The Labour government appears poised to make a landmark change in the UK’s welfare policy, with mounting evidence suggesting the two-child benefit cap will be lifted in the November 2025 budget. The cap, introduced by Conservative chancellor George Osborne in 2017, has long been the subject of fierce debate, with critics arguing it has driven thousands of children into poverty and campaigners insisting its removal is the most effective way to reduce hardship for families across the country.
Currently, the two-child benefit cap prevents families from claiming the £292.81-per-month child element of universal credit or child tax credit for any third or subsequent child born after April 6, 2017. According to the Child Poverty Action Group, this policy pulls 109 more children into poverty every single day it remains in force. The scale of its impact is staggering: if the cap were scrapped, 350,000 children would be lifted out of poverty instantly, while the depth of poverty would be reduced for another 800,000 children. The estimated cost of such a move, according to the Child Poverty Action Group, stands at £2 billion, while the Resolution Foundation think tank puts the figure slightly higher at £3.5 billion and estimates 470,000 children would be lifted from poverty.
Education Secretary Bridget Phillipson has become one of the most vocal advocates for urgent action. Speaking on BBC Radio 4’s Political Thinking, she said, “There’s a real urgency about this because every year that passes as children are born, as they move into that system, the numbers go up, child poverty rates increase. So we have to tackle it.” She did not mince words about the origins of the policy, stating, “This was a Tory policy that’s had a devastating impact on children and we’ll sort it.”
Her remarks come at a time of heightened political focus on the issue. The Labour government, fresh from its electoral victory, established a Child Poverty Taskforce to address rising poverty rates. According to reports in The Guardian, the taskforce concluded that lifting the two-child benefit cap is the “best way” to alleviate the problem. The Treasury, led by Chancellor Rachel Reeves, is now exploring a range of options. These include the possibility of a tapered system, where parents would receive the most benefits for their first child, with decreasing amounts for subsequent children. Another idea under consideration is to raise the cap to three or four children, or to lift it only for working parents on universal credit in an effort to encourage workforce participation.
But for many campaigners and policy experts, partial measures simply won’t cut it. The End Child Poverty Coalition has been unequivocal: “This policy must be scrapped in full for all. Otherwise some families will be forced to remain in poverty because of this government’s choices.” The sense of urgency is echoed by Phillipson herself, who leads the Child Poverty Taskforce. She said, “Through the work of the taskforce I see all the evidence, I look at the numbers, I look at the impact of different policies. This isn’t the only way we’ll take action, to be clear, because there are other steps we need to take, whether on skills, rights at work, much more besides, childcare. But I know what the evidence tells me.”
The debate over the cap has also become a central issue in the Labour Party’s ongoing deputy leadership contest, sparked by Angela Rayner’s resignation last month. Bridget Phillipson, who is running for the post, has made tackling child poverty her “number one priority.” She shared a personal connection to the issue, saying, “It really is personal to me. I know what it’s like to not grow up with very much.” Her main rival, Lucy Powell, has also called for the cap’s abolition, stating it would be the “single biggest policy we could do to address child poverty.” Powell, who was sacked from her cabinet role in a recent reshuffle, has pitched herself as an independent voice, pledging to have “difficult conversations” with the Labour leadership but refusing to “snipe from the sidelines.”
Although Phillipson has secured more nominations from Labour MPs, Powell remains the frontrunner among party members, according to published polling. Voting for the new deputy leader runs from October 8 to October 23, with the result set to be announced on October 25. The contest has added another layer of urgency and scrutiny to the government’s approach to child poverty and welfare reform, with both candidates vying to represent the party’s conscience on social justice issues.
Behind the scenes, the Treasury’s deliberations reflect the complexity of the issue. According to The Guardian, officials are weighing the fiscal cost of scrapping the cap outright against the potential benefits to families and society. The idea of a tapered system or restricting additional benefits to a set number of children aims to balance fiscal responsibility with the need to alleviate poverty. However, critics argue that anything short of full abolition would leave some families behind and undermine the policy’s effectiveness.
Chancellor Rachel Reeves has so far declined to confirm or deny reports that she plans to lift the cap, telling reporters at the Labour party conference that decisions would be announced in due course. The cautious approach reflects the broader economic context, with the government facing competing demands for spending and a desire to demonstrate fiscal prudence after years of austerity and pandemic-related challenges.
Campaigners, meanwhile, continue to push for immediate and comprehensive action. The Child Poverty Action Group’s figures are stark: every day the cap remains, more children are pushed into poverty. The Resolution Foundation’s analysis adds further weight, suggesting that abolishing the cap is the most cost-effective way to reduce child poverty in the UK. The political consensus appears to be shifting, with even some former supporters of the cap now acknowledging its unintended consequences.
As the November budget approaches, all eyes are on the government’s next move. Will Labour seize the moment and fully lift the two-child benefit cap, or will it opt for a compromise solution? For the hundreds of thousands of families affected, the outcome could be life-changing. The debate has brought the realities of child poverty to the forefront of national conversation, forcing policymakers to confront the human cost of welfare policy decisions.
With the budget deadline looming and political stakes running high, the fate of the two-child benefit cap hangs in the balance. The coming weeks will reveal whether the government is prepared to make good on its promises to tackle child poverty—or whether incremental change will leave some of the country’s most vulnerable children waiting for relief.
