Starmer to scrap two-child benefit cap as Treasury told to find money

Policy change will lift hundreds of thousands of children out of poverty after pressure from cabinet and MPs

- Rachel Sylvester

Keir Starmer has told cabinet ministers that he wants to scrap the two-child benefit cap and has asked the Treasury to identify ways to fund the plan.

With Labour MPs threatening to rebel over the government's welfare reforms, the prime minister has privately made clear that he is determined to axe the limit in order to drive down child poverty. “Keir wants to end the two-child cap - he thinks it’s the right thing to do,” one minister said. “It’s the best and most cost-effective way to reduce child poverty. The alternatives cost more and are less effective.”

The change, which would cost £3.5bn a year, would be the second big welfare U-turn after last week’s reversal on the winter fuel allowance.

Starmer’s endorsement will be seen as a victory for Liz Kendall, the work and pensions secretary, and Bridget Phillipson, the education secretary, who have been pushing for the cap to be abolished as the flagship policy in the government's child poverty strategy.

They have been backed by Wes Streeting, the health secretary, and Angela Rayner, the deputy prime minister, as concern grows around the cabinet table that without the shift, Labour will end up presiding over the highest levels of child poverty since records began.

Last week it was reported that the child poverty strategy, which was due in the spring, has been delayed until the autumn. The Observer understands that this is to allow the benefit changes, and the funding of the reforms, to be set out in a fully costed way in the budget.