Scrapping the two-child limit would lift more than half a million out of absolute poverty, according to the Institute for Fiscal Studies. This move could cost the government £2.5 billion annually but would not benefit the poorest households affected by the remaining benefit cap, said the think tank. The IFS stated that eliminating the two-child limit would be the most cost-effective method of reducing child poverty, although it is not a complete solution.
The report highlighted that getting rid of both the two-child limit and the benefit cap would help lift 620,000 children out of poverty but would come with a price tag of over £3 billion each year. Prime Minister Sir Keir Starmer has faced mounting pressure to abolish the two-child policy since taking office in July. The government has cited economic growth as a prerequisite for any changes to the policy due to spending constraints.
The two-child limit, introduced by the Conservatives in 2015 and implemented in 2017, restricts child tax credit and universal credit to the first two children in most households. According to the IFS, reversing this policy could lift 540,000 children out of absolute poverty, defined as households below 60% of the median income in 2010/11, adjusted for inflation.
Scrapping the benefit cap alone would cost around half a billion pounds annually but would benefit the poorest households more significantly. The IFS noted that removing both policies could have a more substantial impact but would come at a higher cost of £3.3 billion annually. The organisation emphasised that eliminating the two-child limit would be the most cost-effective measure in reducing child poverty among the available options.
The current benefit cap levels, last increased in April 2023, stand at £25,323 for couples or households with children in Greater London and £22,020 per year for the rest of Great Britain. Official figures revealed that as of April 2023, 1.6 million children lived in UK households affected by the two-child limit, while 123,000 households had benefits capped as of May.
Recent statistics indicated a record high of 4.33 million children in relative low income households in the UK in the year to March 2023. Sir Keir Starmer previously mentioned that there is no instant solution to child poverty, acknowledging the complex challenges. The government has established a Child Poverty Taskforce to develop a strategy to tackle child poverty, with a focus on providing a good upbringing for children.
In summary, the potential impact of scrapping the two-child limit on reducing child poverty is significant, although it comes with a substantial cost to the government. The issue of child poverty remains a complex and pressing concern that requires a multifaceted approach to address effectively.