Sir Keir Starmer said his party is having to make “tough decisions” ahead of the next election as he appeared to defend his stance on maintaining the two-child benefit cap.

There has been disquiet among Labour MPs after the party leader confirmed he would retain the Conservative-imposed limit which has been criticised for pushing families into poverty.

The policy, introduced by Tory former chancellor George Osborne during his austerity drive, prevents parents claiming Universal Credit for any third or subsequent child.

Scrapping the cap would lift around 270,000 households with children out of poverty at an estimated cost of £1.4 billion in the first year.

But Sir Keir said the economic situation a future Labour government would be faced with if it wins power would mean it would have to be stringent on spending pledges.

We have to take the tough decisions

Sir Keir, asked during a conversation with Sir Tony Blair at the Future of Britain conference what he would say to those wanting more spending commitments, said: “My first reaction is we keep saying collectively as a party that we have to make tough decisions.

“And in the abstract, everyone says, ‘That’s right Keir’.

“But then we get into the tough decision, we’ve been in one of those for the last few days, and they say, ‘We don’t like that, can we just not make that one, I’m sure there is another tough decision somewhere else we can make’. But we have to take the tough decisions.”

Sir Keir told the central London audience that former prime minister Liz Truss “proved the thesis that if you make unfunded commitments, then the economy is damaged and working people pay the price”.

He added: “For her it was unfunded tax cuts, but it could be unfunded spending.

“That can come from both sides of politics, so it is a fundamental. I will not let the next Labour government get anywhere near the equivalent to what Liz Truss did.”

After Ms Truss, Britain’s shortest serving prime minister, and her chancellor Kwasi Kwarteng’s so-called mini-budget in September, mortgage rates rose and the value of the pound was sent tumbling. She resigned from No 10 shortly after.

Former prime minister Sir Tony praised Sir Keir for the “amazing” work he had done to bring Labour “from the brink of extinction” in 2019 to the “brink of government”.

He said the economic picture Labour could potentially inherit after a likely general election next year, with Sir Keir’s outfit currently riding high in opinion polls, was far more stark than in 1997 when New Labour won a landslide.

Sir Tony, whose global institute organised the conference, said: “I think we both agree that 1997 is very different to 2024.

“In 1997, we had a lot of things to do, but on the other hand we could see that growth had stabilised and we could look forward to over 2% … growth.

“What you are going to inherit next year, it is grim.”

Sir Keir said the current mood of the country was “pretty bleak” as he set out the need to reassure voters about the current situation while also setting out a vision for the future.

In a speech before the conversation with Sir Tony on Tuesday, Sir Keir said that the “in-tray of the next government will be like no other”.

Repurposing a slogan used by Sir Tony and New Labour, he said: “We need three things: growth, growth, growth.”

The in-conversation event between Sir Tony and Sir Keir marked the first time they had shared a platform with one another since the Opposition leader was elected in 2020.

Sir Tony opened the one-day conference by warning that a failure to “master” technological advances such as artificial intelligence (AI) could lead to a “retreat” of progressive politics.

“Understanding, mastering and harnessing the 21st century technology revolution is the 21st century’s progressive political mission, in the same way that ultimately mastering the 19th century industrial revolution became the mission first of the Liberal Party in the 19th century and then the Labour Party over 100 years ago,” he said.

“Otherwise, for progressive politics the danger is in retreat to a version of old-fashioned state intervention which now manifests itself in anti-globalisation sentiment, forgetting the enormous benefits open trading markets have brought the world.

“Or in new-fashioned identity politics, which risks mirroring the divisiveness of the far-right, not defeating it.”

Elsewhere at the conference, TV chef Jamie Oliver used his appearance to call for “vulnerable” school children to be offered free school meals in England.

Sir Patrick Vallance, the UK Government’s former chief scientific adviser, later warned that it was “damaging” the country and the European Union for Britain to continue to be outside the Europe-wide research scheme, Horizon.

The UK was excluded from the £85 billion scheme in a tit-for-tat retaliation over post-Brexit trading rules for Northern Ireland in 2020, with Prime Minister Rishi Sunak still considering proposals to rejoin.