Ministers have decided to abandon their controversial plan to lift the child benefit cap, despite previous indications that funding would allow for such an adjustment, The i Paper understands. This development is likely to provoke frustration among many Labour MPs and heighten the risk of another rebellion in the Commons regarding this issue. The decision comes at a particularly challenging time for Sir Keir Starmer, who is already facing potential dissent within his party over broader proposals for welfare cuts.
The two-child benefit limit, introduced by the Conservative government in 2017, has become a significant point of contention for some factions within Labour. This policy stipulates that families receiving universal credit can claim additional payments for only their first two children, meaning that any additional children born after April 2017 do not qualify for extra support. This contentious issue previously led to the suspension of seven Labour MPs in July, who defied party lines to vote for its repeal. The latest announcement may reignite this dispute, as ministers had initially hoped to end the cap as soon as funding permitted. However, given the deteriorating fiscal situation, sources close to the government have revealed that long-term plans to abolish the cap have now been shelved.
Possible Compromises
While ministers are not entirely ruling out potential compromises, such as introducing specific exemptions or raising the cap from two to three children, many remain skeptical. Kim Johnson, the MP for Liverpool Riverside, expressed her disappointment with the government’s inaction, stating that their “refusal” to address the cap is “deeply disappointing.” She dismissed the idea of increasing the cap to cover three children as “providing no real assurance that this issue is being taken seriously.” Johnson emphasized that “analysis has consistently shown that eliminating this cap is the most cost-effective way to reduce child poverty—so why the delay?” She described child poverty as a “national disgrace” and urged the government to act decisively, arguing that anything less would be indefensible. Some Labour politicians are warning that anything less than a complete removal of the child benefit cap could spark another rebellion in the Commons.
Wider Opposition
The dissent highlighted in July’s vote extended beyond the seven suspended MPs, with over 40 additional Labour members choosing to abstain. It remains uncertain when any further vote might occur, as dissenters would likely need to present an amendment to a related piece of legislation to compel the government to act. Several MPs are actively lobbying the Child Poverty Taskforce—which includes ministers from various departments, such as Work and Pensions Secretary Liz Kendall and Deputy Prime Minister Angela Rayner—to consider the significant impact that changing this policy could have on deprivation levels.
It is understood that the All-Party Parliamentary Groups focused on Poverty, Inequality, and Children in the North—comprising over 70 MPs and peers—are eager for the government to show movement on this front. Sources indicate that more Labour MPs are pushing for a commitment to completely scrap the cap, although the number of MPs willing to vote against the government on this issue remains unclear.
Unease Over Departure from ‘Labour Values’
There is growing unease within the party regarding what many perceive as a shift towards policies that diverge from traditional Labour values. This includes concerns about an impending plan to cut disability benefits, which is set to be announced next week. Reports from earlier this month suggested that the government might consider lifting the cap for families with children under the age of five, or potentially increasing it to allow claims for three children. However, government sources indicated that these proposals are not yet fully developed, and any alterations to the policy are unlikely to materialize in the immediate future.
Loyalist MPs
Some Labour insiders suggest that the proposals for compromise are being driven by loyalist MPs seeking to avert another rebellion. They maintain that there is still widespread support among MPs for the complete abolition of the cap, stressing that it is an issue that “unites all factions” within the party. Frustration has been voiced regarding the ambiguous timeline for the Child Poverty Taskforce and any forthcoming announcements. One Labour source remarked, “We are concerned that ministers may attempt to delay action, aiming to buy time. It’s evident they prefer not to reverse course if avoidable, and are focused on maintaining a tough stance on benefits claimants.” Another MP noted that the relatively modest size of the rebellion last year was due to expectations that the Child Poverty Task Group would confirm that removing the cap is essential to achieving the government’s goal of reducing child poverty.
MPs are eager to avoid repeating the mistakes they believe occurred with the government’s decision to mean-test the winter fuel payment and impose inheritance tax on farmers’ land. One MP stated that the challenge lies in swiftly implementing policies that deliver financial relief to households already grappling with hardship. “No one desires a rebellion or a vote against the government. We simply need the government to recognize that we are a Labour government, tasked with delivering Labour policies, and this is crucial to ensuring that families do not suffer losses,” they asserted. While there is a perception that the party leadership has maintained discipline in public, Johnson has been vocally critical of the government’s broader welfare policies, particularly the decision to increase defense spending while claiming there are insufficient funds to lift the benefit cap. She highlighted the upcoming spending review as a pivotal opportunity to prioritize children and families.
A spokesperson from the Department for Work and Pensions stated: “We do not comment on speculation. Our Ministerial Taskforce is exploring all available levers across government to ensure that every child has the best start in life as part of our Plan for Change. As we stabilize the foundations of the economy, we are increasing the Living Wage, adjusting benefits, and supporting 700,000 of the poorest families with children by introducing a Fair Repayment Rate on Universal Credit deductions to assist low-income households and improve their circumstances.”
Why the Two-Child Cap Was Introduced
The two-child benefit limit restricts most families from claiming means-tested benefits and tax credits for more than two children. Implemented by former Conservative Chancellor George Osborne during a period of austerity, this policy aimed to significantly reduce public spending. According to an analysis conducted by the Resolution Foundation last year, the two-child limit results in low-income families losing approximately £3,200 annually for any third or subsequent child born after April 2017. Completely abolishing this policy would incur a cost of £3.6 billion at current prices and could lift 490,000 children out of poverty. A more moderate approach of increasing the limit to three children (while also eliminating the overall benefit cap on households) would cost around £3 billion, yet would only reduce child poverty by 320,000, according to the think tank.
Labour’s Stance on the Policy
Labour has historically criticized the two-child limit since its inception by the Conservative Party. However, in 2023, Sir Keir Starmer indicated that he would not commit to scrapping it in the party’s manifesto, stating that the party would need to “make the tough decisions” if elected to power. Labour later softened its position, asserting that it would seek to eliminate the limit when fiscal conditions allow, thereby leaving the possibility open for its removal should funds become available in the Treasury budget. The decision not to lift the cap has sparked considerable controversy among Labour MPs, with many hoping that the ministerial taskforce on child poverty would lead to an affirmation of the government’s intention to end the policy.
Rebellion
In July, shortly after Labour secured victory in the general election, an amendment was proposed to the King’s Speech calling for the abolition of the two-child limit. This proposal, backed by the SNP, Plaid Cymru, the Green Party, and other MPs—including the now-independent former Labour leader Jeremy Corbyn—resulted in seven Labour MPs rebelling and voting in favor of it, while over 40 others chose not to participate in the vote. Those who rebelled were immediately suspended, and four have since had the party whip reinstated.
