A three-child limit on benefits could cut child poverty by 320,000 by the end of this Parliament, a think tank has projected, but it insisted scrapping the two-child limit entirely is necessary for any poverty strategy to be credible. Labour has been under pressure, including from within the party, to abolish the policy amid record highs in child poverty.
Its child poverty taskforce is due to present a strategy in spring and a new report published on Wednesday has warned the current limit is “incompatible with a credible” plan. The Resolution Foundation estimated that on current forecasts, UK child poverty will hit a record high of 4.6 million children by the end of this Parliament.
The two-child limit was first announced in 2015 by the Conservatives and came into effect in 2017. It restricts child tax credit and universal credit to the first two children in most households. The benefit cap, introduced in 2013 under the then-Conservative and Liberal Democrat coalition government, sees the amount of benefits a household receives reduced to ensure claimants do not receive more than the limit.
The Resolution Foundation estimated scrapping the two-child limit and benefit cap would cost around £4.5 billion by 2029-30. Taken together with other measures such as extending free school meals to all families on universal credit and ensuring local housing allowance is linked to rents, it estimated a total cost of around £9 billion and some 740,000 fewer children in relative poverty in 2029-30.
Prime Minister Sir Keir Starmer has previously indicated he would like to scrap the two-child limit but that the Government cannot currently afford to do so, and has repeatedly stressed a focus on growing the economy. Responding to reports that changing the two-child limit to a three-child limit could be under consideration, the Resolution Foundation estimated this move – taken together with the benefit cap being scrapped – would cost around £3.2 billion in 2029-30 and reduce child poverty by 320,000.
Researchers concluded that while this would be “preferable” to the two-child limit currently in place, “there is a strong principled argument for the social security system to return to allocating support in line with need, and that would require fully abolishing the two-child limit”.
It warned the Government: “It’s time to move on from warm words and start cutting child poverty.” Its estimates, taking into account “£3 billion of scheduled welfare cuts through the ongoing rollout of the two-child limit and family element abolition, and real cuts each year in the value of local housing allowance and the benefit cap”, suggested child poverty could rise to 33% – equating to 4.6 million children – in 2029-30.
Adam Corlett, principal economist at the Resolution Foundation, said: “With a record 4.6 million children set to fall below the poverty line by the end of this Parliament, the Government is right to be formulating a new strategy to combat this scourge of modern Britain.
“However, a credible new strategy will need more than warm words. A Government that is serious about reducing child poverty will need to undo some of the policies announced by previous governments, such as scrapping the two-child limit. The upcoming Spending Review should also look to extend free school meals to more families.
“An ambitious strategy could support around 900,000 children out of poverty by the end of the decade. And while the cost of this action may seem daunting, the cost of inaction is far greater and could leave the Government with an embarrassing record of rising child poverty.”