Scrapping the two-child benefit cap would reverse three quarters of the increase in child poverty under the last Conservative government but cost British taxpayers £2.5 billion a year, according to the Institute for Fiscal Studies.
The limit on the number of children per family eligible for benefits came into effect in 2017 as the Tories tried to slash billions from the welfare bill. Labour, now in power, is under pressure to reverse the policy but has so far refused to do so, citing budget pressures. Seven lawmakers were suspended from the party for voting against the government on the issue just days after its landslide victory in July.
Rosie Duffield, the MP representing Canterbury, quit the party this week accusing the leadership of “hypocrisy” for refusing to help poor children and pensioners while taking tens of thousands of pounds in gifts and free clothes.
In an intervention that will heap further strain on Prime Minister Keir Starmer, the IFS said Thursday that scrapping the cap would take 540,000 people under the age of 20 out of absolute poverty, defined as living in a household on below 60% of median income. The child poverty rate increased by 730,000 under the Conservatives between 2010 and 2022.
“The recent rise in measured child poverty is entirely driven by higher rates of poverty among families with three or more children,” said Anna Henry, a research economist at the IFS. “Scrapping the two-child limit would be a cost-effective way of reducing child poverty, at a lower cost per child than all the other obvious changes to the benefits system.”
The IFS paper, funded by the Nuffield Foundation and produced in association with Citi, was released ahead of Labour’s first budget on Oct. 30. It found that reversing the two-child cap would come at a cost of £4,500 per child brought out of poverty. However, it would not be a “silver bullet” as 70,000 households would see their incomes increase to levels where they are caught by the benefit cap, which limits the total amount of welfare an out-of-work household can receive. Scrapping both the benefit cap and two-child limit would lift 630,000 children out of poverty but cost £3.3 billion, the IFS said.
It added that removing the limit might also have an economic cost by “potentially reducing parents’ incentives to enter work.”
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