Rachel Reeves is poised to scrap the two-child benefit cap and replace it with a ‘taper system’, it emerged tonight.
The Chancellor is under pressure from both backbench MPs and ministers to ditch the welfare limit at her upcoming Budget.
According to reports on Tuesday night, Ms Reeves will lift the cap on 26 November when she announces her next fiscal package.
But Treasury officials are said to be exploring options to replace the limit with a new tapered system instead, amid concerns about escalating costs for extremely large families.
The two-child benefit cap currently prevents parents from claiming Universal Credit or child tax credit for a third or additional child born after April 2017.
Ms Reeves’s department is considering whether additional benefits might instead be limited to three or four children, The Guardian reported.
The newspaper said the Treasury is also mulling over whether there could be a taper rate introduced so parents get the most for their first child and less for subsequent children.
A further option could see the cap lifted only for working parents on Universal Credit, in order to encourage more people into the workforce, it is claimed.
It is estimated that scrapping the cap entirely – which is being demanded by both MPs and charities – would cost around £3billion a year.
The Chancellor is currently scrambling to fill what is suggested to be a £30billion black hole in the public finances ahead of the Budget.
In his Labour conference speech on Tuesday afternoon, Sir Keir Starmer hinted the Government would soon lift the two-child benefit cap.
The Prime Minister said Labour’s extension of free school meals to all children whose parents are on Universal Credit was the ‘first step on our journey to end child poverty’.
But a failure to lift the two-child benefit cap completely could leave Sir Keir and Ms Reeves facing anger from Left-wing Labour MPs and child poverty campaigners.
Lord John Bird, the crossbench peer who founded the Big Issue charity, welcomed the reports that Ms Reeves was poised to scrap the cap in November.
But he warned it must only be a ‘first step’ towards ‘scrapping the cap in full’.
‘Tapered versions of the cap will not be enough to deliver Labour’s ambitious promise to reduce child poverty,’ he added.
‘We need proper, measurable targets to keep up this promising momentum and propel further action that can truly shift this malignant poverty crisis.’
Dan Paskins, of Save the Children, said: ‘We agree with the Prime Minister that action they have taken so far on child poverty is the ‘first step’.
‘The only logical next move is to scrap the two-child limit to benefits in full at the autumn Budget. Time is ticking for Britain’s children.’
The two-child benefit cap was introduced by former Conservative chancellor George Osborne.
As well as Labour MPs demanding the cap be scrapped, Reform UK leader Nigel Farage has backed lifting the welfare limit.
But Tory shadow chancellor Sir Mel Stride said: ‘Scrapping the two-child benefit isn’t just irresponsible – it’s unfair.
‘Rachel Reeves must come clean: where’s the money coming from? Will it be more and more debt, or even higher taxes?
‘The UK is in the grip of Labour’s cost-of-living crisis and the public deserve the truth.
‘With both Reform and Labour committing to the spiraling welfare bill, only the Conservative Party is committed to Britain living within its means.’
Ms Reeves on Tuesday night did not say whether she was planning to scrap the two-child benefit cap.
Asked about reports she would do so at the Budget, the Chancellor told a Labour conference fringe event: ‘Keir said in his speech today that we will reduce child poverty in this Parliament, but we will set out the policies in the Budget.
‘I think we’ve been pretty clear this week that we can’t commit to policies without us explaining where the money is coming from.’
Adding that there were ‘real financial constraints’ due to persistent inflation, tariffs, global conflicts and increased borrowing costs – along with expected changes to OBR forecasts – she said: ‘I would be the first person to want to find some money down the back of the sofa to pay for lots of different things.
‘But I have to be Chancellor in the world as it is, not in the world as I might like it to be.’
A Government spokesperson said: ‘Every child, no matter their background, deserves the best start in life.
‘That’s why our Child Poverty Taskforce will publish an ambitious strategy to tackle the structural and root causes of child poverty.
‘We are investing £500million in children’s development through the rollout of Best Start Family Hubs, extending free school meals and ensuring the poorest don’t go hungry in the holidays through a new £1billion crisis support package.’
