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finishing the Benefit limit for two children “Half-measures” will still increase child poverty, Rachel Reeves A stern report by Britain’s leading leftist think tank has warned.
Conclusion from Sankalp Foundationwhose former director Torsten Bell Now one of Ms Reeves’ Treasury ministers, it comes amid speculation the chancellor will remove the maximum three-child limit to appease angry backbenchers.
The think tank warned: “Removing the two-child limit on benefits altogether is an essential step towards reducing the child poverty rate in 2029/30 compared to 2024/25. Any partial repeal of the policy is not enough to stop the child poverty rate from rising.”
But removing the cap altogether is believed to cost £3.5bn a year, at a time when Ms Reeves has to plug an estimated £40bn budget black hole and is also looking for more headroom flexibility to deal with economic shocks.
However, the report will spark a potential revolt by Labor MPs from across a number of factions within the party, from Treasury select committee chair Dame Meg Hillier to Jeremy Corbyn’s former aide John McDonnell.
Former Prime Minister Gordon Brown is also planning a major intervention on child poverty next week, where he will push to end any caps on child benefits.
During this time, Lucy Powell recently won the deputy leadership of the party Contest elections on the manifesto pledge of abolishing the cap.
Without further policy action, the authors of the new report estimate that the child poverty rate will reach a historic high of 34 per cent (4.8 million children) in 2029-30 after housing costs, up from 31 per cent in 2024-25. This is despite a commitment by the government in July to provide free school meals to all children from families receiving universal credit in England.
The report says eliminating the two-child limit altogether is the most cost-effective way to reduce child poverty rates. This bold action could lift 330,000 children out of poverty today and prevent a further 150,000 children from falling into poverty by 2029-30, at a cost of £3.5 billion (or £7,280 per child lifted out of poverty).
The research shows that any option that only partially improves the two-child limit – including moving to the three-child limit, favored by Ms Reeves, will still leave child poverty rates higher than in 2024-25 at the end of the forecast period (just under 32 per cent).
Dame Meg made clear that she agreed with the report’s findings in broad principle.
She said: “I have checked the numbers and the safest, quickest and most cost-effective way to tackle child poverty is to scrap the two-child benefit limit.
“Introducing a three-child limit would help around 274,000 families – but it would still affect around 166,000 families. Other options (such as exempting children under five) would also help some, but on a much smaller scale [figures suggest 18,700 households based on trying to extrapolate from DWP figures],
“Simply put, there is no better option in terms of value for money, impact or efficiency to fight child poverty than removing the two-child benefit limit altogether.”
Rachel Maskell, suspended from the parliamentary Labor Party for leading the welfare rebellion, warned: “The injustice of child poverty must be tackled squarely with the right fiscal measures, and as the evidence clearly says, by scrapping the two-child limit and removing the welfare cap. Lowering it will reduce the opportunities for a second generation of children.”
Meanwhile, Sir Keir Starmer was forced to abandon welfare reforms before the summer after a massive Labor backbench rebellion to save £5bn threatens another reform if the cap is not scrapped.
Former shadow chancellor Mr McDonnell, who was suspended for a year for voting to scrap the limit, warned: “There will be huge disappointment in Labor ranks if the two-child limit is not abolished altogether. Half measures are not acceptable and will alienate even more of our supporters.”
talking to Independent Before being confirmed as deputy leader, Ms Powell also made it clear that eliminating the cap is one of the changes that should come in the budget on November 26.
He said: “We need to be very clear about the urgency and principles of removing the two-child benefit cap if we want to see child poverty levels reduced in this Parliament.”
Alex Clegg, economist at the Resolution Foundation, said: “If the Government does not act this Parliament, child poverty will reach a new historic high, with more than one in three children growing up in poverty by 2029-30.
“The most effective way to lift children out of poverty is to abolish the two-child limit on benefits altogether. None of the partial alternatives brought forward for repeal in recent months will be enough to stop child poverty rising during this Parliament.
“If the Government wants to deliver on its manifesto promise to develop an ambitious child poverty strategy, it must do the right thing and scrap the two-child limit altogether. This bold action alone will prevent almost half a million children from growing up in poverty by the end of the decade.”
A government spokesperson said: “Every child, no matter their background, deserves the best start in life.
“That’s why our Child Poverty Taskforce will publish an ambitious strategy to tackle the structural and root causes of child poverty.
“We are investing £500m in children’s development through the rollout of Best Start family hubs, expanding free school meals and ensuring the poorest do not go hungry over the holidays through a new £1bn crisis support package.”