Report estimates long-term impact of two-child limit

A report by the Institute for Fiscal Studies estimates that an additional 670,000 children could be affected by the two-child benefit limit by the end of next parliament and is a major driver of child poverty.

Child hold woman's hand at a table. She has her head in her hands and there is an open purse on the table with just a few pence spilling out of it.

 

The number of children affected by the two-child limit is set to increase by a third over the next five years, with many working families affected, according to a new report which says the limit has been a significant contributor to child poverty among larger families.

The report by the Institute for Fiscal Studies [IFS] finds that the two-child limit represents a significant income cut for affected families and that, when fully rolled out, the average affected household will lose £4,300 a year (10% of their income). 57% of households currently affected by the limit have at least one person in work.

It estimates that, when fully rolled out, it will affect one in five children. The report says the-two child limit on benefits, brought in in 2017, is one of the biggest drivers of the increase in child poverty in recent years. In 2014–15, 35% of children in families with three or more children were in relative poverty. By 2022–23, this had risen to 46%. When fully rolled out, the IFS expects the two-child limit to have raised relative poverty among large families by around 500,000 children (4% of all children). Over the same period, child poverty among families with one or two children fell from 26% to 22%.

The IFS estimates that removing the two-child limit would cost £3.4 billion a year in the long run, roughly 3% of the total working-age benefit budget or the cost of freezing fuel duties for the next parliament. It adds, however, that previous studies have found that investments in young children can sometimes partly or even entirely pay for themselves by causing better outcomes for those children in later life.

The Liberal Democrats and Green Party have both committed to abolishing the limit in their manifestos, while the Labour Party have said they will abolish it ‘when fiscal conditions allow’.

Child Poverty Action Group Chief Executive Alison Garnham said: “Child poverty in the UK is a national disgrace and the biggest driver of it is the two child limit. It makes life worse for kids up and down the county and limits their future chances. Children affected by child poverty don’t have a voice in this election, but politicians from all parties have a responsibility to them to show leadership. Any government serious about making things better for the next generation will have to scrap the two-child limit, and do so quickly.”



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