Labour eyes scrapping two-child cap as Reeves weighs for Budget

Labour appears to be edging toward scrapping the two-child cap on benefits, a move that could reframe the party’s welfare stance ahead of next week’s conference. Party insiders and Westminster observers say Keir Starmer could signal a shift on the policy as he seeks to placate mutinous MPs, though officials insist no final decision will be made before the child poverty task force reports are delivered.

Government sources stress that any decision on easing the cap hinges on the task force’s findings, which are expected in time for the chancellor’s package on November 26. Work and Pensions Secretary Pat McFadden said this morning that any announcement on easing the cap would spell out how the £3 billion a year cost would be met. Bridget Phillipson — Downing Street’s de facto candidate for Labour deputy leader — has said the move is “on the table.” Nigel Farage has promised to ditch the limit on benefits claims as he courts Labour voters, but the Conservatives have argued that increasing handouts would be the wrong approach.

On a public visit to Revolut’s new London headquarters, Ms. Reeves told reporters that “for too long, Britain has been the laggard of productivity performance,” a line seen as part of a broader reform rhetoric that could accompany the Budget. Officials are widely expected to align policy pledges with the arithmetic of a tighter fiscal stance as they circulate around the Treasury.

Insiders say Reeves is drawing up roughly £30 billion in potential tax increases for the Budget, a figure that could be refined in the final package. Downgrades to productivity estimates by the Office for Budget Responsibility would intensify the pressure on the chancellor to balance the books. While the £3 billion-a-year cost of changing the cap remains a known quantity, sources stress that the overall revenue package remains contingent on evolving economic forecasts and political calculations. Taken together with last year’s Budget, the tax burden could rise by about £70 billion in roughly 13 months, a level that would place substantial strain on households and businesses during an inflationary period.

Britain faces high price pressures and a slowing economy, with the OECD forecasting the UK will have the highest inflation in the G7 this year. Within Labour circles, there is growing scr unity around reforming the two-child cap, with the IFS estimating that lifting the cap could lift around 500,000 children out of absolute poverty. McFadden said, as noted earlier, that any easing would be fully funded, and reiterated that fiscal responsibility remains central to policy discussions. "We’ve already taken some action on this, we have extended free school meals to all families on universal credit," he told BBC Breakfast, adding that, as with all policy discussions, nothing will be announced without a plan to pay for it.

The task force’s findings are anticipated as a pivotal fulcrum for both Labour’s domestic agenda and the wider political calculus surrounding the Budget. With the conference looming, party MPs and unions have pressed for changes to the two-child cap, arguing the policy contributes to child poverty while opponents warn against expanding welfare spending without clear revenue sources. Analysts caution that any shift would require careful messaging to voters and a credible fiscal plan to avoid undermining financial stability.

As the year closes, Labour’s approach to welfare reform, taxation, and productivity will be tested against the twin pressures of keeping public support and maintaining a credible balance sheet. The coming weeks will reveal whether the two-child cap becomes a cornerstone of Labour’s platform, or whether the party opts for a more cautious stance to preserve unity and economic credibility ahead of the Budget and the next general election.