Rising Child Poverty and the 2-Child Limit: How the Policy Pushes Families into Crisis

Child poverty is climbing, with 700,000 more children living in poverty compared to 2010. In response, the Labour government has introduced a Child Poverty Taskforce. But a critical question remains: will they reconsider the 2-child limit?

This policy, implemented in 2017, restricts families receiving Universal Credit (UC) or Child Tax Credits (CTC) from receiving additional financial support for more than two children. It applies to all children born after April 2017, with some exceptions, such as for twins or non-consensual conception.

As of April 2024, 440,000 households were affected, receiving no support for their third or additional children. Over 1.6 million children live in these households. As time passes, more families are impacted by this policy, which limits much-needed financial assistance.

The Impact of the 2-Child Limit

Families affected by the 2-child limit lose £3,455 per year for each child beyond the second—a significant sum for many struggling households. Advisors report that families under this policy face difficulty affording essential costs like childcare, school uniforms, and food.

One local adviser explained:

“We see people daily who come for food bank referrals or crisis support because they aren’t receiving enough support for all the children they care for. The reality is simple: children are expensive, and limiting help forces families into poverty.”

Many families turn to crisis support and accumulate debt due to this policy. For instance, Carla, a single mother of four, only receives financial support for two of her children. This has left her with tough choices, like whether to pay for food or cover essential bills. Her situation has worsened, with rent arrears building up and multiple food bank visits—her family is now at risk of being cut off from further aid.

The policy was intended to align the financial choices of families receiving benefits with those of other families. However, data shows that the proportion of households on UC and CTC with three or more children hasn’t changed since the policy's introduction. Thousands of families with three or more children, who already had their children before claiming UC, are also impacted.

For families like Dan’s, this policy has been devastating. Dan and his wife had to leave work to care for their paraplegic son and applied for Universal Credit. However, they receive no financial support for their third child, leaving them in a dire financial situation during an already challenging time.

What Needs to Change?

Currently, around 550,000 children aren’t receiving the child element under UC or CTC due to the 2-child limit. Providing the child element to every child would cost an estimated £1.9 billion in 2024/2025, though some households may see reduced payments due to other benefit limits.

Eliminating the 2-child limit would allow families to cover essential costs and lift many out of poverty. It would help people like Carla, who could avoid spiraling into debt, and families like Dan’s, who are forced into financial hardship due to unforeseen life circumstances.

Although the detrimental impact of the 2-child limit is widely acknowledged, the issue of poverty is complex, and removing this policy alone won’t solve it. Rising costs, stagnant Local Housing Allowance rates, and additional reductions in UC leave many families in a precarious financial situation.

While we welcome the creation of the Child Poverty Taskforce, it is clear that a comprehensive, long-term strategy is essential to prevent families from living in perpetual crisis and debt.

Source: Based on statistics from DWP & HMRC (2024) Universal Credit and Child Tax Credit claimants: statistics related to the policy to provide support for a maximum of 2 children.