The decision to scrap the two-child limit in full remains the single most impactful step to reduce child poverty. Bringing this decision into legislation will see 450,000 children lifted out of poverty by 2030. Combined with other key measures announced in the Child Poverty Strategy, more than half a million children (550,000) will be lifted out of poverty by 2030. The abolition of the two-child limit will also reduce the depth of poverty for around 250,000 children. Altogether it will help nearly 1.7 million children.
The additional income families will receive will be spent on purchasing essentials, meeting the increased cost of living and repaying debts built up as a result of trying to afford the basics while living on a low income.
Research shows that making direct cash transfers to families living in poverty has beneficial and advantageous outcomes, both at a family and community level, as well as at a wider societal and economic level. Families with children use cash transfers to purchase essentials for their children like clothing, shoes and furniture, as well as food and heating.
Key findings from the University of Manchester show that “properly designed and implemented anti-poverty transfers strengthen the productive capacity of households, address long-term structural and persistent poverty and allow households to allocate their resources”.
The cost of scrapping the two-child limit in full is £3 billion. The cost of child poverty to the UK economy is £39 billion per year – more than ten times the cost of scrapping the two-child limit.
Scrapping this policy is the most cost-effective and targeted investment into reducing child poverty and will deliver returns over the long-term. It will not only alleviate hardship for low-income families, it will also improve public health, early years development and educational outcomes, and ease pressure on local services, including schools, health and housing.
How families with children typically spend additional income
A single mother, Ellen*, with 3 children, has an income of £2015 per month with the two-child limit in place:
- Income from earnings: £854
- Income from Universal Credit: £903
- Income from Child Benefit: £258
Once the two-child limit is removed, Ellen’s total income will rise to £2307 due to the additional UC allowance, now £1195:
- Income from earnings: £854
- Income from Universal Credit: £1195
- Income from Child Benefit: £258
Ellen is currently in a budget deficit each month after spending on essential costs such as rent, energy, food, clothing, transport and school costs. This deficit means she incurs new debt each month just to make ends meet. This debt is increasing and gathering interest. Following the removal of the two-child limit, Ellen will be able to spend her income on essential costs, and be in a slight budget surplus, meaning she can begin to repay debts previously incurred and avoid incurring new debt. She will also be able to set some money aside for essential unforeseen expenses such as repairing or replacing a broken-down appliance, or seasonal costs such as buying winter clothing and shoes for her children.
*Name changed to protect anonymity
The effects of potentially reinstating the two-child limit
Reinstating the two-child limit would mean that the key driver of child poverty would remain: the 450,000 children lifted out of poverty following the abolition of the two-child limit would remain in poverty, and 250,000 more children would remain in deep poverty. The cost of scrapping the two-child limit in full is £3 billion per year by 2029/30, but as we’ve stated above the cost of child poverty is around £39 billion a year.
There are also key economic advantages to scrapping the two-child limit, which would be undone if it were to be reinstated. Getting rid of the two-child limit is the most cost-effective and targeted investment into reducing child poverty, and will deliver returns over the long-term –not only will it alleviate hardship for low-income families, it will also improve public health, early years development and educational outcomes, and ease pressure on local services, including schools, health and housing. Reinstating the two-child limit would reverse all of this for children, for families and for society.
Key principles supporting the use of cash transfers to families and children living in poverty
- Access to social security is a human right and a child right
- Cash transfers can directly address child poverty in monetary terms
- Cash transfers can serve as a safety net to protect families from sudden and unforeseen changes in circumstances
- Cash transfers can address financial barriers to basic social services, such as education and health, thereby reducing multidimensional child poverty
- Cash transfers can address financial drivers of child protection outcomes
- Cash transfers can address inter-generational cycles of poverty and inequity
References:
The role of cash transfers in tackling child poverty
Direct cash transfers | The University of Manchester
Professor Donald Hirsch, Child Poverty Action Group (2024), The cost of child poverty in 2023 | CPAG
Hayre J., Two-child limit in the UK: where policy meets poverty - PMC, 2024
