The two-child benefit cap is a poverty trap that must be removed
The two-child benefit cap as a policy is an unusual anachronism in British politics. As I will seek to demonstrate it has failed in its original aims, is uniquely adept at increasing child poverty, targets those most in need, exacerbates inequality, does little to ease the burden of Britain’s demographic changes all while saving (relatively) little to the public purse.
The list of former and current political heavyweights that have come out against the cap, continues to grow, most strikingly from across the political spectrum. From the seven Labour leftwingers suspended for voting to scrap the policy and former Prime Minister Gordon Brown, to Reform leader Nigel Farage and even Conservatives like Suella Braverman and former chair of the New Conservatives Miriam Cates. The only political party to staunchly, outright support it remains the Conservative Party, as it has since they first announced the policy in 2015.
Yet, this growing cross-party consensus that the cap must go is nonetheless not matched by public opinion. YouGov polling suggests that six in ten Britons support maintaining the cap with only those aged 18-24 supporting its abolition. Voters from all parties, even Labour, back the policy by anything from a narrow plurality to a decisive majority.
Part of this is a result of the rhetoric which has always been used in support of the measure. The advocates of the cap say that those in receipt of welfare are jobless people trying to exploit the system to live an idle life of luxury at everyone else’s expense. This was certainly the thinking behind Cameron’s 2012 claim that “quite simply, we have been encouraging working-age people to have children and not work, when we should be enabling working-age people to work and have children.”
Perhaps it is best to begin here, by dispelling this myth. Recent analysis shows that more than four-in-five (81 per cent) of families affected by the cap were in work. Furthermore, the Work and Pensions Select Committee found that assumptions this policy would drive up employment in larger families were completely unfounded since it was introduced. As such, this has to be seen first and foremost for what it is: a benefit cut to hard-working families. It’s here where we need to turn to the largest effect of the cap: its laser-like focus on increasing child poverty.
The two-child cap already affects around 500,000 households, a figure forecast to rise to three-quarters of a million families by the middle of the next decade. What this means in practice is tremendously impactful. The policy restricts income for poorer families by almost £3,500 per year for each child and will, when fully implemented, leave families affected on average worse off by £4,300 a year, worth a tenth of their income and almost a quarter of welfare receipts.
Respected think tanks like the Institute for Fiscal Studies (IFS) has found the cap has driven the proportion of children in families with more than two children in relative poverty from around a third a decade ago to 46 per cent in 2022 which the Resolution Foundation expects to surpass half of all children before the end of the decade, the highest proportion in more than three decades. Staggeringly, even in terms of absolute poverty, those in large families are no better off financially than they were a decade ago.
The effect this has is clear to see. Three-quarters of large families are in material deprivation as of 2021-22, more than double the proportion of families with two children or less. Twice as many face food insecurity. They’re more than four times as likely to use a food bank than small families, with more than one in eight using one in the last month. When Alison Garnham, head of the Child Poverty Action Group, described the cap as the “biggest driver” of child poverty, she was absolutely right. Ignoring that fact because it doesn’t suit a particular narrative is a neglect of duty for those in politics.
Furthermore, for Conservatives to back this policy seems in many ways paradoxical. The party has for years, in rhetoric at least, banged an anti-immigration drum and pledged to reduce migrant numbers. Yet, there is little mention of the UK’s growing demographic crisis in this discussion.
Britain’s declining birth rate is set to leave the country dependent on net immigration to maintain a steady population for at least the next 75 years. If you want to reduce immigration, or even reach the Reform UK dream of zero net migration, penalising families who are having children seems an impossible balancing act.
This is why it shouldn’t be surprising that the policy is remarkably unusual internationally. Across Europe only three other countries have similar restrictions on child benefit, all only on three or four children rather than Britain’s two, whilst many, in fact, are more generous as family size increases.
Eliminating the cap would, at the stroke of a pen and simply by restoring child benefit to its pre-2017 eligibility, lift around half a million children out of poverty. But now we turn to the cost. According to the Resolution Foundation, this could reach as much as £3.6 billion a year.
However, it’s worth putting this in context. The Conservative Government’s last two fiscal statements included National Insurance rate reductions worth around £10.3 billion a year. That is a figure almost three times as large as what would be required to lift the two-child benefit cap. That was a political choice. Some Conservatives’ hopes of increasing defence spending to three per cent of GDP would cost as much as £157 billion over the next eight years if achieved by the end of the decade.
Even within the welfare budget, this isn’t radical. The increase in spending accounts for just three per cent of what’s spent on working-age benefits. Finally, it must also be noted that policy doesn’t exist in isolation. The knock-on effects of scrapping the cap are hard to calculate but even the IFS acknowledges it could pay for itself in the long-term by reducing costs for those children affected later in life whilst also reducing pressure on NHS hospitals by cutting A&E admissions.
Ultimately, there is nothing keeping this cap in force other than public opinion. It has objectively failed in its varied aims and has successfully aggravated child poverty when it is already far too widespread in Britain. Whether political leadership, particularly that of the Labour Party, can muster the courage to make the case against the cap and shape public opinion on it is unclear. What isn’t is the damage and hardship that this Cameron-era policy causes. Quite the legacy.
Tom Zundel is a Political and Media Consultant at Bridgehead Communications.
