Keir Starmer’s child poverty taskforce is set to recommend scrapping the two-child benefit cap, increasing pressure on the Government to do it. The taskforce was established by the Prime Minister to look at how to bring down child poverty, and was initially supposed to publish its findings earlier this spring.
However, the taskforce, which is a group of ministers and officials, is instead going to publish its findings ahead of the Autumn Budget.
The two-child benefit cap has long been a dividing issue for the Labour Party. In 2023, Starmer gave an interview to Laura Kuenssburg where he said that he wouldn’t change the policy. In Government, several Labour MPs were suspended for voting for an amendment to scrap the two-child benefit cap.
The two-child benefit cap, introduced by the Conservative government in 2017, prevents parents from claiming child tax credit or universal credit for more than two children. Axing the cap is expected to cost just over £1 billion.
Part of the problem is that the debate around the two-child benefit cap often sparks strong emotion. But when public spending as a proportion of GDP is already at the unaffordable level of 44%, and taxes are going to have to go up yet again this year, it is important to consider whether lifting the cap would have a significant impact on reducing child poverty.
There are also benefits that are not subjected to the two-child benefit cap. In 2024, the Telegraph revealed that almost 24,000 households claim child benefit for six or more children. Child benefit, which is not limited to a certain number of children, costs taxpayers around £13bn every year.
The primary argument being made by those who want the two-child cap scrapped is that it would lift thousands of children out of poverty, and it is likely the argument we will hear from the Child Poverty Taskforce ahead of the Budget. But is this true?
One way of measuring the impact of lifting the two-child limit, other than simply looking at income, is to look at the impact on a child’s school readiness. According to the Institute for Fiscal Studies, there is no evidence of an effect on whether a child is at a ‘Good Level of Development’ (GLD) for children in the groups most likely to be hit by the policy. This includes families in the most deprived 20% of neighbourhoods, and those that are also entitled to free school meals. The report also finds no statistically significant impact of the two-child limit on the proportion of children that achieve this GLD when they reach the age of five. This measure covers communication, physical development, literacy and numeracy skills before Year 1.
Scrapping the two-child cap would, according to these findings, be unlikely to contribute cost-effectively to the Government’s target of increasing the GLD pass rate from 68% to 75%.
For most households across the country, deciding whether they want to have a child is one of the most important decisions they make. This is, in part, because of the significant financial cost of having children. Families make that choice, weighing up the cost of housing, food, childcare and long-term financial stability. Many families choose not to have children, or choose to have fewer children, because they cannot financially provide for more. And yes, with access to free contraception and mountains of reproductive information, having a child is a choice these days.
Would it be fair to create a situation where families who work and carefully budget for their children have to subsidise, through increasing taxes, those who choose to have more children that they cannot afford?
This would put us in a situation in which some families make difficult sacrifices, and others can expand their families, knowing that taxpayers will bear some of the additional costs.
The only sustainable way to make people better off is economic growth. In the three months to July, the UK economy experienced 0.2% growth, and in July alone, it experienced no growth. If we want to lift families and children out of poverty, we cannot continue to slice the same pie ever-smaller. We need to make it bigger.
There are countless pro-growth policies that could be introduced that would alleviate financial pressure on families. One of the most significant costs to families, for example, is housing. The average cost of a house was around 2-3 times the average salary in the 1990s. Now, it is more like 10 times the average salary. Rents are increasing at a pace that far outstrips wage growth. Deregulating the planning system and allowing for the supply of housing to increase would sustainably alleviate pressure on millions of households.
We have to ensure that personal responsibility is at the heart of individual decisions to have more children. Removing the two-child limit discourages families from thinking carefully about their financial position before they choose to make those decisions.
Tackling child poverty need not be the mere expansion of welfare entitlements. We have to implement policies we can afford, and pursue economic growth as a priority. Only then will we be able to eliminate child poverty in a long-term and sustainable way.
