Reeves to scrap two-child benefit cap
Rachel Reeves is poised to abolish the two-child benefit cap at next month’s Budget, in a move that will be cheered by anti-poverty campaigners but is likely to stoke bond market fears that the government is unable to reign in runaway spending and borrowing.
The Chancellor is said to be exploring a new tapered system that would allow families with more than two children to claim child-related benefits, in a response to the recommendations of a child poverty taskforce commissioned by Keir Starmer earlier this year.
The taskforce is expected to find that lifting the two-child limit for universal credit and child tax credit would be one of the most effective ways to lift hundreds of thousands of children out of poverty.
According to a report in The Guardian, Treasury officials remain fearful that large families with five or more children could claim thousands of pounds in additional welfare every year, and so favour lifting the cap to three or four children or introducing a taper rate.
Another option being considered is to abolish the cap solely for working parents on universal credit, to coax the record number of working-age individuals currently out of work back into employment.
“If we’re going to do it, we have to lift the cap, not just language,” a government source told The Guardian.
Lifting two-child benefit cap to cost £3.5bn
The move will come as welcome news to anti-poverty campaigners who – spearheaded by former Prime Minister Gordon Brown – have long campaigned for the policy to be scrapped.
Brown has previously called for the government to raise gambling duties on online betting companies and casinos to fund lifting the cap.
But any decision to lift the cap will pile further pressure on the UK’s creaking public finances ahead of a crucial Budget at which analysts believe the Chancellor will have to plug £30bn shorftall in tax receipts.
Lifting the cap entirely would cost £3.5bn, according to Resolution Foundation estimates, adding to country’s fiscal woes that have seen government borrowing reach its highest levels since the height of the pandemic, driving interest on government debt to the highest of any G7 economy.
The Chancellor had previously suggested to her party that recent welfare U-turns that MPs forced through on the winter fuel allowance and disability benefits meant the Treasury would be unable to lift the two-child benefit cap, a longheld demand of left-leaning lawmakers.
Nigel Farage’s Reform UK has previously called for the limit to be scrapped. The Conservative Party have said any move to get rid of it would not be “economically credible”.