The Chancellor looks set to ditch the cap to appease Labour MPs.
Rachel Reeves is poised to scrap the two-child benefit cap (Image: Getty)
Rachel Reeves has pledged to pursue welfare reform as she prepares to announce £3billion to end the two-child benefit cap in the Budget. The Chancellor described that control of Government finances was needed to bring inflation down and ease the cost-of-living.
The Chancellor argued that taming inflation would involve controlling spending, overhauling asylum, scrapping police and crime commissioners and shutting quangos such as NHS England. She said it will also mean reforming Britain’s welfare system from one which traps millions of people on benefits to one that helps claimants into work.
Ms Reeves’ £3bn giveaway to less well-off families comes after rebel Labour MPs torpedoed last summer’s £5bn worth of benefit cuts. The Sunday Times reports scrapping the cap is a bid to appease those MPs in exchange for their not opposing reforms to be proposed next year.
Proposed welfare reforms are set to follow a review of Personal Independence Payments led by Sir Stephen Timms, Minister for Social Security and Disability, and former health secretary Alan Milburn’s quest to find ways to get young people into work and off benefits.
The Chancellor said future welfare reforms would transform the system into one “designed to help people succeed”. She isn’t expected to announce such reforms at the Budget on Wednesday (November 26).
In 2025 to 2026 the UK is forecast to spend £316.1bn on welfare, according to Government figures. Total welfare spending is forecast to be 10.6% of Gross Domestic Product and 23.5% of the total amount the Government spends over the same period.
Annual spending on health and disability benefits alone is estimated to rise to £100bn by 2030.
Ms Reeves had reportedly mulled introducing a tapered child benefit cap instead of scrapping it entirely.
But The Sunday Times reports she has agreed to ditch it completely, citing sources saying modelling by the Government showed it is only £200million more expensive to abolish it in full compared with tapering it.
The two-child benefit cap was introduced by former chancellor George Osborne and applies to universal credit and tax credits, not child benefit payments. It means poorer families don’t receive extra benefits when they have a third or subsequent child and applies to those born after April 6, 2017.
According to the Institute of Fiscal Studies, had the cap not been brought in families could have received an average £4,400 in benefits per year.
Civil society and campaign groups have long called for the cap to go so thousands of children can be lifted out of poverty. Others argue Britain cannot afford to scrap it.
The Conservative Party has pledged to reinstate the cap if it is scrapped in the Budget. Tory leader, Kemi Badenoch, has insisted the UK can’t afford to hand out £3bn more in benefits for larger families.
Mrs Badenoch told reporters on Tuesday: “We need to start living within our means, that is something I will stand by.”
Reform UK leader Nigel Farage has signalled his support for scrapping the cap, arguing government needs to encourage Brits to have more children.
