The Conservative Government introduced the two-child limit in 2017. The policy restricts welfare payments to two children per family and applies to Universal Credit and child tax credit.
The Labour Government is due to publish a Child Poverty Strategy later this year, with a promise to bring about “an enduring reduction in child poverty”.
But the Resolution Foundation said that without a commitment to scrap the two-child rule, child poverty would rise over the course of this Parliament.
Research from the think tank, entitled Turning the tide: What it will take to reduce child poverty in the UK, found the child poverty priority should be to abolish both the two-child limit and the benefit cap. It calculated this would take an estimated 500,000 children out of poverty in 2029/30.
With the policy costing around £10,000 for every child lifted out of poverty, the move would cost £4.5bn. But the foundation said it is “the most efficient anti-poverty measure the Government could take”.
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An interim policy of scaling the policy back to a three-child limit (while also scrapping the benefit cap) would cost around £3bn, but lower the child poverty reduction to 320,000.
The report warned that the roll-out of £3bn of previously announced benefit cuts will contribute to an increase in child poverty rates from a projected 31% at the start of the Parliament (2024/25) to 33% by the end (2029-30), meaning the number of children below the poverty line would rise to an all-time high of 4.6 million.
Researchers calculated that if the Government’s wider goals to boost employment and reduce housing costs are successful – for example, by further increasing parental employment by 160,000 and keeping down private rents – about 130,000 children would be lifted out of poverty.
The Resolution Foundation said this “welcome scenario” would boost the Treasury coffers by £2bn, but would not be enough to achieve falling child poverty rates over the Parliament.
Recommendations to reduce child poverty
The Resolution Foundation also suggested the following actions to reduce child poverty:
- Extending free school meals to all families receiving Universal Credit. At a cost of £1.2bn, this would lift a further 100,000 children out of poverty.
- Restoring and boosting the family element of Universal Credit and re-linking Local Housing Allowance to local rents. This would lift another 140,000 children out of poverty, at a cost of around £3bn.
Adam Corlett, principal economist at the Resolution Foundation, said: “With a record 4.6 million children set to fall below the poverty line by the end of this Parliament, the Government is right to be formulating a new strategy to combat this scourge of modern Britain.
“However, a credible new strategy will need more than warm words. A Government that is serious about reducing child poverty will need to undo some of the policies announced by previous Governments, such as scrapping the two-child limit. The upcoming Spending Review should also look to extend free school meals to more families.
“An ambitious strategy could support around 900,000 children out of poverty by the end of the decade. And while the cost of this action may seem daunting, the cost of inaction is far greater and could leave the Government with an embarrassing record of rising child poverty.”
