Reversing two-child benefit cap could lift 630,000 children out of poverty
Reversing the two-child benefit cap would be one of the most cost-effective ways to reduce child poverty, a leading think tank has said.
The Institute for Fiscal Studies (IFS) made the assessment ahead of the Budget, when the Chancellor is widely expected to announce changes to the disputed border.
The cap, introduced by the Conservatives in 2017, limits the universal tax or child tax credit to the first two children in most households.
Fully reversing this situation would cost around £3.6bn and lift around 630,000 children out of poverty, the IFS estimates.
The IFS also outlined partial return options that would allow the government to avoid the full cost by prioritizing certain groups. Rachel Reeves has faced growing calls to lift the border.
Exempting working families from this cap would reduce the bill to £2.6 billion and reduce child poverty by 410,000.
A payment of half the fee for the first two children for third and subsequent children would cost around £1.8bn.
Tom Wernham, senior research economist at IFS, said: “Reversing the two-child limit is one of the most cost-effective options the government has to rapidly reduce child poverty.
“There are ways to partially roll back the policy which would cost less than the full £3.6bn needed to abolish it completely.”
He said the government must ultimately decide who it wants to help and what it wants the aid system to do.
“This could target support for the youngest children, or strengthen work incentives by removing the cap for working families, or distribute the extra money across a thinner but broader group,” he said.
“None of these options would be as costly as a full reversal, but they wouldn’t do much to reduce poverty either.”
It comes as part of the IFS’s annual “green budget” and sets out the challenges facing the Chancellor ahead of the Budget each year.
A government spokesman said: “Every child deserves the best start in life, whatever their background.
“That is why our Child Poverty Working Group will publish an ambitious strategy to tackle the structural and root causes of child poverty.
“We’re investing £500 million in children’s development with the launch of Best Start Family Centres, expanding free school meals and ensuring the poorest don’t go hungry over the holidays through a new £1 billion crisis support package.”
The strategy is expected to be published this autumn.
