Currently, Britain’s two-child benefit cap prevents low-income families from claiming additional means-tested support for any children beyond their second.
A Party Divided
Labour finds itself torn between competing pressures over welfare reform. The party’s left wing fears any measures that could be perceived as balancing budgets at the expense of society’s most vulnerable members. Meanwhile, centrists highlight an increasingly unsustainable welfare system that expanded dramatically under Conservative rule and shows no signs of contracting under Labour leadership.
Chancellor Rachel Reeves faces a stark choice: allocate £3-4 billion to eliminate the cap entirely, or risk angering Labour MPs—many holding narrow majorities—who believe they were elected to uphold core Labour principles, including abolishing precisely this kind of restriction.
Middle Ground Solutions
The chancellor might find breathing room through compromise measures requiring less funding while appeasing party critics. The Institute for Fiscal Studies suggests several alternatives: raising the threshold from two to three children would require £2.6 billion, while implementing a graduated system—full benefits for the first two children, half benefits thereafter—would cost approximately £1.8 billion.
Former Home Secretary David Blunkett stands virtually alone among senior Labour figures in opposing outright abolition. Instead, he advocates maintaining the cap with targeted exceptions for disabled children and widowed parents, while redirecting resources toward broader anti-poverty initiatives and employment support programs. His proposal includes funding these measures through gambling taxation—a cause championed by former Prime Minister Gordon Brown.
Political Calculations
With the government consistently emphasizing fiscal constraints and the lingering effects of austerity on public finances, committing billions to scrap a policy that commands public support presents significant risks. Recent YouGov polling reveals 59% of Britons favour retaining the cap, with just 26% supporting its removal.
Nevertheless, Reeves recognizes the intensity of feeling within Labour ranks regarding child poverty reduction. Education Secretary Bridget Phillipson has framed tackling child poverty as the party’s “moral mission.”
Broader Challenges Ahead
Whatever decision Reeves makes, her political challenges extend beyond this single issue. October’s budget will include tax increases, and the chancellor has declined to rule out breaking Labour’s manifesto commitment to avoid raising taxes on working people. Combined with persistently disappointing polling numbers for Labour, this could trigger widespread public disillusionment.
Lifting the benefit cap might energize Labour MPs, but if it fails to prevent substantial losses of party activists in May’s local elections, Reeves and Prime Minister Sir Keir Starmer will need to offer their party stronger incentives—and soon.
