The combined impact of the benefit cap and two-child limit on
welfare support are set to increase child poverty rates in
families with at least three children from 34 per cent in
2013-14, when the benefit cap was first introduced, to 51 per
cent by the end of the decade (2028-29), according to new
Resolution Foundation research published today (Wednesday).
The briefing shows that the number of families covered by the
policies has grown rapidly over the past decade, and will
continue to do so in the decade ahead.
Back in April 2013, when the benefit cap – a limit on the total
amount of support that out-of-work families can claim – was
introduced, just 26,000 families were affected by the policy.
However, successive cash freezes to the cap mean that by this
April the benefit cap will be £14,000 a year lower in real terms
(£10,000 in London) than when it was first introduced. As a
result, the number of families affected has grown to 108,000.
The two-child limit – which restricts welfare support to just two
children, irrespective of the households’ employment status – was
introduced in April 2017, and by the following April 70,000
families were affected. This has grown to 420,000 as of 2022-23,
as more children have been born, and will eventually rise to
around 750,000 when the policy is fully rolled-out. Overall,
around 500,000 families are currently affected by the policies
(including 34,000 who are affected by both).
The Foundation notes that while both policies are often
associated with workless households, six-in-ten families affected
by the two-child limit are actually in work.
The scale of income losses the policies bring about – around
£3,200 per child for the two-child limit – mean that they have
played a major role in driving up poverty rates among large
families.
In 2013-14, 34 per cent of children in large (3+ children)
families were in relative poverty. By 2021-22, this figure had
risen to 43 per cent, and by the end of the decade (2028-29) it
is projected to rise to 51 per cent. Over this same period, child
poverty among smaller (two children) families is projected to
fall slightly (from 25 to 24 per cent).
As a result of this rise, outcomes for large families are
deteriorating. In 2021-22, three-quarters (75 per cent)
experienced material deprivation, compared to 34 per cent of
smaller families, and one-in-seven (16 per cent) experienced food
insecurity (compared to 7 per cent among smaller families).
And while both policies have increased poverty and deprivation,
the evidence suggests that they have failed to deliver on their
stated policy objectives. The Government’s own review of the
benefit cap suggests that while it has encouraged more families
into work they have still got poorer, and it has not encouraged
families to move into lower-cost areas. The two-child limit has
had a negligible impact on birth rates for low-income families.
Given the policies’ failure to improve employment outcomes, and
the damage they have done to the living standards of large
families, the Foundation says that both policies should be
scrapped.
Abolishing the two-child limit would cost around £2.5 billion
next year (rising to £3.6 billion by the time the policy is fully
rolled out), or £3 billion if the benefit cap were abolished too.
This would lift 490,000 children out of poverty overnight, says
the Foundation. Neither of the main parties have said that they
would abolish either policy.
Lalitha Try, Economist at the Resolution Foundation,
said:
“The benefit cap has now been in place for over a decade, and the
two-child limit for over six years. Their coverage has grown over
time so that half a million families are now affected.
“While they have had limited success on their stated objectives
of encouraging low-income families into work, or to have fewer
children, they have driven up levels of poverty, deprivation and
food insecurity among large families.
“By the end of the decade, the policies are due to drive the
majority of large families into poverty. Abolishing them next
year would cost £3 billion – and would lift 490,000 children out
of poverty overnight.”
