Scrapping the harsh two-child benefit limit entirely could elevate 630,000 children out of poverty, according to findings from experts.
The Institute for Fiscal Studies (IFS) has identified this move as one of the most efficient methods to decrease child poverty. It is anticipated that Keir Starmer will make adjustments to or eliminate the policy introduced during the Conservative era as part of an upcoming review on child poverty.
The government is exploring various alternatives to replace the existing two-child limit, which currently affects Child Tax Credits and Universal Credit for the initial two children in a family. One proposed option is a new tiered payment system where parents would receive more support for their first child and less for subsequent children.
Although some Labour MPs advocate for a complete abolition of the limit, the IFS has suggested ways for Chancellor Rachel Reeves to partially reverse the cap in order to mitigate the costs of a full repeal.
Exempting working families from the limit could reduce expenses to £2.6 billion and lower child poverty by 410,000. Alternatively, providing payments for third and subsequent children at half the rate allocated for the first two children would cost approximately £1.8 billion and lift 310,000 children out of poverty.
However, the authors point out that these measures would not be as effective in poverty reduction compared to a complete reversal. The IFS estimates that a full repeal would cost around £3.6 billion and help lift approximately 630,000 children out of poverty in the long term.
Tom Wernham, a senior research economist at IFS, emphasized the cost-effectiveness of reversing the two-child limit as a swift strategy to combat child poverty. He highlighted the possibility of partially undoing the policy at a lower cost than a complete removal, urging the government to make decisions regarding the focus and objectives of the benefit system.
A government spokesperson emphasized the importance of providing every child with equal opportunities, stating that the Child Poverty Taskforce will soon unveil a comprehensive strategy to address the underlying causes of child poverty. Initiatives such as the rollout of Best Start Family Hubs, extension of free school meals, and a £1 billion crisis support package aim to support children’s development and well-being.