Rachel Reeves has announced an end to the two-child benefit cap at today’s Budget, following months of intense pressure from backbenchers, campaign groups and political opponents.
The move will increase the benefits for 560,000 families by an average of £5,310, the Office for Budget Responsibility’s (OBR) fiscal outlook has calculated.
Set to come into effect from April 2026, the government estimates that the change will reduce the number of children living in poverty by 450,000 by 2029/30.
It will cost the Exchequer £3bn by this time, according to the OBR.
This will be partly offset by reforms to gambling taxation, set to raise £1.1bn, mirroring a recommendation made by Gordon Brown in the build-up to the fiscal event.
Writing in the New Statesman following the announcement, the former Labour prime minister said: “In one short Budget intervention this afternoon, Chancellor Rachel Reeves has done more to transform the lives of 450,000 of Britain’s poorest children than any of the seven previous Conservative chancellors, who, in 14 long years, did nothing but harm to the lives of vulnerable children.”
“It is time for every party to realise that the country’s future depends on investing in the potential not just of some of our children, but all of our children,” he added.
The decision will come as a relief for child poverty campaigners who had urged the chancellor to fully scrap the policy, rather than tweak it.
It marks a major U-turn for Labour, with ministers previously refusing to listen to critics on the measure. Last year, the prime minister enforced the whip on seven Labour MPs who voted against their party to oppose the two-child benefit cap.
Here’s everything you need to know about the policy and what the scrap will mean for families:
What is the two-child cap on benefits?
The two-child benefit cap prevents parents from claiming universal credit or tax credit for their third child. It was introduced by the Conservatives and came into place in April 2017. It only applies to children who were born after 6 April 2017.
The measure was announced by then-chancellor George Osborne alongside a raft of other changes to the benefits system. The Conservatives said the measures were designed to encourage benefit recipients “to make the same choices as those supporting themselves solely through work”.
Latest official figures show that 1.6 million children are living in families affected by the policy. Campaigners, charities and politicians from across the spectrum have called on the government to scrap the measure.
It is a separate policy to the benefit cap, which was also introduced under the then-Conservative and Liberal Democrat coalition government, which sees the amount of benefits a household receives reduced to ensure claimants do not receive more than the limit.
What is the effect of the two-child cap?
Organisations working in the sector argue that 109 children across the UK are pulled into poverty by the policy every day.
The number of children living in poor households has been steadily increasing over the past decade, with 4.5 million children – around one in three – now living in poverty.
Poverty can be defined in several ways, but the Department for Work and Pensions (DWP) uses “relative low income” as a marker, referring to people in households which earn below 60 per cent of the median income of £36,700 in 2024, or £22,020.
Some of these children are going without essentials, according to the Joseph Rowntree Foundation, such as food, heating, clothing or basic toiletries.
How have parents and campaigners reacted?
Alison Garnham, chief executive of Child Poverty Action Group said: “Scrapping the two-child limit will be transformational for children. This is a much-needed fresh start in our country’s efforts to eradicate child poverty and while there is more to do it gives us strong foundations to build on. Every child deserves the best start in life and with today’s decision government has done the right thing.”
Shauna and her husband have three children. He works full time. She says: “This will make a big difference because we’ve had to incur debts. Hopefully it will mean I can cover the last bills that come in each month instead of being in the red. I could buy a new mattress for two of my children. They can feel the springs on the mattresses they’ve got that they’ve had for many years.”
Jo has four children. She says the extra money will help to pay for childcare enabling her to do extra work shifts. She said:“Support for each of my children would also mean they can have better quality food rather than always the cheapest. We are living breadline to breadline.”
Responding to today’s announcement, Moazzam Malik, CEO of Save the Children UK said: “We welcome this bold action by the Chancellor to scrap the two-child limit. By the end of this Parliament, 450,000 children across the country will have been lifted out of poverty. Scrapping this unjust policy is the single most powerful step to reduce child poverty in a generation.”
Sophie Livingstone MBE, chief executive for Little Village, said: “Scrapping the cruel two-child limit is long-overdue and a powerful win for the parents and campaigners who fought so hard for change.
“It will finally ease the pressure for many struggling families but we can’t however forget those parents and children who have endured this policy for the last decade and all the work that’s still left to do if we’re going to end child poverty.”
Thea Jaffe, a mum of three supported by the charity, said: “This money will help me pay for bills and essentials, but what I’m most excited about is finally spending a weekend just playing with my kids instead of budgeting and worrying. But let’s be clear, it will still be another hard six months until April figuring out winter boots, coats, childcare, higher energy bills; not to mention Christmas!”
