UK's Reeves scraps two-child welfare cap to cut poverty

LONDON (Reuters) -Britain's finance minister Rachel Reeves said on Wednesday a two-child limit on welfare payments would be scrapped in April to help reduce child poverty rates, a move estimated to cost 3.1 billion pounds ($4 billion) by 2029-30.

Many lawmakers in Reeves' Labour Party have long campaigned for the removal of the cap, arguing the limit penalises larger families. Recent polling, however, showed 59% of the British public were in favour of keeping the cap.

"We on this side of the House do not believe that the solution to a broken welfare system is to punish the most vulnerable children," Reeves said. "We are lifting 450,000 children out of poverty with the end of the two-child limit."

The welfare cap, introduced by the Conservative government in 2017, has meant many low-income families do not receive further benefits when they have a third child or subsequent children.

It was brought in to ensure families receiving welfare payments faced similar decisions about having children as those supporting themselves solely through work.

Britain's Office for Budget Responsibility estimated removing the cap would cost 3.1 billion pounds ($4.1 billion) in 2029-30, and said it would increase benefits for 560,000 families by an average of 5,310 pounds a year.

Reeves said in her speech that children should not bear the brunt when families find themselves in difficult times, such as when a parent dies, suffers ill health or loses their job.

About 15% of families with under-18s have three or more children in Britain while 41% have two children and 44% have one child, according to the latest figures from the Office for National Statistics. 

Thea Jaffe, 40, told Reuters before the budget that she was at "breaking point" without the extra support for her third child.

"Due to skyrocketing childcare costs and skyrocketing rent, the skyrocketing cost of living, which has really shot up since I was pregnant with him, more than I think many families could have planned for, I struggle to break even," she said on Tuesday.

($1 = 0.7583 pounds)

(Reporting by Andy Bruce, writing by Sarah Young and Paul Sandle, editing by Catarina Demony and Toby Chopra)