Partial lifting of the two-child limit would still leave child poverty rates rising over the Parliament

Fully scrapping the two-child limit on benefits is an essential step towards achieving lower child poverty rates in 2029-30 than in 2024-25. No partial repeal of the policy is sufficient to keep child poverty rates from rising, according to new analysis from the Resolution Foundation today (Thursday).

No half measures uses the latest economic data to model the impact of recently floated reforms, ahead of the expected publication of the Government’s Child Poverty Strategy next month.

Without further policy action, the authors estimate that child poverty rates will hit a historic high of 34 per cent (4.8 million children) in 2029-30 after housing costs, up from 31 per cent in 2024-25. This is despite the welcome commitment the Government made in July to extend free-school meals to all children in families receiving Universal Credit (UC) in England.

The report maintains that fully scrapping the two-child limit remains the most cost-effective way of driving down rates of child poverty. This bold move could lift 330,000 children out of poverty today and prevent a further 150,000 from falling into poverty by 2029-30, at a cost of £3.5 billion (or £7,280 per child lifted from poverty).

The research reveals that any option which only partially reforms the two-child limit – including moving to a three-child limit, lower child elements for third and subsequent children, and lifting it for working families – would still leave child poverty rates higher at the end of the forecast (just under 32 per cent) than in 2024-25. This would be inconsistent with the Government’s election promise to deliver an “ambitious child poverty strategy.”

Each of the potential partial options comes with additional problems. Lifting the two-child limit for working households only creates sharp cliff edges, while a three-child limit would still fail to restore the link between need and entitlement for children’s benefits.

The economies of scale argument put forward to justify paying the child element at a lower level for third and subsequent children is contestable, and even less persuasive when the already low level of children’s benefits is taken into account.

Repealing the two-child limit at the Budget would unequivocally be a step in the right direction. However, even then, the Government’s ‘child poverty headroom’ – the gap between the Foundation’s projection for 2029-30 and the 2024-25 baseline – would be worryingly slight (0.4 percentage points), leaving it at risk of still seeing child poverty rise over the Parliament if economic conditions were to deteriorate.

Scrapping the two-child limit is therefore the bare minimum needed to achieve falling child poverty rates, say the authors. Re-linking housing support to local rents, as part of wider efforts to reduce the poverty impacts of housing, would help further reduce child poverty rates.

Alex Clegg, Economist at the Resolution Foundation, said:

“If the Government doesn’t act this Parliament, child poverty will reach a new historic high, with more than one in three children growing up in poverty by 2029-30.

“The most effective way to lift children out of poverty is to fully scrap the two-child limit on benefits. None of the partial options for repeal floated in recent months would be enough to keep child poverty from increasing over the course of this Parliament.

“If the Government wants to meet its manifesto promise of developing an ambitious child poverty strategy, they should do the right thing and scrap the two-child limit in its entirety. This bold action alone would save nearly half a million children from growing up in poverty by the end of the decade.”