It is time to abolish the two-child benefit cap
One of the legacies of the late, great veteran Labour MP Frank Field was his work to eliminate poverty. His vision was of a welfare system, suffused with compassion, that ended the cycle of dependency by incentivising the economically inactive into work, thereby restoring dignity to those in penury. He understood that a poverty-fighting social security system must insulate the vulnerable from destitution whilst empowering them towards self-sufficiency.
I’d like to think that Frank would have welcomed some of the government’s recent reforms to welfare. Whilst I’m proud of our record in bringing unemployment down to just over 4%, the number of people who are economically inactive due to long-term sickness is at a record high of 2.8 million. With the overall number of PIP claims now up by almost a third since 2020, and “anxiety and depressive disorder” being the most common reason cited, there is an urgent need for reform.
I welcome the increased rigour to the Work Capability Assessment to get people back into work. Protecting those who need the most support while motivating and supporting those that can into work is a delicate balance but we need to get it right.
However, the truth is that Conservatives should do more to support families and children on lower incomes and cut welfare subsidies to people and businesses that do not need them. A crucial reform that Frank advocated was to scrap the two-child benefits limit, restricting child tax credits and universal credit to the first two children in a family. If they have a third or fourth child a low-income family will lose about £3200 per year. Over 400,000 families are affected and all the evidence suggests that it is not having the effect of increasing employment or alleviating poverty. Instead, it’s aggravating child poverty.
Introduced by George Osborne as part of his austerity package in 2017, this cap aimed to ensure that “families on benefits face the same financial choices about having children as families who are supporting themselves solely through work.” The reality is that about 1 million children have now found themselves in increasing levels of poverty. According to the Joseph Rowntree Foundation, 43% of children in families with three or more children were in poverty in 2021/22, with those under the age of four hit the hardest, almost twice as high as the poverty rate for children in one or two-child families. Why has this unintended consequence come about?
As the Select Committee for Work and Pensions found, the more children in a family, the less likely the adults in the home are to be in work. Many people don’t know about the limit when they have their third or fourth child, and almost half of households affected are single parent families who are disproportionately affected. As a result the policy has pushed more children into relative poverty and forced more families to use food banks. From what I see, this cap is creating the very culture of dependency that we are trying to vanquish.
Abolishing the two-child limit would cost the Government £2.5bn in 2024/25. This money could be found by getting more out of work claimants off welfare and back into work, and perhaps introducing some form of means testing for pensioners. Many wealthy pensioners have massive assets tied up in housing and pensions. Means testing the benefits for the wealthy and retired at the top of the wealth scale will go a long way to supporting those who need it at the bottom. And we should also consider raising the minimum wage so that we take more workers out of in-work benefits, reduce the benefits bill and incentivise work again.
Do we support families or do we penalise them? That’s the real question of a compassionate welfare system. Let’s abolish the two-child limit, eradicate child poverty for good and make Frank Field proud.
