The government is considering getting rid of the two-child benefit cap first brought in by the Conservatives.
The policy has caused considerable consternation within the Labour Party, with a growing number of MPs calling to scrap it and ministers so far refusing to.
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But now, Education Secretary Bridget Phillipson has given the government’s strongest hint yet it may scrap the cap after she told Sky News ministers are “considering” lifting it.
We look at what the cap is and the controversy over it.
What is the two-child benefit cap?
Since 2017, parents have only been able to claim child tax credit and universal credit for their first two children, if they were born after April 2017.
An exception is made for children born as a result of rape.
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Who introduced it?
Then work and pensions secretary Iain Duncan Smith first proposed the policy in 2012 under the Conservative-Liberal Democrat coalition government.
It was not until 2015 that then chancellor George Osborne announced a cap would be introduced from the 2017/2018 financial year.
The coalition said it made the system fairer for taxpayers and ensured households on benefits faced the same financial choices around having children as those not on benefits.
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What is Labour’s position on the cap?
The party has long been divided over the issue, with Sir Keir Starmer ruling out scrapping the cap in 2023.
He then said Labour wanted to remove it, but only when fiscal conditions allowed.
Following Labour’s landslide victory last July, the prime minister refused to bow to pressure within his party, and suspended seven MPs for six months for voting with the SNP to scrap the cap.
Ministers have toed the party line for months, but the narrative started to shift in May, with Sir Keir reported to have asked the Treasury to see how scrapping it could be funded.
The publication of Labour’s child poverty strategy was delayed from the spring to autumn, fuelling speculation the government wants to use the next budget to scrap the cap.
Then the education secretary told Sky News on 27 May lifting the cap is “not off the table” – and “it’s certainly something that we’re considering”.
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How many children does the cap affect?
Government figures show one in nine children (1.6m) are impacted by the two-child limit.
In the first three months Labour were in power, 10,000 children were pulled into poverty by the cap, the Child Poverty Action Group found.
In May, it said another 109 children are pulled into poverty each day by the limit, adding to the 4.5 million already in poverty.
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The Resolution Foundation said the cap would increase the number of children in poverty to 4.8 million by the next election in 2029-30.
Torsten Bell, the foundation’s former chief executive and now a Labour Treasury minister, said scrapping the cap would lift 470,000 children out of poverty.
How much would lifting the cap cost the taxpayer?
The cap means for every subsequent child after the first two, families cannot claim benefits worth £3,455 a year, according to the Institute for Government.
It estimates removing the limit would cost the government about £3.4bn a year – equal to roughly 3% of the total working-age benefit budget.
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It is also approximately the same cost as freezing fuel duties for the next parliament.
Research has found the indirect fiscal impacts of lifting the cap could be higher, as some data shows investing in young children can pay for itself by causing better outcomes for them later in life.
