Reeves hints at ending two-child benefit cap

Rachel Reeves has given her clearest signal yet that limits on benefits by family size could be lifted in the 26 November Budget. Speaking to the BBC’s Matt Chorley, the chancellor said children in bigger families should not be “penalised”, and pledged action on child poverty. The Budget date is confirmed by HM Treasury.

Before we go further, here’s the policy in plain English. The two-child limit stops most families on Universal Credit or Child Tax Credit from getting the extra child element for a third or later child born after 6 April 2017. There are narrow exemptions (for example, multiple births and non‑consensual conception). This is separate from Child Benefit. That’s the House of Commons Library’s summary.

What difference would scrapping it make? The Institute for Fiscal Studies says reversing the policy is one of the most cost‑effective ways to reduce child poverty, lifting about 540,000 children above the absolute poverty line in the long run at a cost of roughly £2.5bn a year, with other IFS work putting the long‑term cost nearer £3.4bn. Parliament’s researchers estimate the policy saves up to £3.6bn once fully rolled out, implying a similar order‑of‑magnitude cost to abolish it.

You may have heard about “tapered” alternatives. The Guardian and LabourList reported the Treasury had looked at paying most for the first child and less for later children, or limiting support to three or four children, or applying changes only to working families. The Resolution Foundation and others argue only full repeal meaningfully reduces poverty.

Politics matters here. Inside Labour, pressure has grown. Lucy Powell is now Labour’s deputy leader and has urged the party to hold firm on promises to help families; Bridget Phillipson, the education secretary, has said scrapping the cap is “not off the table”. Those positions have been reported by Labour, the Guardian and the Evening Standard.

Other parties have staked out lines. Reform UK’s Nigel Farage has pledged to scrap the cap, with some proposals framed specifically for working UK nationals, while the Conservatives say the cap should stay and have warned they would reverse any move to abolish it. ITV News and the Evening Standard set out those positions.

Quick check on Child Benefit, as it’s often confused with the cap. Child Benefit still exists for as many children as you have. But since April 2024, families where the highest earner’s income rises above £60,000 begin to face the High Income Child Benefit Charge, and the benefit is fully clawed back at £80,000. That’s from HMRC’s update.

Reeves also used the interview to hint at difficult tax choices. She said sticking rigidly to every manifesto line would mean deep cuts to investment, and she would “do what is right” instead. City A.M. reported her comments and, separately, Sky News carried her wording on not penalising children in larger families.

Where does that leave income tax thresholds? The last Conservative government froze thresholds to April 2028. Reeves said in 2024 she would not extend that freeze, but this autumn ministers have declined to rule out keeping it in place for longer. The BBC and Reuters capture that tension; Deloitte summarises the current freeze and thresholds.

What a freeze means for you: as pay rises but thresholds stay fixed, more of your income is taxed and more people drift into higher bands. That phenomenon-often called fiscal drag-quietly raises revenue without changing headline rates. For students, this is a neat example of how “not raising rates” can still raise taxes over time.

One more practical wrinkle: even if the two-child limit goes, the separate overall benefit cap would still restrict some households’ payments. The IFS estimates around 70,000 of the poorest households would see gains from abolition partly or fully wiped out unless the benefit cap is addressed too.

The timetable is short. The Budget is on Wednesday 26 November, alongside fresh forecasts from the Office for Budget Responsibility. Expect the headlines to weigh child poverty gains against the bill, and to set out how any welfare changes sit alongside tax decisions and the NHS funding push. We’ll be looking for clear, costed choices.