Benefits to keep frozen cap next year despite end of two-child policy
A Department for Work and Pensions (DWP) minister gave an update on Labour’s decision to freeze the cap on the total amount of out-of-work benefits a family can claim, saying it was in the “best interests of children”.
It was confirmed at the end of November that, apart from the two-child limit, the benefit limit would be frozen for the fourth year in a row in 2026.
This limits the amount of benefit a non-working household with children can receive to £22,020 per year (or £25,323 in Greater London), the rate set in 2023/24. This does not apply to universal credit claimants who care for disabled people or who are themselves severely disabled.
Speaking in the House of Lords, DWP Secretary of State Baroness Maeve Sherlock told her counterparts there were “no plans” to lift the cap.
He added: “The benefit cap aims to encourage work as it is in the best interests of children to live in working households wherever possible.
“We are delivering a step change in employment and skills support for parents, enabling parents to balance work and care responsibilities through high-quality, flexible jobs, and improving access to childcare so parents can work better.”
The government has a legal obligation to review this level every five years, with the next review due in November 2027. However, this does not prevent ministers from making earlier decisions on this issue.
The reiteration of the policy comes despite Labor’s pledge to scrap the two-child benefit limit, commonly known as the cap, from April 2026. As of this decision, the increase that families will receive in the child element of universal credit for their third or subsequent children will be included in the aid upper limit.
This means some families may not feel the full impact of the change as the amount they receive will be capped. There will be no increase in income for families already over the limit.
Nearly 124,000 families were affected by the benefit cap in October, according to the Child Poverty Action Group (CPAG), which covers nearly 300,000 children. The charity had called on the government to remove the cap as well as the two-child limit, describing the policies as ‘evil twins’.
CPAG researchers claim that lifting the cap would lift these children out of the deepest poverty at a cost of £300 million. Their analysis showed that the cap left a lone parent with three children renting a three-bedroom house in the private sector in inner London with just £3 to live on after rent.
The Solution Foundation calculated that one in six children affected by the two-child benefit cap will not benefit fully from the removal of the cap because their household has already reached or will reach the benefit cap.
Economist Alex Clegg, of the influential think tank, said: “The benefit cap arbitrarily distorts the link between need and entitlement in the benefits system. “It does not affect as many families as the two-child limit, but those affected by it could be pushed into similarly serious hardship.
“The fact that the value of the cap is frozen by default and has been cut in cash since it was introduced in 2013 means that its impact will worsen over time. The real value of the benefit cap for families is £14,500 lower in 2025-26 than when it was introduced in 2013-14.”
A DWP spokesman said: “We know that work is the best way out of poverty, so we’re transforming employment and skills support for parents with high-quality, flexible jobs and improved access to childcare.”
