Scrapping the harsh two-child benefit limit entirely could elevate 630,000 children above the poverty line, according to experts’ analysis. The Institute for Fiscal Studies (IFS) suggests that this action would be highly effective in reducing child poverty and may be part of an upcoming child poverty review led by Keir Starmer to amend the previous Tory policy.
Various alternatives are being considered by the government to replace the current two-child limit, which currently restricts Child Tax Credits and Universal Credit to the first two children in a family. One proposal involves implementing a new tiered payment structure where parents receive more financial assistance for the first child than for subsequent children.
Despite some Labour MPs advocating for a complete abolition of the limit, the IFS has proposed options to Chancellor Rachel Reeves that could partially reverse the cap, potentially avoiding the full removal costs. For instance, exempting working families from the limit could reduce expenses to £2.6 billion and alleviate child poverty for 410,000 children. Introducing a reduced payment rate for the third and subsequent children, costing approximately £1.8 billion, could lift 310,000 children out of poverty.
Although these partial solutions would not have the same impact on poverty reduction as a complete reversal, the IFS estimates that fully eliminating the two-child limit would require around £3.6 billion and could help approximately 630,000 children in the long run. Tom Wernham, a senior research economist at IFS, emphasized the cost-effectiveness of reversing the limit and highlighted the importance of the government’s decision on who to prioritize for assistance within the benefit system.
The government has stated its commitment to providing every child with equal opportunities by addressing the structural causes of child poverty through initiatives like the Child Poverty Taskforce. Investments totaling £500 million in children’s development, including the expansion of Best Start Family Hubs, free school meal extensions, and a new £1 billion crisis support package to prevent hunger during school holidays, demonstrate their dedication to tackling child poverty comprehensively.