Families hit by Tory two-child restrict as additional 670,000 children impacted over 5 years
Another 670,000 children will be impacted by the two-child benefit limit by the end of the next Parliament, analysis shows today.
The Tory policy restricts most low-income families to claiming Universal Credit and child tax credit for their first two children. Families lose out on £3,455 per year per child after that, according to the Institute for Fiscal Studies (IFS). Half (50%) of families impacted by the cap in 2023 were single parents, and 57% had at least one adult in paid work.
Labour and the Conservatives have both resisted calls to immediately scrap the cap, which has been blamed for pushing more kids into poverty. The Liberal Democrats and the Green Party have pledged to remove it.
The policy only applies to children born after 5 April 2017, so the number of children affected is growing every year. Currently, it affects around 2 million children; this will rise by 250,000 next year and by 670,000 before the end of the next parliament, according to the IFS.
When fully rolled out, it will affect 38% of children in the poorest fifth of households and 43% of children in households with at least one person of Bangladeshi or Pakistani origin. Researchers said this was partly due to these families being likely to have more children and being more likely to be on low income.
Eduin Latimer, a Research Economist at IFS, said: “The two-child limit is one of the most significant welfare cuts since 2010 and, unlike many of those cuts, it becomes more important each year as it is rolled out to more families. It has a particularly big impact on the number of children in poverty for two reasons: it mostly affects poorer households and, by definition, its effects are entirely concentrated in families with at least three children.”
Removing the two-child limit would cost £3.4billion a year in the long run, researchers said. This would be just 3% of the total working-age benefit budget, or the cost of freezing fuel duty for the next parliament.
However the IFS estimates the move would lift 500,000 children out of relative child poverty, which is defined as living in a household earning below 60% of median income after housing costs.
Poverty rates have risen for families with three or more children since 2014/15, when 35% of bigger families were in relative poverty. This had risen to 46% by 2022/23.
Over the same period, child poverty among families with one or two children fell from 26% to 22%.
