Catastrophic caps

An analysis of the impact of the two-child limit and the benefit cap

In the benefit system, entitlement and need are intertwined: the greater the need, the more benefit income a family is usually entitled to receive. But in the 2010s, two policies were introduced that delinked entitlement and need by limiting the amount of benefits some families could receive: the benefit cap in 2013, and the two-child limit in 2017.

At present, nearly half a million families are hit by at least one of these policies. Although the benefit cap affects out-of-work families only, this is not the case for the two-child limit, and six out of ten families affected by the two-child limit today contain at least one adult that is in work.

The two-child limit results in low-income families losing around £3,200 a year for any third or subsequent child born after April 2017. And when 100,000s of families lose out on £1,000s of benefit income a year, poverty rates soar. In 2013-14, 34 per cent of children in larger families were in poverty, but this is projected to rise to 51 per cent in 2028-29. In contrast, the proportion of two-child families in poverty is projected to remain more or less constant over the same 15-year period, at around 25 per cent. Other outcomes are also worse for larger families: in the year 2021-22, three-quarters (75 per cent) of larger families were in material deprivation, compared to 3-in-10 families with fewer than three children (34 per cent); and 16 per cent of larger families were in food insecurity, compared to 7 per cent of families with fewer than three children.

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