A powerful rethink of the UK’s welfare strategy could lift hundreds of thousands of children out of poverty, but will the government act?
Reversing the controversial two-child benefit cap would be one of the most impactful and cost-effective moves to tackle child poverty in the UK, according to the influential Institute for Fiscal Studies (IFS).
Pressure Mounts to Ditch Two-Child Cap Amid Poverty Concerns
The policy, introduced in 2017 by the Conservative government, currently limits access to the child tax credit or Universal Credit to just the first two children in most households.
Ahead of the Chancellor’s Budget announcement, expectations are rising that changes to the policy may finally be on the table. The IFS’s analysis arrives at a critical time, as political and public pressure grows.
The IFS estimates a full reversal of the cap would come at a cost of approximately £3.6 billion — but it could lift around 630,000 children out of poverty.
“Reversing the two-child limit is one of the most cost-effective options the government has to achieve a quick reduction in child poverty,” Tom Wernham, Senior Research Economist at IFS
Cheaper Alternatives, Smaller Impact
The report also explored less costly partial reversals, including:
- Exempting working families: Would cut costs to £2.6 billion and still reduce child poverty by 410,000.
- Half-rate payments for third+ children: Would cost £1.8 billion.
Although these scaled-down approaches would be easier on the budget, they wouldn’t deliver the same life-changing results. Still, the IFS insists these options could strike a balance between financial constraints and moral responsibility.
“There are ways to partially undo the policy that would cost less than the full £3.6 billion needed for its full removal,” Wernham explained.
Choices With Consequences
The IFS’s annual “Green Budget” report makes it clear — the government has tough decisions to make. Should it focus support on the youngest children? Or provide greater aid to working families? Or spread the money wider but thinner?
“It could target support on the youngest children, or strengthen work incentives by lifting the limit for families in work, or spread the extra cash more thinly but across a wider group. None of these options would be as costly as full reversal, but nor would they do as much to reduce poverty,” Wernham said.
Labour Under Pressure Too
While the cap was introduced under the Conservatives, Labour’s Shadow Chancellor Rachel Reeves has come under increasing pressure to pledge a reversal if the party wins power. Campaigners argue that scrapping the cap aligns with Labour’s values and commitment to fighting inequality.
Fact Box: What Is the Two-Child Cap?
- Introduced: 2017 by the Conservative government
- Policy: Limits child tax credit or Universal Credit to the first two children in a family
- Goal: Encourage financial responsibility among larger families
- Criticism: Deepens poverty among larger low-income households
Government Response: Strategy Incoming
The government, while not yet committing to scrapping the cap, insists it remains focused on tackling child poverty. A spokesperson highlighted current investments, saying: “Every child, no matter their background, deserves the best start in life. That’s why our Child Poverty Taskforce will publish an ambitious strategy to tackle the structural and root causes of child poverty.”
The spokesperson also pointed to key programmes already in motion:
- £500 million towards children’s development via Best Start Family Hubs
- Extended free school meals
- £1 billion crisis support package to ensure vulnerable children don’t go hungry during school holidays
The full strategy is expected to be unveiled this autumn.
A Policy at the Crossroads
With the Budget fast approaching and the future of millions of children hanging in the balance, the debate over the two-child limit is heating up. The IFS has placed the ball firmly in the government’s court, offering clear evidence that meaningful change is not only possible, it’s urgently needed.
Whether ministers will seize the moment or opt for half measures remains to be seen.
Will this Budget mark a turning point in the fight against child poverty? Or another missed opportunity?
