End of child benefit cap ruled out as fresh Labour rebellion looms

Ministers have abandoned their plan to lift the controversial child benefit cap, when funds allowed them to, The i Paper understands.

The news is likely to anger many Labour MPs and will increase the chances of another Commons rebellion over the issue.

It comes at a time when Sir Keir Starmer is already facing potential unrest in his party over wider plans for welfare cuts.

The two child benefit limit, introduced under the Conservatives in 2017, has become a totemic issue for some in Labour.

It means families on universal credit can only claim additional payments for their first two children, and that  additional offspring born after April 2017 do not qualify for extra help.

The issue led to the suspension of seven Labour MPs in July after they defied their Government and voted to scrap it.

The latest development could help to reignite the row. Ministers had previously held out hope that they would end the cap when funds allowed.

But since then the country’s fiscal predicament has worsened. Now sources familiar with Government plans have indicated that the long term plans to get rid of the cap have been dropped.

They said the idea was no longer on the table, even if savings are found elsewhere in the welfare budget.

Possible compromises

Ministers are not ruling out possible compromises which could see certain exemptions introduced, or even the cap being raised from two to three children.

But that is unlikely to placate some. Kim Johnson, the MP for Liverpool Riverside, told The i Paper that ministers’ “refusal” to move the cap was “deeply disappointing”.

She dismissed suggestions that it could be increased to cover three children as “offering no real assurance that this issue is being taken seriously”.

“Analysis has repeatedly shown that scrapping this cap is the single most cost-effective way to reduce child poverty – so why the delay?” she said.

“Child poverty is a national disgrace, and the Government must act now. Anything less is indefensible.”

Some Labour politicians are warning that anything short of removing the child benefit cap entirely could incite another Commons rebellion.

Wider opposition

The opposition indicated by July’s vote went further than the seven suspended MPs. More than 40 additional Labour members abstained.

It is not clear when any vote would take place as rebels would be likely to need to table an amendment to another, related, piece of legislation in order to attempt to force the Government’s hand.

Some MPs are lobbying the Child Poverty Taskforce – consisting of cross-departmental ministers including Work and Pensions Secretary Liz Kendall, Deputy Prime Minister Angela Rayner and Education Secretary Bridget Phillipson – to consider the impact changing the policy would have on deprivation levels.

It is understood the All Party-Parliamentary Groups on Poverty and Inequality and Children in the North – totalling more than 70 MPs and peers – are keen for movement from ministers.

Sources said more MPs across the Labour party were pushing for a commitment to scrap the cap entirely, although the exact number of MPs prepared to vote against the Government on this is unclear.

Unease over departure from ‘Labour values’

They told The i Paper there was unease across the party over what has been perceived as a push for policies that are not aligned with Labour values, such as the plan to cut disability benefits which is set to be announced next week.

Reports earlier this month suggested ministers could consider lifting the cap for those with children under the age of 5-years-old, or increasing it to allow parents to claim for three children.

Government sources said these proposals were not at an advanced stage and said any change to the policy would not be introduced for “a while”.

Another, senior, government source said they had not personally seen plans to lift the cap for under-5s “written down anywhere” but indicated that ministers were open to the compromise position.

The source said the idea to loosen the restrictions for parents of younger children “makes sense”, adding: “If you can’t go the whole way and lift the cap then I can see why you would go for under-5s.

“If we get everything else in place over the course of this parliament, kids from low income families will be getting two meals a day in school through breakfast clubs and lunches. So I can certainly understand the logic.”

Loyalist MPs

Some Labour sources suggested the proposals were coming from loyalist MPs who were looking to find a compromise position to prevent another rebellion.

They insisted there is still widespread support across all MPs to scrap the cap entirely – arguing it is an issue that “unites all factions” across the party.

And insiders have expressed frustration about the vague timeline for the child poverty task force and any subsequent announcements.

“We are worried the ministers might try and kick it into the long grass to try and buy themselves some time. It’s clear they’d rather not u-turn if they can avoid it, and are keen to be seen to be tough on benefits claimants,” one Labour source said.

One MP said the only reason the rebellion was relatively small last year, was because they expected the Child Poverty Task Group, which will report in the coming months, to recognise that removing the cap was the only way to fulfil the government objective of bringing down child poverty.

MPs are keen to avoid being stung again as they believed happened over the Government’s decision to mean-test the winter fuel payment, and introduce inheritance tax on farmers’ land.

One said the new intake was trying to find a way to remain loyal to the party leadership and the PM whilst ensuring a “Labour policy” makes it through – among wider welfare cuts.

The Labour MP said: “The challenge is how do you do it fast to get money into the pockets of households that are already struggling?

“No one wants to see a rebellion or a vote against the government. We just need the Government to see that we’re a Labour government, needing to deliver a Labour policy and this is something that we need to get money into the pockets of households where children will lose out.”

They dismissed talk of a widespread rebellion on the issue – pointing out that the tough approach to expelling former rebels had kept MPs toeing the line in public.

But Johnson, who has been highly critical of the Government’s wider welfare policy criticised the Government decision to increase defence spending whilst maintaining that there were not currently funds to lift the benefit cap. And she said the upcoming spending review would be a “critical opportunity to finally prioritise children and families”.

A DWP spokesperson said: “We do not comment on speculation. Our Ministerial Taskforce is exploring all available levers across government to give every child the best start in life as part of our Plan for Change.

“As we fix the foundations of the economy, we’re increasing the Living Wage, uprating benefits and supporting 700,000 of the poorest families with children by introducing a Fair Repayment Rate on Universal Credit deductions to help low-income households and make everyone better off.”

Why the two child cap was introduced

The two-child benefit limit prevents most families from being able to claim means-tested benefits and tax credits for more than two children.

It was implemented by former Conservative chancellor George Osborne during the years of austerity,and was designed to reduce public spending.

According to analysis carried out by the Resolution Foundation last year, the two-child limit results in low-income families losing around £3,200 a year for any third or subsequent child born after April 2017.

Scrapping the policy completely would cost £3.6bn in today’s prices and take 490,000 children out of poverty.

An interim policy of scaling the policy back to a three-child limit (while also scrapping the overall benefit cap on households) would cost around £3bn, but lower the child poverty reduction to 320,000, the think tank said.

Labour’s stance on the policy

Labour had previously been very critical of the two-child limit when it was introduced by the Tories. But in 2023 Sir Keir Starmer confirmed he would not promise to scrap it in his manifesto.

He said the party would “have to make the tough decisions” if it got into power.

Labour then softened its stance and said it would seek to scrap the limit but when the fiscal conditions allow – leaving the door open to it being removed if funds could be found in the Treasury budget.

The decision not to lift it has been very controversial among Labour MPs – and there has been hope that the ministerial taskforce on child poverty would result in confirmation the government still plans to end the policy.

Rebellion

In July, shortly after Labour won the general election, an amendment was tabled to the King’s Speech which called for the two-child limit to be scrapped.

The SNP proposal was backed by Plaid Cymru, the Green Party and other MPs, including now-independent former Labour leader Jeremy Corbyn.

Seven Labour MPs rebelled and voted in favour of it – and more than 40 chose not to vote.

Those who rebelled were immediately suspended. Four have since had the party whip reinstated.