Scrapping the restrictive two-child benefit cap entirely could elevate 630,000 children above the poverty line, according to experts’ analysis. The Institute for Fiscal Studies (IFS) suggests that this measure would be highly efficient in combating child poverty. It is anticipated that Keir Starmer will revise or eliminate the Conservative policy as part of an upcoming review on child poverty.
The government is exploring various alternatives to replace the two-child limit, which currently affects Child Tax Credits and Universal Credit for only the first two children in a family. Proposed options include implementing a new tapered rate system that provides higher benefits for the first child and reduced benefits for subsequent children.
Despite suggestions to partially reverse the cap to mitigate costs, some Labour MPs advocate for its complete removal. The IFS proposes that exempting working families from the limit could save £2.6 billion and reduce child poverty by 410,000 children. Alternatively, providing payments for third and subsequent children at half the rate of the first two could cost around £1.8 billion and lift 310,000 children out of poverty.
However, the authors highlight that these partial measures would not be as effective in poverty reduction as a complete reversal. The IFS estimates that fully removing the two-child limit, at a cost of £3.6 billion, could lift around 630,000 children out of poverty in the long term.
Tom Wernham, a senior research economist at IFS, emphasized the cost-effectiveness of reversing the two-child limit as a swift solution to reduce child poverty. He outlined various options for the government to consider, emphasizing the importance of determining the target beneficiaries and the purpose of the benefit system.
In response, a government spokesperson emphasized the commitment to providing every child with equal opportunities, highlighting investments in children’s development through initiatives such as Best Start Family Hubs, extended free school meals, and a crisis support package to prevent hunger among the most vulnerable during holidays.