In a move that could redefine the landscape of British welfare policy, Chancellor of the Exchequer Rachel Reeves is expected to announce the lifting of the controversial two-child benefit cap in her November 2025 Budget. The policy, which has been a lightning rod for criticism since its introduction by Conservative Chancellor George Osborne in 2015 and implementation in 2017, currently restricts child tax credit and universal credit to the first two children in most households. According to The Guardian and Bloomberg, the Treasury is actively exploring options that range from expanding eligibility to three or four children to introducing a tapered system where payments decrease for each subsequent child.
The two-child cap affects an estimated 1.6 million children across the UK. Campaigners have long argued that the policy is not only "cruel" but also the single largest driver of child poverty in the country, with some estimates suggesting that 109 children are pulled into poverty every day because of it. The Child Poverty Action Group and the Joseph Rowntree Foundation estimate that abolishing the policy entirely could cost around £3 billion by the end of this Parliament in 2029/30, while the Resolution Foundation puts the figure slightly higher at £3.5 billion. Yet, the same think tank argues that easing the cap to three children would cost £2.4 billion in 2029/30 and lift approximately 280,000 children out of poverty.
At the Labour Party conference in Liverpool on September 30, 2025, Prime Minister Sir Keir Starmer gave the clearest hint yet that change was coming. In his keynote speech, Starmer described the extension of free school meals as a “first step on our journey to end child poverty,” emphasizing, “We have walked that road before, and we will walk that road again, because a Britain where no child is hungry, when no child is held back by poverty, that’s a Britain built for all.”
Rachel Reeves, pressed on the specifics during the conference, was careful not to make any premature commitments. She stated, “Keir said in his speech today that we will reduce child poverty in this Parliament, but we will set out the policies in the Budget. I think we’ve been pretty clear this week that we can’t commit to policies without us explaining where the money is coming from.” She cited “real financial constraints” such as persistent inflation, tariffs, global conflicts, increased borrowing costs, and the need to account for upcoming changes in Office for Budget Responsibility forecasts. “I would be the first person to want to find some money down the back of the sofa to pay for lots of different things. But I have to be Chancellor in the world as it is, not in the world as I might like it to be,” Reeves explained, according to multiple outlets including The Guardian and The Times.
Despite the cautious tone from the Chancellor, government sources told The Guardian, “If we’re going to do it, we have to lift the cap, not just language,” signaling that the November Budget is likely to bring concrete action. The i Paper and Bloomberg also reported that the Treasury is considering a range of options, including limiting additional benefits to three or four children or paying them only to working parents on universal credit. The idea of a "tapered" benefit system is also on the table, which would see parents receive less for each subsequent child, allowing the government to balance social goals with fiscal responsibility.
The political debate around the two-child cap is as heated as ever. Shadow chancellor Sir Mel Stride was quick to criticize the proposed changes, saying, “Scrapping the two-child benefit isn’t just irresponsible – it’s unfair. Rachel Reeves must come clean: where’s the money coming from? Will it be more and more debt, or even higher taxes? The UK is in the grip of Labour’s cost of living crisis, and the public deserve the truth. With both Reform and Labour committing to the spiralling welfare bill, only the Conservative Party is committed to Britain living within its means.” Conservative leader Kemi Badenoch echoed this sentiment, insisting the cap remains the right policy even if it “may not be popular,” and vowed to reinstate it if it were scrapped.
On the other side, campaigners and some Labour voices argue that nothing short of total abolition will suffice. Luke Hurst, national coordinator of Labour campaign group Mainstream, stated, “This is a step in the right direction, but nothing less than the total abolition of the two-child limit will suffice. If it just becomes a ‘three-child benefit limit’ then millions of children in this country will continue to suffer.” Lord John Bird, Big Issue founder and crossbench peer, added, “We must build on this bold first step to smash the systems that entrench children in poverty and rob them of their potential – which means scrapping the cap in full. Tapered versions of the cap will not be enough to deliver Labour’s ambitious promise to reduce child poverty.”
The Children’s Charities Coalition—which includes Action for Children, Barnardo’s, The Children’s Society, National Children’s Bureau, and NSPCC—issued a joint statement: “Removing the two-child limit entirely would immediately benefit hundreds of thousands of children and be a huge step forward in tackling the shameful levels of child poverty in this country.” Steve Darling, the Liberal Democrat work and pensions spokesman, urged the government to “turn words into action and scrap the unfair two-child cap” without delay, adding, “Lifting the two-child benefit cap is the quickest and most effective way to tackle the scourge of child poverty. And it’s the right thing for our economy too, supporting today’s children to have better health, education and employment prospects in their future.”
Interestingly, even Reform UK leader Nigel Farage has expressed support for lifting the cap, calling it “the right thing to do.” This rare moment of agreement between parties that are otherwise at odds on most issues underscores the broad and complex coalition pushing for change.
As the November Budget approaches, all eyes are on Reeves and the Treasury as they weigh the social benefits of reducing child poverty against the fiscal realities of a tight economic environment. The coming weeks are set to be a test of Labour’s ability to deliver on its ambitious social promises while maintaining economic credibility—a balancing act that will define not only the fate of the two-child benefit cap but also the broader direction of welfare policy in the UK.
The stakes are high, and the outcome will be felt by millions of families across the country. Whether the government opts for full abolition, a tapered system, or a compromise measure, the decision will mark a pivotal moment in the ongoing struggle to address child poverty and shape the future of Britain’s social safety net.
