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Labour MPs have publicly thrown their weight behind Rachel Reeves’s budget after she abolished the two-child benefit cap and unveiled a slate of progressive measures, including a mansion tax.
Backbenchers rallied round the prime minister and chancellor on Wednesday afternoon after Keir Starmer hailed the measures being announced as “a Labour budget with Labour values”.
The decision to entirely scrap the two-child limit, which prevents parents from claiming child tax credit or universal credit for more than two children, was openly celebrated by dozens of Labour MPs who have been publicly and privately pushing for the measure. It will cost £3bn at the end of this parliament.
In a joint statement Helen Hayes and Debbie Abrahams, the chairs of the education and work and pensions select committees, said the move would “immediately lift hundreds of thousands of children out of poverty and stop even more being drawn into it”.
Antonia Bance, Labour MP for Tipton and Wednesbury and former senior union official, said on Bluesky that she had “worked to end the two-child limit ever since the day I was elected” and that ministers had “acted to give every child the best start in life”.
Ruth Cadbury, Labour MP for Brentford and Isleworth and chair of the transport select committee, said Reeves was lifting nearly half a million children out of poverty “at the stroke of a pen”.
Announcing the decision in the Commons, Reeves said she would not “preside over a status quo that punishes children for the circumstances of their birth”.
One Labour frontbencher said that “the price of keeping the PLP on side to secure some time and bandwidth is probably what made it worth it – as well as lifting more children out of poverty”. They added that the budget had bought the chancellor “time and respect – the question is what she and the PM now do with it”.
Starmer and Reeves have embarked on a charm offensive in recent weeks to shore up their position with their fractious parliamentary party. The chancellor privately urged Labour MPs on Monday to back her make-or-break budget and told them that “when you look at the distributional analysis you’ll see this is a Labour budget, a progressive budget, a budget I’m proud of”.
Among the measures unveiled on Wednesday that have proven popular with backbenchers, Reeves raised the minimum wage and introduced a gambling levy on online betting companies and a tax on homes worth over £2m.
But privately Labour MPs said the parliamentary party’s reactions to the budget were mixed. One MP called it a “complete shambles” and “worst budget I’ve seen”, adding: “They could have taxed banks, they chose to tax our constituents instead.”
They cited the decision to freeze income tax thresholds for another three years, the budget’s central revenue-raising measure, which will generate £7.6bn by 2030 by bringing more people into paying tax and into higher tax bands. The budget includes a tax raid on pension contributions and cuts the tax-free cash Isa limit for under-65s.
Kemi Badenoch, the Conservative leader, told the Commons that “all this budget delivers is higher taxes and out of control spending” and said it made Reeves’s position “untenable”.
“She chose to impose the jobs tax, driving unemployment higher month after month. She chose to abandon welfare reform, meaning the benefits bill is spiralling. She chose to spend more and more money she didn’t have, leaving taxpayers to foot the bill,” she said. “She’s out of money, out of ideas, out of her depth that she has run out of road.”
Adrian Ramsay, the Green party’s Treasury spokesperson, said that Labour ministers had “chosen to paper over the cracks – with half-measures that won’t do enough to fix the deep-rooted problems in our economy that are keeping ordinary people in poverty while the super-rich get richer”.
Nigel Farage, the Reform UK leader, gave a press conference where he condemned what he called a budget which would do nothing to help an economy “on the edge of a precipice”.
Speaking alongside Zia Yusuf, Reform UK’s head of policy, Farage reiterated Reform’s proposals to cut taxes by reducing spending, with cuts particularly focused on overseas nationals, including those from the EU with settled status.
He said he believed a general anti-business sentiment would cause more wealthy people and entrepreneurs to leave the UK. “My prediction is the exodus will continue, the exodus will accelerate,” he said, blaming what he called “signals from a government that literally doesn’t understand business, because none of them have ever been in business”.
