Rachel Reeves has announced during her Autumn Budget that she will eliminate the contentious two-child benefit cap. This cap restricts low-income families from accessing additional means-tested benefits when they have a third or subsequent child born after April 6, 2017, impacting those receiving Universal Credit and Tax Credits.
Initially implemented by the Conservatives in April 2017, the policy has faced criticism from advocates who argue that limiting benefits is contributing to a rise in child poverty. The cap is scheduled to be removed starting in April 2026, with the Chancellor emphasizing a stance against penalizing vulnerable children within the welfare system.
According to the Office for Budget Responsibility (OBR), the removal of the two-child benefit cap is projected to incur costs of £3 billion by 2029/30. In April 2025, a total of 1,665,540 children were affected by this cap, as reported by the Department for Work and Pensions (DWP).
It is important to note that the two-child benefit cap differs from the benefit cap, which sets a maximum limit on the total benefit amount one can receive. Chris Sherwood, CEO of the NSPCC, welcomed the decision to eliminate the two-child limit, highlighting its potential to lift hundreds of thousands of children out of poverty and improve their overall well-being.
The Institute of Fiscal Studies (IFS) estimates that families impacted by the cap could have received an average of £4,400 in annual benefits if the restriction had never been introduced. However, projections suggest that lifting the cap could result in an annual cost of £3.6 billion, with Universal Credit claimants receiving additional monthly payments based on the child’s birth date.
Payments continue until the child reaches 16 or, if in full-time education or approved training, up to the age of 19. To enhance the effectiveness of the Budget in addressing child poverty, the NSPCC urges the government to develop a comprehensive strategy that addresses the root causes of poverty to ensure every child has the opportunity to thrive.