Rachel Reeves suggests removing the two-child limit on benefits in the upcoming Budget, arguing that children should not be penalized for their family's size. This proposal could significantly impact child poverty rates in the UK.

At a glance

  • Rachel Reeves indicates support for lifting the two-child benefit cap.
  • The two-child limit was introduced in 2017 under Conservative policies.
  • Reversing the cap could reduce child poverty for 630,000 children at a cost of £3.6 billion annually.

    • Policy Proposal on Family Benefits

    Rachel Reeves, the Chancellor, has expressed her intention to consider lifting the two-child limit on benefits in the next Budget. This limit, which was introduced in 2017, restricts families on universal or child tax credits from receiving payments for any third or subsequent child born after that date. Reeves argues that it is unfair for children in larger families to face financial penalties through no fault of their own. During an interview with Matt Chorley on BBC Radio 5 Live, Reeves emphasized her commitment to addressing child poverty. She stated, "I don't think that it's right that a child is penalised because they are in a bigger family." This statement aligns with calls from some Labour MPs for a complete reversal of the two-child policy.

    Potential Changes to Benefit Structure

    Reports suggest that the Treasury is exploring various options regarding family benefits. One possibility includes a tapered approach, where parents would receive the full benefit for their first child and reduced amounts for subsequent children. Other proposals involve limiting additional benefits to three or four children. Reeves' comments indicate a shift in Labour's approach to family benefits, as she seeks to prioritize the needs of larger families. She noted that parents may face changing financial circumstances, which could justify having more children. The discussion around these changes is gaining momentum, especially in light of recent leadership contests within the Labour Party.

    Tax Policy and Budget Priorities

    In addition to her comments on family benefits, Reeves has hinted at potential changes to tax policies. She has not ruled out breaking Labour's manifesto pledge not to raise income tax rates, VAT, or National Insurance. While she acknowledged the possibility of adhering to the manifesto, she emphasized the need for necessary actions to ensure the country's financial stability. Reeves stated, "What I can promise now is I will always do what I think is right for our country." This statement reflects her commitment to making difficult decisions that may not be politically popular but are deemed essential for the nation's welfare.

    Impact of the Two-Child Cap

    The two-child benefit cap has been a contentious issue since its introduction. The Institute for Fiscal Studies estimates that fully reversing this cap could lift 630,000 children out of absolute poverty, defined as living in households with incomes below 60% of the median average. However, this reversal would come at a significant cost of £3.6 billion annually. Pressure to eliminate the cap has intensified, particularly following the recent Labour deputy leadership contest. Candidates Lucy Powell and Bridget Phillipson both expressed support for more robust measures to combat child poverty. Meanwhile, Reform UK has pledged to scrap the limit if it gains power, while the Conservative Party maintains that the cap should remain in place.

    Conclusion and Future Considerations

    As discussions around the two-child benefit cap continue, the political landscape remains dynamic. Reeves' proposals could lead to significant changes in how benefits are allocated to families, particularly those with more children. The outcome of these discussions will likely have lasting implications for child poverty rates and the overall welfare system in the UK.