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UK households could be set for a £4,300 boost on average if the government goes ahead with plans to scrap the two-child benefit cap.
This week, it was revealed that Education Secretary Bridget Phillipson is considering axeing the limit on child benefits for families, currently capped at two children. It means that families would be able to claim extra benefits for having a third child onwards, instead of being limited to only claiming for the first two children.
The benefit cap, which was introduced by the Conservatives in 2017, restricts child tax credit and Universal Credit to the first two children in most households. Education Secretary Bridget Phillipson suggested scrapping the policy is “not off the table” earlier this week, before Downing Street revealed ministers are “not going to rule anything out when it comes to tackling child poverty”.
Nigel Farage also announced he would remove the two-child benefit cap if Reform ever formed a government.
According to a report from the Institute for Fiscal Studies (IFS) released in 2024, this could be worth as much as £4,300 per household on average.
In a report, it said: “Low-income families typically receive an additional £3,455 a year of universal credit (or child tax credit) for each child they have. But the ‘two-child limit’ means that claimants do not receive an additional amount for third or subsequent children born after 5 April 2017.
“To illustrate the impact of the policy, take a lone parent with three children who lives in social rented accommodation costing £500 per month, and not working. Their universal credit entitlement will be made up of the basic £4,721 per year in universal credit for single adults; £6,000 to cover the cost of their housing; and – in the absence of the two-child limit – £10,365 for their children.
“On top of this, they receive £3,102 a year in child benefit, which is unaffected by the two-child limit, giving them a total income of £24,188 (without the two-child limit); they would also generally have support to cover most or all of their council tax bill.
“The two-child limit means they receive £3,455 less each year in universal credit, representing a 14% cut to their income and putting them into relative poverty.
“Turning to the impact across the population, we find that, when fully rolled out, on average affected households will lose £4,300 per year, representing 10% of their average income and 22% of average benefit income.”
Ms Phillipson, who is leading the Government’s child poverty task force alongside the Work and Pensions Secretary, said the taskforce is “certainly looking at” the policy, when asked if she would scrap the cap.
“As I say, nothing’s off the table but this is not straightforward, the costs are high,” she added.
The Prime Minister’s official spokesman said on Tuesday that the Government is “absolutely committed to tackling child poverty”.
