In a significant move for millions across the UK, Chancellor Rachel Reeves has announced a substantial £15 billion benefits spending plan in her recent Budget. The package includes inflation-linked increases for key working-age benefits and the landmark decision to scrap the two-child benefit cap, a policy long criticised for pushing children into poverty.
Key Benefit Increases from April
The Chancellor confirmed that payments for working-age benefits will rise in line with September's inflation rate of 3.8 per cent, effective from next April. This uplift applies to Universal Credit, Personal Independence Payment (PIP), and child benefits, representing a government investment of up to £6 billion.
For the over 3.8 million PIP claimants, this means the highest award rates will increase. The weekly payment for those receiving both the daily living and mobility components will rise from £187.45 to £194.55.
Universal Credit claimants are set for an even more significant boost in 2026. Due to the Universal Credit Act 2025, which mandates above-inflation increases until 2030, claimants will receive an extra 2.3 per cent on top of inflation. With inflation at 3.8 per cent, this results in a total 6.2 per cent rise from April 2026.
Scrapping the Two-Child Cap
In one of the Budget's most anticipated announcements, Ms Reeves confirmed the complete removal of the two-child benefit cap from April. She labelled the policy, which limits universal credit and tax credit claims to two children in most households, as one that "pushes kids into poverty more than any other".
The Chancellor also pledged to abolish the associated "rape clause", which required women to prove children were conceived non-consensually to receive support. She described this as a "grotesque indignity" and "dehumanising", stating she would not tolerate it any longer.
This reversal, projected to cost around £3 billion annually, is expected to lift hundreds of thousands of children out of poverty. The Chancellor confirmed the move was "fully costed and fully funded" through measures tackling fraud and error in the welfare system, tax avoidance, and reformed gambling taxation.
Broader Financial Impact
The state pension will also see a significant increase, rising by 4.8 per cent in line with earnings rather than inflation. This represents a £550 annual increase for the full state pension at a cost of approximately £7.8 billion.
According to the Office for Budget Responsibility (OBR), these changes mean government spending on welfare is now projected to increase from £333.0 billion in 2025/26 to £389.4 billion in 2029/30. This marks a substantial rise compared to previous forecasts.
The Budget decisions follow the Chancellor abandoning proposals for a wider welfare system transformation due to backbench resistance, which would have cost roughly £5 billion. Plans to strip winter fuel payments from millions of pensioners were also ditched, adding an extra £1.25 billion expense for the government.
