LABOUR will not scrap the two-child benefit cap despite pressure from left wing MPs, according to Downing Street sources.

Plans to shelve the rule have reportedly been binned because of Labour’s £5 billion welfare U-turn.

Earlier this year Starmer told his cabinet he wanted to scrap the cap and asked the Treasury to identify ways to fund the plan.

However, a No 10 source has now told The Sunday Times: “My assessment is that is now dead in the water.”

And a No 11 source warned MPs there has to be “trade offs” for not introducing major welfare reforms, reports the outlet.

“Whether that’s tax rises or not scrapping the two child benefit cap,” they added.

Parents have only been able to claim child tax credit and universal credit for their first two children since 2017.

Imposed in April 2017, parents can not claim child tax credit or universal credit worth up to £3,455 per year for more than two children.

An exception is made for children born as a result of rape.

Eliminating the cap could incur costs of approximately £3.5 billion, an issue that has historically caused a split within the Labour party. Sir Keir Starmer, however, decided against removing the cap by 2023.

He then said Labour wanted to remove it, but only when fiscal conditions allowed.

After Labour’s overwhelming win last July, the prime minister resisted internal pressure and decided to suspend seven MPs for six months because they sided with the SNP in a vote to abolish the cap.

For months, ministers aligned with the party stance, but things began to change in May. Reports suggested that Sir Keir had requested the Treasury to explore potential funding for removing the cap.

Labour MPs who forced Sir Keir Starmer into a U-turn last week had set their sights on lifting the benefit cap.

But it looks like that plan is now set to be scrapped once and for all with a decision on the cap set for the autumn.

Speculation has been mounting that ending the two-child benefits cap will be the third welfare U-turn after those relating to winter fuel payments and disability benefits, which have already cost Rachel Reeves billions.

Sir Keir recently suffered the biggest blow to his leadership since coming into power a year ago after he was forced to abandon a key plank of his controversial benefit cuts in order to get them through parliament.

Just minutes before voting began, ministers announced that plans to restrict eligibility for personal independence payments were being dropped.

Sir Keir had already been forced into a U-turn the week before when more than 130 Labour MPs turned rebels and signed an amendment that would have effectively killed the bill off.

Among the concessions announced then was a plan to impose tougher eligibility rules only on future PIP claimants, leaving existing recipients unaffected.

It comes after analysis of official figures previously revealed that ditching the child benefits cap would hand thousands of pounds a year in extra benefits to 180,000 large families in which no one goes out to work.

But critics of the cap claim it has worsened child poverty.

The hard-hitting rule, which slashes payments like Universal Credit and Child Tax Credit, is costing struggling households an average of £4,300 each, according to a recent report from the Institute for Fiscal Studies.

Official figures from the Department for Work and Pensions (DWP) show a staggering 450,000 families were stung by the cap last year.

Most of those hit – around 280,000 families – have three kids, while 120,000 have four, and 56,000 are raising five or more little ones.

The DWP doesn’t reveal exactly how much the biggest families are missing out on.