UK Government to Eliminate Two-Child Benefit Cap by April 2024

The UK government will abolish the two-child benefit cap starting in April 2024. The announcement was made by Chancellor Rachel Reeves, who emphasized that her party aims to support vulnerable families rather than penalize them. The cap, originally implemented by the Conservative government in 2017, restricts parents from receiving universal credit or tax credits for more than two children.

This policy shift is expected to have significant financial implications, with estimates indicating a cost of approximately £3 billion annually by the 2029-2030 fiscal year. Reeves stated that the current welfare system’s failures should not result in further hardship for children, asserting, “We do not believe that the solution to a broken welfare system is to punish the most vulnerable children.”

The Conservative Party has criticized this decision, arguing that families receiving benefits should make the same financial choices regarding childbearing as those not reliant on state support. Kemi Badenoch, the Conservative leader, defended the cap, suggesting it balances support for struggling families with the taxpayers’ burden. She accused the Labour government of losing control over welfare spending, asserting, “They are hiking taxes on workers, pensioners, and savers to pay for handouts to keep their backbenchers quiet.”

Reeves has faced increasing pressure from Labour MPs and charities advocating for the removal of the cap as a cost-effective measure to combat child poverty. The government estimates that this policy change could lift around 450,000 children out of poverty by 2029-2030. The announcement was met with enthusiasm from Labour MPs in the House of Commons, with Reeves noting that the cap “pushes kids into poverty more than any other” and had negligible impact on family size.

Reeves attributed the ability to remove the cap to efforts targeting fraud and error in the welfare system, alongside reforms aimed at tax avoidance and gambling taxes. She claimed that these measures would contribute to the most significant reduction in child poverty during a parliamentary term since records began.

Alison Garnham, chief executive of the Child Poverty Action Group, described the government’s decision as “transformational for children,” highlighting its potential to lay the groundwork for eradicating child poverty in the UK. Labour MPs, including Helen Hayes and Debbie Abrahams, who chair the Commons Education and Work and Pensions committees, issued a joint statement expressing that the removal of the cap would have a “direct and positive impact” on children’s wellbeing. They also noted that the government’s broader child poverty strategy would need to be much more ambitious.

Currently, approximately 1.6 million children live in larger families affected by this policy, which applies to third or subsequent children born after April 6, 2017. Reports indicate that around 59% of these families have at least one working parent. Research has shown that the cap has contributed to rising poverty rates among children in larger families since its implementation, with poverty rates for such children increasing from 40% in 2017 to around 44% last year.

Calls for a full reversal of the policy have intensified, especially after the Treasury considered alternative approaches, such as tapering benefits for additional children. Earlier this month, Reeves suggested that scrapping the cap entirely was the preferred option, stating that children in larger families should not be penalized through no fault of their own.

Although removing the cap has long been a priority for many Labour MPs, Reeves has faced mounting pressure to act. New deputy Labour leader Lucy Powell and Education Secretary Bridget Phillipson were among those advocating for the cap’s removal in recent months. While Labour’s election manifesto included a commitment to an ambitious child poverty reduction strategy, some MPs were disappointed that the party did not immediately promise to abolish the two-child limit.

The government’s comprehensive child poverty strategy was initially scheduled for release in the spring but has been postponed and is now expected in the coming days. This development signals a significant shift in the government’s approach to welfare and child support, with potential long-term benefits for families across the UK.