Tens of thousands of children affected by the two-child benefit limit may not be lifted out of poverty unless the overall benefit cap is reformed, official figures show.
Introduced by the Conservatives, the two-child limit stops households with a third or subsequent child born from 6 April 2017 receiving additional universal credit or child tax credits for these members of the family.
Labour is under pressure to scrap the policy – a key cause of child poverty in larger families. Last month it suspended the whip from seven MPs who voted for an amendment to the king’s speech backing its abolition.
But the figures, supplied by the Department for Work and Pensions (DWP) under the Freedom of Information Act, show that the impact of scrapping the two-child limit would be dented unless the benefit cap – introduced by the coalition government in 2013 to limit the amount a household can receive – is also reformed.
As of April 2024 – the most recent figures available – 27,000 households claiming universal credit were hit by both the two-child limit and the benefit cap, including 100,000 children.
The true figure of those affected by both policies is likely to be higher, as the DWP data excludes households that receive old-style child tax credits and all households in Northern Ireland.
The benefit cap places an upper limit on the total benefits that working-age households can receive. The amount varies by location and household but particularly hits those living in areas with high rents.
Alison Garnham, chief executive of Child Poverty Action Group, said: “The two-child limit and benefit cap are hugely harmful for children because they break the link between a family’s assessed need and their entitlement to support. Both policies force families to live on less than they need. Both are driving up child poverty. In keeping with the government’s pledge to tackle child poverty, they must be scrapped in the upcoming budget.”
The DWP figures show that households affected by both the two-child limit and the benefit cap lose £273 a month on average due to the benefit cap – equivalent to about £3,276 a year. There are 4,120 households that lose out on more than £500 a month – £6,000 a year.
Prof Kitty Stewart of the London School of Economics said: “We’ve been really concerned about families affected by both these policies for two reasons – first, they are losing out on very substantial amounts of money, which is causing real hardship. And second, although they are among those who are in most urgent need, they won’t see any change at all if the two-child limit is scrapped.”
She said the current benefit cap would also catch some families for the first time if the two-child limit was scrapped, denying them the full benefit from doing so.
“By definition, benefit-capped families are not working, or working few hours – but as we already have quite tough work conditionality requirements, this tends to reflect considerable barriers to work, including young children or children with health difficulties or special educational needs. Over two-thirds of capped families are single parents, half with a child under five.
“While some people have responded to the policy by moving into work, our research found that it has actually pushed others further from the labour market. Our research found that there is no way for families to escape the cap by moving – they are already in the cheapest accommodation, often overcrowded and poor quality.”
Joseph Rowntree Foundation’s chief analyst, Peter Matejic, said: “A generation of children is growing up hungry and cold, with their parents forced into unthinkable decisions about whether to heat their homes, or put food on the table or warm clothes on their children’s backs. This is a disgrace in a country as wealthy as the UK.
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“A coherent child poverty strategy, based on research and evidence, is required to tackle the crisis facing those at the sharpest end of the UK’s social security system.
“As well as scrapping the two-child limit, we need universal credit to be reformed and the benefit cap reformed or, better still, removed so that the minimum level of support never falls below the amount required to afford essentials. Making these changes can lift hundreds of thousands of children out of poverty.”
Removing the two-child limit would cost the government an estimated £2.5bn this year, rising to £3.6bn a year further down the line.
The government has launched a ministerial child poverty taskforce, which is due to publish a new child poverty strategy next spring. Among the stated objectives of the taskforce is “supporting households to increase their income, including considering social security reforms that support people into work and alleviate poverty”.
Work and pensions secretary Liz Kendall said: “Child poverty is a scar on our society. It harms children’s life chances and our country as a whole. That is why tackling child poverty is a top priority for this government. We will take action with a comprehensive strategy to drive down poverty and drive up opportunity, building a better future for us all.”