners insist that anything less than a full lifting of the limit will fall short. Dan Paskins, director of UK impact at Save the Children, said: “The only logical next move is to scrap the two-child limit to benefits in full at the autumn budget. Time is ticking for Britain’s children.”
