Reeves warned she must end child benefit cap altogether or face rise in poverty
Ending the two-child benefit limit with “half measures” would lead to increased child poverty, warned Rachel Reeves in a scathing report by Britain’s leading left-wing think tank.
The findings by the Resolution Foundation, whose former director Torsten Bell is now one of Ms Reeves’ Treasury secretaries, came amid speculation that the Chancellor would raise the limit to a maximum of three children in a bid to appease angry supporters.
The think tank warned: “The full removal of the two-child limit on benefits is an important step towards lower child poverty rates in 2029/30 than in 2024/25. Partial repeal of the policy is not enough to prevent child poverty rates from rising.”
But the cost of removing the cap entirely is believed to be £3.5bn a year, at a time when Ms Reeves must fill a budget black hole estimated at £40bn and is also seeking more headroom to deal with economic shocks.
But the report will fuel a potential revolt from Labor MPs from various factions within the party, from Dame Meg Hillier, grand chair of the Treasury select committee, to Jeremy Corbyn’s former ally John McDonnell.
Former prime minister Gordon Brown is also planning a major crackdown on child poverty next week, where he will push for the removal of any caps on child benefit.
Meanwhile, Lucy Powell won the party’s vice-presidential contest with a manifesto pledge to abolish the cap.
The authors of the new report predict that without further policy action, child poverty rates will reach a historic high of 34 per cent (4.8 million children) in 2029-30, up from 31 per cent in 2024-25, after housing costs. This is despite the government’s pledge in July to provide free school meals to all children from families receiving universal credit in England.
The report suggests that completely removing the two-child limit remains the most cost-effective way to reduce child poverty rates. This bold move could lift 330,000 children out of poverty today at a cost of £3.5bn (or £7,280 per child lifted out of poverty) and prevent a further 150,000 children falling into poverty by 2029-30.
The research finds that any option that only partially changes the two-child limit, including moving to the three-child limit that Ms Reeves is thought to favor, would leave child poverty rates higher at the end of the forecast than in 2024-25 (just under 32 per cent).
Dame Meg made it clear she generally agreed with the report’s findings.
He said: “I’ve got the figures straight and the surest, quickest and most cost-effective way to reduce child poverty is to remove the two-child benefit limit.
“Imposing the three-child limit could help around 274,000 families, but would still affect around 166,000 families. Other alternatives (such as exempting children under five) could also help some, but on a much smaller scale.” [figures suggest 18,700 households based on trying to extrapolate from DWP figures].
“Quite simply, there is no better alternative to tackling child poverty in terms of value for money, impact or efficiency than removing the two-child benefit limit altogether.”
Rachael Maskell, who was suspended from parliamentary Labor for leading the welfare rebellion, warned: “The injustice of child poverty must be confronted fully with proper fiscal action and, as the evidence clearly shows, the removal of the two-child limit and the removal of the benefits cap. Diluting this will dilute the opportunities of another generation of children.”
Meanwhile, there is another threat of a fresh crisis if the cap is not lifted, after Sir Keir Starmer was forced to abandon welfare reforms before the summer to save £5bn after a mass Labor revolt.
Mr McDonnell, the former shadow chancellor who was suspended for a year over the vote to lift the cap, warned: “There will be huge disappointment within Labor ranks if the two-child cap is not removed altogether. Half measures are unacceptable and will alienate more of our supporters.”
To talk Independent Before she was confirmed as deputy leader, Ms. Powell also made clear that removing the cap was one of the changes that should come to the budget on November 26.
He said: “We need to be much clearer about the urgency and principles of removing the two-child benefit limit, because if we want to see child poverty levels fall in this parliament.”
Solution Foundation economist Alex Clegg said: “Unless the government takes action this parliament, child poverty will reach a new historic peak and more than one in three children will grow up in poverty by 2029-30.
“The most effective way to lift children out of poverty is to completely abolish the two-child limit on benefits. None of the partial abolition options floated in recent months will be sufficient to prevent child poverty from increasing throughout this parliament.
“If the government wants to deliver on its manifesto promise to develop an ambitious child poverty strategy, it must do the right thing and scrap the two-child limit altogether. This bold action alone could save nearly half a million children from growing up in poverty by the end of the decade.”
A government spokesman said: “Every child deserves the best start in life, whatever their background.
“That’s why our child poverty task force will publish an ambitious strategy to tackle the structural and root causes of child poverty.
“We’re investing £500 million in children’s development with the launch of Best Start Family Centres, expanding free school meals and ensuring the poorest don’t go hungry over the holidays through a new £1 billion crisis support package.”
