Labour’s newly elected deputy leader, Lucy Powell, said ministers should keep the manifesto commitment not to raise Income Tax, National Insurance or VAT and urged the government to lift the two‑child benefit cap in full. Speaking to BBC Radio 5 Live on 6 November, she framed sticking to the pledge as a matter of public trust as Budget decisions are finalised.
Chancellor Rachel Reeves will deliver the Budget on Wednesday 26 November 2025. In pre‑Budget remarks this week she declined to recommit to the manifesto wording and did not rule out an Income Tax rise, signalling difficult choices on revenue.
The government’s fiscal framework requires the current budget to be in balance by 2029/30 and public sector net financial debt to be falling across the forecast period. In March the Office for Budget Responsibility assessed headroom against the current budget target at about £9.9bn (0.3% of GDP), a historically narrow margin.
Since spring, draft forecasting and external analysis have pointed to weaker productivity and higher debt‑interest costs, implying a £20–30bn deterioration in the outlook. The National Institute of Economic and Social Research has argued the Chancellor should build a £30bn buffer to meet her rules with confidence.
Powell’s stance tracks Labour’s published manifesto position not to increase headline rates of Income Tax, National Insurance or VAT for “working people”. Party materials reiterated that commitment during and after the election campaign.
On the two‑child limit, recent DWP data show almost 1.7 million children live in families affected by the policy, with around 37,000–40,000 more children impacted over the past year. Major charities say the policy pushes families into hardship even when parents are in work.
The Treasury is weighing options alongside broader fiscal choices. Reporting indicates scenarios from full abolition to partial reforms, including covering three or four children, tapering support for later‑born children, or exempting households where an adult works. Officials have not confirmed a final approach.
Independent modelling puts full abolition at roughly £3–3.6bn a year by the end of this Parliament. Alternatives carry smaller price tags but also smaller poverty reductions: a three‑child limit has been estimated at about £2.4bn in 2029/30, while exempting working families is modelled at around £2.6bn. Analysts note interactions with the separate household benefit cap.
For households, the two‑child limit removes up to about £3,500 a year per third and subsequent child. Scrapping it would lift hundreds of thousands of children above the poverty line, though around 70,000 of the very poorest households would see gains curtailed unless the benefit cap is also addressed.
Powell’s intervention follows her 25 October election as Labour’s deputy leader, a party role outside the Cabinet. She now sits on Labour’s National Executive Committee, while David Lammy serves as Deputy Prime Minister and Justice Secretary after the September reshuffle.
The Budget on 26 November will clarify how ministers intend to reconcile fiscal rules, manifesto tax wording and any reforms to the two‑child limit. Any decision to change Income Tax or alter child‑related entitlements would require rapid implementation work across HM Treasury, HMRC and the DWP.