The Department for Work and Pensions (DWP) is considering changes to the controversial two-child benefit cap, which limits tax credits and Universal Credit claims to a family’s first two children. Introduced in 2015 under David Cameron and George Osborne’s austerity measures, the cap has faced criticism for increasing child poverty. While the Labour Party, including Prime Minister Sir Keir Starmer, previously opposed the cap, they have now suggested reforms instead of complete removal due to financial constraints.
Several potential changes to the policy are being discussed, including exemptions for certain families, increasing child benefit payments, and even raising the cap to three children. Here’s a breakdown of all the possible ways the government might modify the two-child cap.
Table of Contents
1. Exempting Parents of Disabled Children
One of the key proposals is to exclude parents of disabled children from the cap. This change would ensure that families with children requiring extra care and financial support do not suffer under the current restrictions.
The government has acknowledged that the two-child cap disproportionately impacts low-income families, especially those with disabled children. By allowing exemptions, they aim to provide targeted relief without scrapping the policy entirely.
2. Exempting Parents Who Are Employed
Another proposal under consideration is to allow exemptions for parents who are in work. The idea is to encourage employment while offering financial support to working families with more than two children.
If this change is implemented, families where at least one parent has a job could receive additional tax credits or Universal Credit for their third child. This measure could reduce child poverty while also promoting workforce participation.
3. Increasing Child Benefit Payments for Young Children
Instead of removing the cap, the government is also discussing increasing child benefit payments for parents of young children. This would help ease the financial burden on families without making drastic changes to the existing system.
By providing additional support for families with younger children, the government hopes to tackle child poverty at an early stage. This could be a cost-effective alternative to scrapping the cap entirely.
4. Raising the Cap to Three Children
Another possibility is raising the limit from two children to three. This would allow families to claim tax credits and Universal Credit for one additional child, offering some relief while still maintaining restrictions.
The government is considering this option as a middle-ground solution that balances financial responsibility with social support. However, even this change would require significant government spending.
5. Extending Free School Meals
The Resolution Foundation has proposed that the government extend free school meals to all families receiving Universal Credit. This measure could lift an estimated 100,000 children out of poverty at a cost of £1.2 billion.
While this does not directly change the two-child cap, it would provide much-needed support to struggling families and help address child poverty rates in the UK.
6. Restoring the Family Element of Universal Credit
Another recommendation is to restore and increase the family element of Universal Credit, which was previously reduced. This payment could be worth up to £800 annually by 2029-2030 and would help support low-income families.
Along with re-linking the Local Housing Allowance to local rent prices, this measure could lift an estimated 140,000 children out of poverty. However, it would cost around £3 billion, making it a significant financial commitment for the government.
What’s Next?
While the Labour government has committed to reducing child poverty, fully removing the two-child cap remains unlikely due to the high costs involved. Instead, they are exploring targeted changes that could provide relief to struggling families without significantly increasing public spending.
The upcoming spending review will be crucial in determining which measures will be implemented. If exemptions, increased benefits, or raised caps are introduced, millions of families could see some financial relief. However, without significant reforms, child poverty in the UK is expected to rise, putting further pressure on the government to act.
FAQ’s
What is the two-child benefit cap?
The two-child benefit cap restricts tax credits and Universal Credit payments to a family’s first two children. It was introduced in 2015 to reduce government spending.
Why is the UK government considering changes to the cap?
The cap has been widely criticized for increasing child poverty. The Labour government is reviewing possible changes to provide financial relief to struggling families.
What changes to the two-child cap are being considered?
Proposals include exempting parents of disabled children, increasing child benefit payments, raising the cap to three children, and extending free school meals.
Will the two-child cap be completely removed?
Complete removal is unlikely due to the high cost. Instead, the government is considering targeted exemptions and increases in child benefits.
When will changes to the two-child cap take effect?
There is no official timeline yet, but the government is actively reviewing the policy, and changes may be announced in upcoming budget plans.
