Education

Rachel Reeves signals move to abolish two-child benefit cap to combat child poverty

Monday, 10 November 2025 5:24PM UTC

UK Chancellor Rachel Reeves has indicated plans to remove the controversial two-child benefit limit in the upcoming Budget, aiming to significantly reduce child poverty and support large families, amidst ongoing debates over fiscal responsibility and social justice.

Rachel Reeves, the UK Chancellor of the Exchequer, has indicated a strong inclination to remove the two-child limit on working-age benefits in the forthcoming Budget, marking a significant policy shift aimed at reducing child poverty. Speaking on BBC Radio 5 Live, Reeves asserted that it was unfair for children to be "penalised" for being in larger families through no fault of their own and confirmed her commitment to taking action on child poverty, harking back to Labour’s previous government achievements in this area.

The two-child benefit cap, introduced by the Conservative government in 2017, restricts welfare benefits payments for families on Universal Credit or Child Tax Credit to the first two children born after April 2017. The policy excludes Child Benefit payments, which remain payable regardless of family size for those earning under £80,000. According to the Resolution Foundation think tank, abolishing the cap altogether could cost around £3.5 billion annually but is projected to lift approximately 470,000 children out of poverty, making it one of the most effective measures to tackle child deprivation in the UK.

Reports from various sources, including The Guardian and The Independent, reveal internal discussions within the Treasury about potential alternatives, such as implementing a tapered benefits approach by reducing payments for children beyond the first, or limiting additional support to families with three or four children. However, the Resolution Foundation has issued a cautionary note against such half-measures, warning that partial reforms, such as raising the cap to three children, would not prevent child poverty from rising and would leave many children still facing deprivation. The think tank emphasizes that fully scrapping the cap remains the fastest and most cost-effective way to reduce child poverty rates significantly by 2029-30.

Large families stand to benefit notably if the policy is rescinded, with some households potentially receiving up to £20,000 a year in extra support. Official figures indicate that over 71,000 large families on Universal Credit would be eligible for increased payments, with a family of five potentially gaining more than £10,000 annually and even higher sums for those with more children. Labour MPs and campaigners have described the cap as "deeply unfair," arguing that it disproportionately impacts children living in poverty.

While Reeves has conveyed her intentions to ease or remove the cap, the financial implications pose a challenge, particularly in light of the sizeable budget deficit estimated at £40 billion. The Labour government, elected in July 2024 on promises to raise living standards without increasing income tax rates, VAT, or National Insurance contributions, faces a delicate balancing act. Reeves herself acknowledged that adhering strictly to manifesto pledges without raising revenue would require deep cuts in capital spending, something the government seems reluctant to pursue.

In addition to addressing child poverty, Reeves is considering broader fiscal measures to fund social priorities, such as reforms to the way environmental and social care levies are charged. Plans under review include shifting approximately £3.5 billion of charges currently embedded in electricity bills into general taxation, targeting higher earners to bear the cost. This redistribution aims to lower energy costs for the poorest households, allowing those on lower incomes to save around £110 per year while increasing the tax burden on wealthier quarters of the population.

Overall, Reeves's emerging approach reflects a willingness to reshape welfare and tax policies to combat inequality and support vulnerable families. While the precise details of the two-child cap removal remain under scrutiny, the Chancellor's firm statement against penalising children due to family size signals a clear policy direction. Political pressure within Labour, from campaign groups, and partly from Reform UK, supports the call for scrapping the cap, although Conservatives maintain that removing it is economically unsound. The forthcoming Budget will therefore be closely watched for how it balances social justice commitments with fiscal responsibility.

📌 Reference Map:

^[1] (BBC News) - Paragraphs 1, 2, 3, 6, 7
^[2] (Reuters) - Paragraphs 2, 3, 5
^[3] (The Independent) - Paragraphs 3, 4
^[4] (The Free Library) - Paragraph 4
^[5] (GB News) - Paragraph 7
^[6] (Upday) - Paragraph 1

