Tory warning on Reeves as Cabinet weighs 3bn to lift two-child benefit cap
Jenrick says lifting the cap would require tax rises or more borrowing, as Labour presses for child-poverty policy shifts
A senior Conservative warned today that Labour’s policy stance could push Britain into an economic doom loop as Cabinet ministers weigh lifting the two-child benefit cap at a cost of about £3 billion. The warning came as evidence grew of backbench pressure within Labour and a growing expectation from government aides that changes to the cap could appear in the run-up to the November Budget.
Robert Jenrick, a senior Tory, told the Times that to fund such spending Labour would need to raise taxes and borrow more. He argued Reeves has already increased borrowing, warning that the resulting mix of higher debt and inflation would dampen growth and reduce employment. The Times reported that Cabinet ministers are considering recommending that the chancellor lift the two-child cap before the Budget scheduled for 26 November, a move that would be politically consequential for both parties.
A Labour child poverty taskforce, co-led by Bridget Phillipson, is said to have concluded that scrapping the cap would most effectively lift children out of poverty, according to the Times. The group is said to estimate a £3 billion price tag for lifting the cap alongside the broader benefit-system reforms being discussed. Government sources noted that no decisions had been made, but said an announcement could come with or ahead of the Budget, or even before it.
Education Secretary Gillian Keegan’s successor in Labour circles has signaled openness to the idea, with Phillipson telling BBC Radio 5 Live that tackling child poverty is a priority in the party’s leadership contest. Reeves, too, suggested changes were on the table, indicating the issue is moving from the backbench to the center of fiscal discussions as Labour weighs how to balance promises with a £30 billion package of tax increases being floated for the Budget.
On the Tory side, Kemi Badenoch and other ministers have maintained the cap as a fiscal sanity measure, arguing that lifting it would be unaffordable and could fuel higher welfare costs without addressing underlying poverty. More than 100 Labour MPs have signed a letter urging the chancellor to scrap the limit, proposing a £3.2 billion funding mechanism drawn from a targeted levy on harmful online gambling products. The MPs argued that the current UK tax take on remote gambling is comparatively low and that the industry’s profitability, coupled with offshore structures, undercuts public revenue.
They cited a report by the Institute for Public Policy Research, supported by former prime minister Gordon Brown, which argued that gambling-levy reforms could generate the necessary funds to scrap the two-child limit and the benefit cap. The debate reflects a broader political question about how to address poverty and welfare costs while sustaining the public finances ahead of the next general election.
The dispute plays out as the government navigates a high-stakes fiscal agenda, with Reeves facing pressure from her own party and opposition to deliver policies that can be funded without derailing growth. The Budget remains several weeks away, but the tempo of discussions and the number of potential policy pivots being considered indicate a high-stakes balancing act between promises to voters and the need to maintain fiscal credibility.
In a wider context, the episode highlights the ongoing struggle within the governing coalition and the opposition over how to handle welfare, taxation and social protection in a climate of uncertain economic growth and shifting public support. World readers are watching how the UK coordinates social policy with macroeconomic stability as it approaches a politically pivotal period.