In a significant policy reversal, Chancellor Rachel Reeves is set to announce the abolition of the controversial two-child benefit cap during Wednesday's Budget announcement. The move follows months of intense pressure from Labour backbenchers, campaign groups, and political opponents who have long argued the policy exacerbates child poverty across the UK.
Why the Policy Change Matters
Government insiders have confirmed to The Independent that the Treasury will scrap the controversial policy, which currently prevents parents from claiming universal credit or tax credit for their third child. The decision represents a major victory for campaigners and comes as the Labour government seeks to address discontent among MPs and improve struggling poll numbers.
Rachel Reeves had previously hinted at the potential abolition earlier this month, stating on BBC Radio 5Live that she doesn't believe it's right that children are "penalised" for being part of large families. The chancellor emphasised the economic costs of allowing child poverty to go unchecked, adding: "In the end, a child should not be penalised because their parents don't have very much money."
The Human Impact of the Cap
Latest official figures reveal the staggering scale of the policy's impact, with 1.6 million children currently living in families affected by the two-child limit. Campaign organisations working in the sector estimate that 109 children across the UK are pulled into poverty by the policy every single day.
The broader context shows a worrying trend in child poverty rates, with approximately 4.5 million children – around one in three – now living in poor households across the country. According to analysis from researchers at the Child Poverty Action Group (CPAG), removing the two-child benefit cap could lift 350,000 children out of poverty.
The Joseph Rowntree Foundation has documented how some affected children are going without essentials such as adequate food, heating, clothing, or basic toiletries due to the financial constraints imposed by the policy.
Financial Implications and Alternatives
The Treasury has been considering various approaches to reforming the policy, with options including increasing the limit to three or four children, or introducing a taper rate that would provide higher entitlement for the first child and reduced support for subsequent children.
Estimates of the cost of complete abolition vary significantly between organisations:
- The Resolution Foundation suggests removal could cost £3.5 billion in 2029-2030
- CPAG projects a lower cost of approximately £2 billion
- The Independent's calculations indicate extending the limit to three children could cost at least £1.3 billion annually
The policy was originally introduced by the Conservative government under then-chancellor George Osborne in April 2017, with the stated aim of encouraging benefit recipients to "make the same choices as those supporting themselves solely through work."
Former prime minister Gordon Brown has been among the most prominent voices calling for the "total abolition" of the two-child benefit cap, warning against any attempts to merely tweak the existing limit rather than removing it entirely.
The Labour government had previously maintained that tight Budget resources prevented action on the cap, making this week's expected announcement a significant U-turn that reflects the growing political pressure and evidence of the policy's damaging effects on child welfare across the United Kingdom.
