Rachel Reeves is expected to lift the controversial two-child benefit limit in the Budget, as officials look at a number of options including a ‘tapered’ system.
The chancellor is under intense pressure to scrap the “cruel” policy, brought in by Tory chancellor George Osborne, which campaigners say is the biggest single measure that could take children out of poverty.
The government has set up a taskforce into child poverty and the chancellor has said she expects to respond to its recommendations when she unveils her Budget in November.
At the weekend Sir Keir Starmer’s choice to become his party’s deputy leader Bridget Phillipson said abolishing the cap, which affects 1.6 million children was “on the table”.
But, amid concerns that the move could prove extremely costly because of larger families, with those with more than six children potentially entitled to thousands of pounds more in benefits, a system of tapering is reportedly under consideration.
This could allow ministers to ensure parents get less money for each subsequent child, or limit additional benefits to three or four children, or pay it only to working parents on Universal Credit.
In his speech at Labour party conference in Liverpool on Tuesday, Sir Keir gave a strong hint the government would take further action, calling extended free school meals a “first step on our journey to end child poverty”.
The prime minister added: “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.”
Government sources told the Guardian they expected Ms Reeves to take action in November’s budget. “If we’re going to do it, we have to lift the cap, not just language.”
In an appearance at the conference on Monday, Ms Reeves would not say whether she was planning to scrap the cap.
She said: “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.”
Adding that there were “real financial constraints” due to persistent inflation, tariffs, global conflicts and increased borrowing costs – along with expected changes to OBR forecasts – she said: “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.”
Shadow chancellor Sir Mel Stride said: “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 spiraling welfare bill, only the Conservative Party is committed to Britain living within its means.”
Luke Hurst, national coordinator of Labour campaign group Mainstream, said: “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.”
