Benefit cap and two-child limit are set to push over half of children in large families into poverty by end of the decade

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.