Time to scrap the two-child limit

Child benefit was a universal benefit that was not means-tested, but that changed in 2013 with the introduction of the High Income Child Benefit Charge (HICBC) which effectively reclaims child benefit if any household member is earning over £60,000 pa (£50,000 prior to 2024). 

In 2017 a policy was introduced restricting Universal Credit and child tax credit for 3rd and subsequent children born after that year. The stated aim of the two-child limit was to make “families on benefits face the same financial choices about having children as families who are supporting themselves solely through work”. Without commenting on the moral case for using the benefits system to deter people from having children, the policy has failed to achieve its objective, with studies showing only a small fall in births in affected families.

What the policy has achieved is a massive rise in child poverty. 25% of children are now living in poverty. A report from the Resolution Foundation in January 2024 suggested that half of families with three children or more will be in poverty by 2028-29, up from a third in 2013-14 – whereas the number of two-child families in poverty is expected to stay the same, at one in four. This supports the argument that the two–child benefit limit has increased child poverty. It is estimated that 420,000 families were affected by the two-child limit in 2023, so the number of families affected is significant. 

The impact of the limit is going to get worse.

As the policy applies to children born after 6 April 2017, the impact on child poverty is continuing to increase, and when the policy is fully rolled out it is expected to affect 750,000 families.

So why isn’t the new Government repealing the two-child limit?

Seven Labour MPs were suspended from the Parliamentary Labour Party for supporting an amendment in the King’s Speech. At first sight this suggests that the Labour party is opposed to a change to the limit. However, comments from a number of other Labour MPs suggest a strong desire to reduce child poverty, and that the suspensions were about party unity around the King’s Speech. The way forward may be to persuade the Labour party to change its policy from within. The main objection to a change of policy seems to be the cost, estimated at £1.7bn, and where this would be funded from.

To put the costs in perspective, in the spring 2024 budget the High Income Benefit Charge Threshold was increased from £50,000 to £60,000, at a cost of £635 million in 2025-26. 

In a wider context, investing in children carries long=term benefits, with improved educational outcomes and longer healthy life expectancy. Sir Michael Marmot advocates “Give every child the best start in life” as the first of six key recommendations in his report Fair Society; Healthy Lives to address health inequalities.

As a local councillor I have seen the impact that early intervention and prevention (or the lack of it) can have on the costs of expensive high-needs intervention. So perhaps the £1.7bn cost of abolishing the two-child limit should be compared with the £7.3bn a year spent on Research & Development tax credits, of which over £1bn goes on R&D carried out overseas, and 80% of the cost goes on research that would have happened anyway.

The case for abolishing the two-child limit seems strong. It has not achieved its stated aims. It has contributed to an increase in child poverty. 

Some further reading

• Child poverty in the midst of wealth (UNICEF TransMonEE)
• Absolute poverty: UK sees biggest rise for 30 years (BBC News)
• Catastrophic caps (Resolution Foundation)
• Two-child benefit cap: ‘Every month is a struggle’ (BBC News)

The politics

Connor Naismith MP posted on X/Twitter:

“I passionately care about lifting the 7,000 children in my constituency out of poverty. Motions to amend a King’s Speech will not do that. A serious, considered plan from a Labour government will. I will work constructively with colleagues to ensure we deliver that plan.”

Sam Corcoran is a Labour councillor, former leader of Cheshire East Council, and a member of the Roman Catholic National Justice and Peace Network.