Labour’s much-touted abolition of the two-child cap won’t be straightforwardly good news for thousands of families in Britain who may not benefit from its removal. Chancellor Rachel Reeves announced the move in her tax-raising November Budget, suggesting that scrapping the restriction on child tax credit and universal credit to the first two children in most households would lift 450,000 children out of poverty by 2039. But 60,000 of the eligible families could lose out on some or all of the extra cash by hitting an overall household benefit cap.
The household benefit cap is a limit on the total amount of social security benefits the majority of working-age people in the UK can receive, and currently stands at £22,000 a year or slightly above in areas where cost-of-living is higher. Around 50,000 households that would have profited from the removal of the two-child cap will not see any financial gain because of the benefit cap, according to an impact assessment first reported in the i newspaper, while a further 10,000 will only partially gain.
The benefit cap doesn’t apply to households earning at least £846 a month through paid work.
Deven Ghelani, founder of Policy in Practice, warned that the complexity of the UK benefits system would “limit the impacts on larger families and prevent some from a change that could otherwise provide much-needed financial relief” ahead of last year’s fiscal statement.
“Our analysis finds that one in ten children hit by the two-child limit won’t benefit from it being abolished, and a further one in ten will only benefit partially, unless the Chancellor lifts the benefit cap too,” he said.
“This interaction highlights once again the complexity of the benefit system, and the complex analysis needed to ensure support on the frontline gets to those families who need it most.”
The change means that from April 2025, families can receive the child element of universal credit for all children, regardless of family size.
Child poverty experts have linked rising rates of poverty in large families to the cap, which was introduced by the Conservative-led coalition Government in 2013.
While the decision to scrap it was met with criticism from rival parties, with Tory leader Kemi Badenoch pledging to reinstate it if she comes into power, campaigners heralded the news as a “game-changing moment for children”.
Dan Paskins, executive director of Save the Children UK said: “The Government is right to recognise that children have paid the price of a poorly thought-out policy for far too long. We warmly welcome this momentous change and the leadership that the Prime Minister and Chancellor are showing.”