Scrapping two child benefit cap ‘still on table’ as Labour rebel hostility climbs

Keir Starmer is still considering scrapping the two child benefit cap, Downing Street has insisted, amid simmering discontent among Labour backbenchers over the Government’s welfare reforms.

Senior government sources said removing the two child limit was “still on the table”, adding that none of the Cabinet were supportive of the cap that was introduced by the former Conservative government.

It comes as Labour rebels have tabled a further amendment to the Welfare Bill opposing £2bn cuts to the health element of universal credit. The bill is being backed by nearly two dozen Labour backbenchers in a fresh threat to the Prime Minister’s authority.

Education Secretary Bridget Phillipson warned on Sunday that removing the cap, which means families can only claim child tax credit and universal credit for their first two children, had become “harder” as a result of MPs forcing the Government to abandon most of its welfare reforms last week.

Speaking to the BBC, Phillipson said that ministers are “looking at every lever and we’ll continue to look at every lever to lift children out of poverty”.

Pushed on whether the chances of the benefit cap going are now slimmer, Phillipson said: “The decisions that have been taken in the last week do make decisions, future decisions harder.

“But all of that said, we will look at this collectively in terms of all of the ways that we can lift children out of poverty.”

Reports over the weekend quoted sources within No 10 stating that any plans to remove the cap were now “dead in the water”, in a move that threatened to further damage relations with Labour backbenchers.

But that view was rejected by a separate figure within Downing Street, who told The i Paper that the Government was committed to tackling child poverty, and that this would require a number of different levers, adding: “We are not ruling anything out. Nothing is off the table.”

Both No 10 and the Education Secretary stressed on Sunday that there would be a “cost” associated with the decision by Labour MPs to rebel last week.

The U-turn on welfare reforms has cost the Government £5bn a year, while the climbdown on winter fuel payments will cost around £1.25bn. Should the Prime Minister agree to scrap the two child cap, at a cost of around £3.5bn, it would all but wipe out Chancellor Rachel Reeves’s £9.9bn fiscal headroom.

Reeves used an interview over the weekend to warn there would have to be “trade offs” following the welfare decision, adding that it would be “irresponsible” to rule out further tax rises in the Autumn Budget to pay for such measures.

One leading Labour rebel said the Treasury must push ahead with scrapping the two child cap, as well as abandoning cuts to welfare.

“No 10’s response to the concessions given in the welfare bill was to say that we can say goodbye to the notion of getting rid of the two child cap,” the senior MP said. “Keir wanted to do it but now it’s off the table? The question is: are we saying it’s either supporting kids in poverty or disabled people? My view is simple: we can do both.”

Ministers are eager to avoid stoking further anger among their own MPs, after several Cabinet members admitted the welfare fiasco had been “damaging” for the Government.

Phillipson acknowledged that the Government “pushed ahead too fast”, adding: “We didn’t listen enough to people, including, I would say, including to lots of people who had concerns about the nature of that change.”

Around 23 Labour MPs have signed a fresh amendment that will attempt to force the Government to scrap its reforms to the health element of universal credit, which they say will cut £2bn in benefits.

MPs are due to vote on the third reading of the Welfare Bill on Wednesday.