It is time to abolish the twochild benefit cap
There is an urgent need to reform a welfare system that does not incentivise work and punishes the poor The policy has pushed more children into relative poverty and forced more families to use food banks
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 while empowering them towards self-sufficiency.
I’d like to think Frank would have welcomed some of the Government’s recent reforms to welfare. While I’m proud of our record in bringing unemployment down to just over 4 per cent, 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 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 who 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 £3,200 per year. More than 400,000 families are affected and all the evidence suggests 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 one million children now find themselves in increasing levels of poverty. According to the Joseph Rowntree Foundation, 43 per cent 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 the poverty rate for children in one or two-child families. Why has this unintended consequence come about?
As the work and pensions committee 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 these households 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. This cap is creating the very culture of dependency we are trying to vanquish.
Abolishing the two-child limit would cost the Government £2.5billion in 2024-25. This money could be found by getting more claimants off welfare and back into work, and perhaps introducing some form of means testing for pensioners. Many wealthy retirees have massive assets tied up in housing and pensions. Means testing the benefits for the 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.