Rachel Reeves is reportedly set to propose the complete removal of the two-child benefit cap in the upcoming November budget. This measure has an estimated cost of over £3 billion and is projected to lift around 350,000 children out of poverty. The plan marks a departure from earlier considerations where the Chancellor had contemplated only partial adjustments, such as tapering the cap for larger families or those with higher incomes.
Reeves’s initiative comes in response to Prime Minister Keir Starmer’s directive for Labour to prioritize reducing child poverty ahead of the next election. While the measure has garnered popularity among the electorate, it has faced backlash from some Labour MPs who are wary of its political implications. During a recent radio interview, Reeves emphasized the consequences of allowing child poverty to persist unchecked, noting that various circumstances can lead families to find themselves struggling despite having large families.
Chancellor Reeves’s allies have indicated that her statements reflect a strong intention to abolish the cap entirely. This shift is notable compared to the last election, during which Reeves and Starmer refrained from committing to cap removal due to fiscal constraints. According to the Resolution Foundation, fully eliminating the cap could incur costs of approximately £3.5 billion by the 2029-2030 fiscal year.
Starmer has consistently defended the decision to maintain the cap and even suspended several MPs for advocating its repeal last year. In light of a recent rebellion within the party, he appointed Education Secretary Bridget Phillipson to lead a taskforce aimed at devising strategies to combat child poverty. Phillipson is expected to release her recommendations concurrent with the budget announcement.
In addition to these changes, Reeves is also contemplating a tax increase to strengthen the economy, suggesting a potential 2p rise in income tax coupled with a corresponding cut to national insurance. This plan could impact higher earners significantly, as reports indicate that tax cuts may be limited for individuals earning above £50,000.
Source: https://www.theguardian.com/uk-news/2025/nov/10/rachel-reeves-signals-plan-remove-two-child-benefit-cap-budget