Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The number of children affected by the UK’s contentious two-child limit on benefits increased by 8.5 per cent over the past year, official data shows, increasing pressure on the new Labour government to scrap the policy.

The policy, which restricts child welfare payments to the first two children in most families, affected a record 1.6mn children in the year to April 2024, up from 1.5mn, according to data from HM Revenue & Customs and the Department for Work and Pensions. 

Prime Minister Sir Keir Starmer has refused to commit to ending the policy despite significant pressure from figures inside his party, including former prime minister Gordon Brown, who point to data showing it as the primary driver of the UK’s rising child poverty rates. 

The policy was introduced by the Conservative government in April 2017, saying it would force families living on benefits to face the “same financial choices” as working families. But there is scant evidence that it has reduced the number of parents on benefits having three or more children.

Senior figures from children’s charities and the Church of England called for the policy to be scrapped following the publication of the new figures.

“We know that the two-child limit is a failing policy that actively pushes families into poverty,” said Joseph Howes, chair of the End Child Poverty UK umbrella group.

He added that scrapping the policy would move “the needle on child poverty overnight”.

The Rt Revd Martyn Snow, Lord Bishop of Leicester, said: “Abolishing this unfair policy is essential if we are to turn the tide on poverty and ensure that every child is supported to flourish in all areas of life.”

Labour has committed in its manifesto to a review of the UK’s universal credit welfare system, but has not guaranteed it will abolish a policy that deputy prime minister Angela Rayner said in 2020 was “obscene and inhumane”.

Removing the two-child cap would cost £3.4bn a year, according to the Institute for Fiscal Studies think-tank. 

Labour has said it will fund free breakfast clubs for all primary school pupils at a cost of £315mn over the parliament.

About 25 per cent of children in 2022-23 were living below the poverty line up from 23.8 per cent the previous year, the largest annual increase since records began in 1994-95, according to government statistics.

The poverty line is defined as 60 per cent of average inflation-adjusted income in 2010-11.

The number of families impacted by the policy, which applies to children born after April 2017, will continue to rise inexorably during this parliament as more children are born into households of three or more children.

The Resolution Foundation think-tank projects that 750,000 families will be affected by 2035, when all children in families of three or more will be captured by the policy. 

Torsten Bell, the former director of the Resolution Foundation who was elected as a Labour MP this month, described the policy as “immoral” in an article for The Guardian newspaper this April, arguing that it came close to creating “a poverty guarantee”.

By the end of the parliament in 2029 more than half of children in large families will be living in relative poverty, defined as 60 per cent of the UK’s median household income — a higher proportion than in 1997 when Tony Blair swept to power in a Labour landslide.

Work and pensions secretary Liz Kendall said: “Too many children are growing up in poverty and this is a stain on our society.

“We will work to give every child the best start in life by delivering our manifesto commitment to implement an ambitious strategy to reduce child poverty.

“I will hold critical meetings with charities and experts next week to get this urgent work under way.”