Source: Noah Wire Services

More on this

https://www.bbc.com/news/articles/c70j7dxjp5wo?at_medium=RSS&at_campaign=rss - Please view link - unable to able to access data
https://www.reuters.com/world/uk/uks-reeves-scrap-two-child-cap-benefits-payments-guardian-reports-2025-09-30/ - UK Finance Minister Rachel Reeves plans to eliminate the two-child cap on welfare payments in the upcoming November 26 budget, according to a report by The Guardian. This policy change could mark a significant step in Labour's aim to reduce child poverty, potentially lifting 500,000 children out of absolute poverty. The cap, introduced by the previous Conservative government, restricts welfare benefits to the first two children in most families and is estimated to cost around £3 billion ($4.03 billion) annually if reversed. Reeves emphasized the importance of fiscal responsibility while acknowledging the need to raise living standards—a key promise that helped Labour win a landslide election in July 2024. The finance ministry is considering several alternatives, including limiting extra benefits to a third or fourth child, tapering support by child, or applying changes only to working parents on income support. Labour had previously declined to reverse the cap, citing fiscal constraints, but is now reassessing amidst broader policy reviews. ([reuters.com](https://www.reuters.com/world/uk/uks-reeves-scrap-two-child-cap-benefits-payments-guardian-reports-2025-09-30/?utm_source=openai))
https://www.the-independent.com/news/uk/politics/rachel-reeves-budget-child-benefit-cap-b2854625.html - Ending the two-child benefit cap with 'half measures' will still see child poverty rise, Rachel Reeves has been warned in a hard-hitting report from the UK’s leading left-wing think tank. The findings from the Resolution Foundation, whose former director Torsten Bell is now one of Ms Reeves’s Treasury ministers, come amid speculation that the chancellor will lift the cap to a maximum of three children in a bid to appease angry backbenchers. The think tank warned: 'Fully scrapping the two-child limit on benefits is an essential step towards achieving lower child poverty rates in 2029/30 than in 2024/25. No partial repeal of the policy is sufficient to keep child poverty rates from rising.' But the cost of lifting the cap altogether is believed to be £3.5bn a year, at a time when Ms Reeves has to fill a budget black hole estimated at £40bn and is also seeking more headroom flexibility to deal with economic shocks. The report maintains that fully scrapping the two-child limit remains the most cost-effective way of driving down rates of child poverty. This bold move could lift 330,000 children out of poverty today and prevent a further 150,000 from falling into poverty by 2029-30, at a cost of £3.5 billion (or £7,280 per child lifted from poverty). The research reveals that any option which only partially reforms the two-child limit – including moving to a three-child limit, thought to be favoured by Ms Reeves, would still leave child poverty rates higher at the end of the forecast (just under 32 per cent) than in 2024-25. Dame Meg made it clear that she agrees with the findings of the report in broad principle. She said: 'I’ve crunched the numbers and the surest, fastest, and most cost-effective way to clamp down on child poverty is to abolish the two-child benefit limit. Introducing a three-child limit would help around 274,000 families – but it would still impact around 166,000 families. Other alternatives (such as exempting under-fives) would also help some, but on a much smaller scale [figures suggest 18,700 households based on trying to extrapolate from DWP figures].' ([the-independent.com](https://www.the-independent.com/news/uk/politics/rachel-reeves-budget-child-benefit-cap-b2854625.html?utm_source=openai))
https://www.thefreelibrary.com/Large+families+could+get+%C2%A320,000+a+year+boost+if+Rachel+Reeves+axes+benefit+rule;-a0852380941 - Thousands of families could pocket up to £20,000 a year in extra handouts if the Chancellor bows to pressure to scrap the two-child benefit cap. Official figures reveal that 71,580 large families on Universal Credit would qualify for enhanced benefit payments. In theory, a family with five children could get £10,544 a year extra, while it could be over £20,000 more for those with eight. The cap, brought in by the Conservatives in 2017, bars parents from claiming an extra £292.81 a month for a third or subsequent child. Ministers said it was a vital curb on welfare spending and a way to ensure fairness for working taxpayers. But Labour MPs are demanding Sir Keir Starmer axe the cap, which they brand 'deeply unfair' to children in poverty. ([thefreelibrary.com](https://www.thefreelibrary.com/Large%2Bfamilies%2Bcould%2Bget%2B%C2%A320%2C000%2Ba%2Byear%2Bboost%2Bif%2BRachel%2BReeves%2Baxes...-a0852380941?utm_source=openai))
https://www.gbnews.com/money/rachel-reeves-new-tax-hit-cut-energy-bills - Higher-earning households may face increased taxes to finance reductions in energy costs for Britain's poorest families, as the Chancellor explores a significant redistribution of financial burdens. The proposal under consideration would transfer approximately £3.5billion in charges currently attached to electricity bills into the general tax system. These charges, which fund social care initiatives and environmental programmes, would no longer appear on household energy statements but would instead be covered through broader taxation measures. The wealthiest quarter of earners would shoulder the financial impact, whilst those on lower incomes would see their annual energy expenses decrease. Under the proposed changes, households with the lowest incomes would benefit by approximately £110 each year, according to calculations presented to the Treasury. Families in the middle income brackets would see more modest savings of roughly £40 annually. However, the financial burden would shift significantly towards affluent households, with the highest-earning quarter facing additional costs averaging nearly £350 per year. Households with the lowest incomes would benefit by approximately £110 each year. This redistribution reflects a deliberate policy choice to reduce the financial pressure on vulnerable households whilst requiring those with greater resources to contribute more through the tax system. The changes would fundamentally alter how environmental and social programmes are funded across British households. The Resolution Foundation, a think tank with established connections to Labour ministers, has developed and presented this redistribution proposal to Ms Reeves. The organisation has characterised the existing arrangement as 'highly regressive' and advocates for fundamental changes to how these programmes receive funding. ([gbnews.com](https://www.gbnews.com/money/rachel-reeves-new-tax-hit-cut-energy-bills?utm_source=openai))
https://www.upday.com/uk/politics/chancellor-set-to-scrap-two-child-benefit-cap-in-budget/jc245f1 - Chancellor Rachel Reeves appears set to lift the controversial two-child benefit limit in her upcoming Budget. When asked directly about reports suggesting she will make such an announcement in her November statement, the Chancellor notably did not deny the move. Charities, campaigners and many within the Labour Party have long called for the policy to be scrapped. Critics argue it drags children into poverty and have mounted sustained pressure for its removal. ([upday.com](https://www.upday.com/uk/politics/chancellor-set-to-scrap-two-child-benefit-cap-in-budget/jc245f1?utm_source=openai))

