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Sir Keir Starmer is under fresh pressure to lift the two-child benefit cap in Labour’s first budget in October.
The prime minister is facing renewed calls to scrap the austerity-era policy after a senior party figure suggested it would not be removed by chancellor Rachel Reeves in the statement this autumn.
MPs and anti-poverty campaigners have warned that delaying the end of the limit will keep hundreds of thousands of children in poverty ahead of the October 30 budget.
After figures showed borrowing in July surged to a higher than expected £3.1bn, placing additional pressure on the Treasury, it is widely expected Ms Reeves will outline a series of tax hikes and spending cuts to balance the books. She has previously attacked the last Conservative government for leaving a £22bn hole in the public finances.
But Kim Johnson, the Labour MP for Liverpool Riverside, said: “It is disappointing that Labour is not leaping at the opportunity to axe the two-child cap and immediately lift 400,000 children out of poverty.”
She welcomed the child poverty taskforce set up by the government, but told The Guardian: “It is untenable that a Labour government takes no action until then to ease the hardship for the 4 million children living in poverty in this country.”
And former shadow chancellor John McDonnell added: ““The two-child limit has become a symbol of the new government’s lack of appreciation of the need for urgent radical action.”
Mr McDonnell is one of seven Labour MPs who had the whip suspended for backing an SNP-led amendment to Sir Keir’s first King’s Speech calling for the two-child limit to be axed.
He said: “Children are living in poverty now, many classified as facing destitution.
“Delaying action on lifting children out of poverty cannot morally, economically or politically be justified.”
The two-child benefit cap, imposed by Tory former chancellor George Osborne, prevents parents from claiming benefits for any third or subsequent child born after April 2017.
Sir Keir had previously called for the policy to be scrapped but has since said Labour cannot fund the move and will not promise to do so until it can say how the change would be paid for.
Lifting the cap would bring 300,000 children out of poverty and 700,000 more out of deep poverty, according to the Child Poverty Action Group (CPAG).
CPAG chief executive Alison Garnham said: “The government has pledged an ambitious child poverty-reduction strategy but unless it scraps the two-child limit on benefits – and soon – it will fail to deliver on that.
“Children in poverty are hungry now. Their life chances are being jeopardised now. They need the government to do the right thing and scrap the policy in the autumn budget before more damage is done.”
The latest calls to scrap the cap came after Torsten Bell, former chief executive of the Resolution Foundation and new MP for Swansea West, said Labour will not use its first budget to scrap the measure.
Speaking at the Edinburgh Book Festival, Mr Bell said: “You’ve got to be clear where that money’s coming from and that’s what budgets are for and the government’s committed to a child poverty strategy.”
He added: “My view is, why don’t you let the ministers that are writing your child poverty strategy publish that strategy before you start criticising them?
“They accept there is a child poverty strategy coming ... not in time for the Budget on 30 October but soon in the months after that, so that’s what I’ll be looking out for.”
