Rachel Reeves set to allow bigger families to claim more benefits in £3bn move

Rachel Reeves is set to allow parents with bigger families to claim more benefits. The Chancellor, who is set to clobber millions with tax hikes, said children "should not be penalised because their parents don't have very much money".

The comments are the strongest indication yet that she could remove the two-child limit on working-age benefits introduced under the Conservatives in 2017. The move will cost the Chancellor £3billion, at a time when she is trying to fill a £30billion black hole in the public finances. But speaking to Matt Chorley on BBC Radio 5 Live, Ms Reeves suggested she did not want to see benefits limited according to family size.

"I don't think that it's right that a child is penalised because they are in a bigger family, through no fault of their own," she added.

"And so we will take action on child poverty. The last Labour government proudly reduced child poverty, and we will reduce child poverty as well."

She added there were "plenty of reasons why" parents who decided to have three or four children could see their financial circumstances change.

Asked if her changes would mean more working people are paying for people on benefits, Ms Reeves said: "I was listening to the radio, I was getting ready for work this morning, and there was a story around the number of people who are homeless in Britain today.

"Now, many of those will include families. They might not be living on the streets, but they might be living in temporary B&B accommodation, or they might sleep on someone's floor in someone's living room.

"Now obviously they have real human costs, but it also has an economic cost as well because the cost of temporary accommodation has skyrocketed and continues to increase.

"The costs of the lost educational attainment as kids move school constantly to move to new accommodation, the costs on people's health - both physical and mental - from poor-quality accommodation, from a lack of good nutrition.

"The social costs and the personal costs are most important, but I don't think we can lose sight as well of the costs to our economy in allowing child poverty to go unchecked. And in the end, a child should not be penalised because their parents don't have very much money.

"There are plenty of reasons why people make decisions to have three, four children, but then find themselves in difficult times.

"You'll also have things like adoption or foster caring. Lots and lots of different reasons why families change shape and size over time."

The Chancellor has all but confirmed she will break Labour's flagship manifesto commitments on tax in a fortnight's time.

She told BBC Radio 5 Live on Monday: "It would, of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending and the reason why our productivity and our growth has been so poor these last few years is because governments have always taken the easy option to cut investment - in rail and road projects, in energy projects, in digital infrastructure.

"And as a result, we've never managed to get our productivity back to where it was before the financial crisis.

"So we've always got choices to make, and what I promised during the election campaign was to bring stability back to our economy, and what I can promise now is I will always do what I think is right for our country."

She added: "I will do what I believe is right for our country, and sometimes that means not always making the easy decisions, but the decisions that I think are in our national interest."

The Resolution Foundation, a Left-wing think-tank closely embedded within the Labour movement, is pushing for a policy that would raise income tax by 2p while cutting National Insurance by the same amount.

This would shift the burden onto those who do not pay National Insurance - including pensioners, the self-employed and landlords - while leaving most workers' pay packets unaffected.

Fears are mounting that the Chancellor will clobber OAPs with a double-whammy by hiking income tax and extending the freeze on the lower tax threshold.

Campaigners have warned that the measures are more unpopular than when Ms Reeves snatched away the winter fuel allowance.

More than 160,000 people have now signed a petition demanding a stop to the so-called "retirement tax" before the November 26 showpiece.