Noah Fact Check Pro

The draft above was created using the information available at the time the story first emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed below. The results are intended to help you assess the credibility of the piece and highlight any areas that may warrant further investigation.

Freshness check

Score: 8

Notes: The narrative is recent, with the earliest known publication date being 30 September 2025. The report is based on a press release, which typically warrants a high freshness score. However, similar reports have appeared in the past, such as on 30 September 2025, indicating that the narrative has been covered before. The report includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged. ([reuters.com](https://www.reuters.com/world/uk/uks-reeves-scrap-two-child-cap-benefits-payments-guardian-reports-2025-09-30/?utm_source=openai))

Quotes check

Score: 7

Notes: The direct quotes from Rachel Reeves and other officials are consistent with previous reports, indicating potential reuse of content. Variations in wording are minimal, suggesting that the quotes have been used in earlier material. No online matches were found for some of the quotes, raising the score but flagging them as potentially original or exclusive content.

Source reliability

Score: 9

Notes: The narrative originates from reputable organisations, including the BBC, Reuters, and The Independent, which strengthens its reliability. However, some sources, such as The Free Library and GB News, are less well-known and may not be as reliable. The Mental Health Foundation's response adds credibility to the report. ([mentalhealth.org.uk](https://www.mentalhealth.org.uk/about-us/news/mental-health-foundation-responds-reports-two-child-benefit-cap-be-replaced?utm_source=openai))

Plausability check

Score: 8

Notes: The claims about the two-child benefit cap and its potential removal are plausible and align with previous discussions and reports. The narrative lacks specific factual anchors, such as exact dates for the policy change, which reduces the score and flags it as potentially synthetic. The tone and language are consistent with typical political reporting, and the structure is focused on the main claim without excessive or off-topic detail.

Overall assessment

Verdict (FAIL, OPEN, PASS): OPEN

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary: The narrative presents a plausible and timely report on Rachel Reeves' plans to scrap the two-child benefit cap. While the source reliability is generally strong, the presence of less reputable sources and the lack of specific factual anchors suggest a need for further verification. The potential reuse of quotes and recycled content also raises questions about the originality of the report. Therefore, the overall assessment is 'OPEN' with medium confidence.

Welfare reform
Child poverty
UK Budget