A 'cruel' Department for Work and Pensions (DWP) benefits cap will result in hundreds of thousands additional households losing £4,300 per year.
The Growing Impact of DWP's Universal Credit Rule
The Department for Work and Pensions (DWP) intends to tighten enforcement of its two-child benefits cap, affecting families receiving Child Tax Credit and Universal Credit. This policy limits financial assistance to families' first two children, as a means of controlling government welfare costs.
The Institute for Fiscal Studies (IFS) estimates that the number of families affected by this cap will grow by one-third. This implies that more households will receive lower benefits, potentially losing an average of £4,300 per year. For some households, this means a hefty 10% loss in annual income, putting additional strain on already tight budgets.
Eduin Latimer, an IFS research economist, stated: "The two-child limit is one of the most significant welfare cuts since 2010 and, unlike many of those cuts, it becomes more important each year as it is rolled out to more families."
Mubin Haq, CEO of the abrdn Financial Fairness Trust, commented: "The limit has been a significant contributor to child poverty amongst large families during a period when poverty for families with one or two children fell.
"If the next Government is serious about tackling child poverty, it will need to review the two-child limit." Paul Carberry, chief executive at Action for Children, said: "Here is yet more shocking evidence of the huge scale of the damage being caused to children and families by the cruel two-child limit, which is well known to push families into poverty and, which if scrapped, would lift 300,000 children out of hardship.
"The election presents an opportunity for bold and ambitious action to be taken and for all political parties to commit to ending child poverty once and for all. That must include an increase to the child element of Universal Credit and scrapping the two-child limit and benefit cap."
Further Impact on Child Poverty and Family Finances
The Conservative government implemented the two-child benefit cap in 2017, restricting Child Tax Credit and Universal Credit to the first two children. Campaigners have long urged for its abolition, arguing that it would help bring thousands of children out of poverty.
According to a second research conducted by the Joseph Rowntree Foundation (JRF), 40% of people working in primary schools and GP practices thought about abandoning their jobs due to a "shameful" level of hardship among the population.
The JRF discovered that service providers were "staggering under the weight of hardship" because they had to provide additional assistance to roughly four million individuals who were struggling to pay for necessities such as food, heating, and clothing.
According to the IFS, the two-child cap has contributed to an increase in the share of children in big families living in relative poverty from 35% in 2014-15 to 46% in 2022, while poverty rates for families with one or two children have decreased.