Reeves to launch crackdown on benefit fraud alongside lifting two-child limit | Budget 2025

Rachel Reeves will launch a new crackdown on benefit fraud while also scrapping the two-child limit for universal credit at a cost of £3 billion, as ministers try to fend off criticism over increased welfare spending in the budget.

The Chancellor has decided to abolish the two-child limit altogether; It’s a move that will be welcomed by Labor MPs who have long highlighted its impact on rising child poverty.

But the Conservatives and Reform quickly sought to portray the chancellor as presiding over a rising welfare bill while also introducing multibillion-pound tax increases on working people.

Conservative party leader Kemi Badenoch said: “On Wednesday Starmer and Reeves will increase your taxes to fund more prosperity.”

Meanwhile, the Liberal Democrats warned that the plan to freeze tax thresholds would affect 9 million people by pushing them into higher tax bands by 2030, saying ordinary people were being “milked for their hard-earned money”.

At the same time, Reeves is coming under attack from the left, with Green party leader Zack Polanski and Unite general secretary Sharon Graham pressing him to go further on a more significant wealth tax. Graham said if the budget was not enough for Labor, neither Reeves nor Keir Starmer should remain in office, either hitting working people or those who were sick and unable to work, rather than society’s richest.

Wanting to head off criticism, Reeves will say he plans to save an extra £1.2bn by 2031 by detecting faulty universal credit payments.

A Treasury source said: “We will never tolerate fraud, error or waste in the benefits system; every pound of taxpayers’ money must be spent with the same care that employees spend their own money.

“That’s why the Chancellor is doubling down on this work next week, expanding targeted case reviews to save taxpayers billions of dollars and ensure aid goes to those who really need it, protecting taxpayers’ money so it can be invested in the public services we all deserve.”

Whitehall sources said the chancellor was unlikely to attempt further big cuts in the welfare bill in the budget after scaling back cuts to disability benefits in the face of a major Labor revolt earlier this year.

Reeves explored the possibility of blackouts mobility chartThis allows claimants to use their personal independence payments (Pips) towards new cars, but disability groups have warned there will be serious consequences if the scale of changes being carried out are continued.

Reeves signaled in an article for the Sunday Times this weekend that he was still committed to “reforming” the benefits system. But this is unlikely to happen until after Labor Secretary Stephen Timms’ review of disability benefits and former cabinet minister Alan Milburn’s review of unemployed young people make recommendations later next year.

Milburn this weekend said there should be no “no-go areas” when it comes to reforming the benefit system and has previously said the UK cannot afford to back down on changes to welfare.

Reeves said his budget, which is supposed to plug a £20bn financial gap, would focus on helping people with living costs and target inflation.

The Treasury said the budget would confirm there would be an increase in state pensions of more than £550 a year, compared to the amount they would increase if they were raised in line with inflation due to Labour’s triple lock pledge. The government is trying to rebuild the trust of older voters after infuriating many by scrapping the winter fuel allowance and then making a partial U-turn.

Reeves said: “Whether it’s our commitment to a triple lockdown or rebuilding our NHS to reduce waiting lists, we’re supporting pensioners to give them the retirement security they deserve.”

The government is also freezing rail fares and prescription charges, moving to remove some taxes from electricity bills, and also introducing multibillion-dollar tax increases.

Some of the tax increases Reeves would favor include:

• Freezing income tax thresholds for an extra two years until 2030, bringing more people into higher tax bands as wages rise.

• Making salary sacrifice schemes, including pension contributions, less generous.

• Higher taxes on the most expensive properties, including a surcharge on the highest-value homes.

• A pay-per-mile scheme for electric cars to help close the tax gap from the gas tax as more people choose green vehicles.

In the run-up to the budget, Reeves said he was “tired of people explaining how to be chancellor” after weeks of criticism from left and right.

Starmer defended his chancellor, saying women face more abuse than men in public life. The Prime Minister said he was proud to appoint Britain’s first female chancellor, adding that she and other women in politics and the media were attacked more often than their male counterparts.

“I’m really proud to have the first female chancellor ever. I’m really proud that we have a female chancellor who’s doing a really good job,” she said. “I firmly believe that women are subject to much more criticism and abuse in public life than men. That’s true in politics, but it’s also true in many other areas – frankly, I’d say the media – and I think we need to acknowledge that.”