The Institute for Fiscal Studies (IFS) has released a comprehensive analysis exploring various options for reforming or abolishing the controversial two-child limit on benefit payments. This policy, introduced in 2017, restricts the child element of Universal Credit and Child Tax Credit to the first two children in a family, with certain exemptions for multiple births and children born from non-consensual conception. The IFS report highlights the significant role this limit plays in increasing child poverty across the UK.
According to the IFS, completely abolishing the two-child limit would cost the Treasury an estimated £2.5 billion per year. Such a move, however, is projected to lift approximately 250,000 children out of poverty, representing a substantial reduction in child deprivation. The report details that the policy disproportionately affects larger families and those where parents are unable to work, despite being designed to encourage families to consider their financial circumstances when having more children.
Beyond outright abolition, the IFS report presents several alternative reform pathways. One option discussed is extending the limit to three children, which would be a less costly intervention than full abolition but would still provide some relief to a subset of affected families. Another proposal involves introducing a 'first child premium,' where the benefit for the first child is set at a higher rate, potentially aiming to balance support for all children with fiscal constraints.
The analysis also delves into the complexities of the current exemption system, such as the 'non-consensual conception' clause, which has been criticised for its intrusiveness and difficulty in application. Reforming or removing these exemptions could simplify the system but might also raise other ethical and practical concerns. The IFS emphasises that any reform carries trade-offs between its cost to the public purse, its effectiveness in tackling child poverty, and public perceptions of fairness.
The Labour Party has previously committed to abolishing the two-child limit if they win the next general election, arguing that it is a key driver of child poverty. The Conservative Government, however, has consistently defended the policy as a measure to ensure fairness to taxpayers and to encourage responsible family planning. The IFS report provides detailed evidence that will likely fuel further debate on this divisive aspect of the UK's welfare system as the country approaches a general election.