Election 2024: Two-child limit will affect a further 670,000 children by the end of the next parliament

Highlighting that neither Labour nor the Conservatives referenced the policy in their manifestos, IFS estimates that removing the limit would reduce relative child poverty by approximately 500,000

The two-child limit will affect a further 670,000 children by the end of the next parliament, according to the Institute for Fiscal Studies (IFS).

Introducing new research into the impact that the two-child limit in universal credit has had since its introduction in April 2017, the IFS highlights that while the Liberal Democrats and Green Party have both committed to abolishing the policy in their manifestos, the Labour Party has only said that it will abolish it ‘when fiscal conditions allow’ and, like the Conservatives, it did not reference the limit in its manifesto.

However, when fully rolled out, the IFS reports that affected households will lose £4,300 per year, representing 10 per cent of their average income and 22 per cent of their average benefit income. In addition, while the policy currently affects 550,000 households, 250,000 extra children will be affected by the policy next year and 670,000 extra children will be affected by the end of the next parliament.

Turning to the impact on different households, the IFS also highlights that the policy affects -

• 23 per cent of households with children in the poorest fifth of the income distribution, but 38 per cent of children in the poorest fifth of the income distribution; and
• 43 per cent of children in households with one adult of Bangladeshi or Pakistani origin (400,000 children), compared with 17 cent of children in other households (2.4 million children).

While acknowledging that the two-child limit is not the only driver of recent increases in relative child poverty rates for larger families - the benefit cap also disproportionately affects larger families - the IFS suggests that removing it would go some way to reversing the trend, reducing relative child poverty by approximately 500,000 (4 per cent of all children). It adds that the estimated cost of such a move would be around £3.4 billion a year, equal to approximately 3 per cent of the total working-age benefit budget.

Research Economist at the IFS and co-author of the research Eduin Latimer said today -

'The two-child limit is one of the most significant welfare cuts since 2010 and, unlike many of those cuts, it becomes more important each year as it is rolled out to more families. It has a particularly big impact on the number of children in poverty for two reasons: it mostly affects poorer households and, by definition, its effects are entirely concentrated in families with at least three children.'

For more information, see Without reform, the two-child limit will affect 670,000 additional children by the end of the next parliament from ifs.org.uk

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