Good afternoon from New Economy Brief.
Earlier this month, the government published its Child Poverty Strategy, fulfilling a 2024 manifesto commitment. Most of the headline measures had already been announced, including the abolition of the two-child limit, the rollout of free breakfast clubs, and the expansion of free school meals. The decision to end the two-child limit — a deeply controversial policy — marks the culmination of a long and hard-fought campaign and has rightly been hailed as a major victory, which will reduce child poverty significantly.
However, as we explore in this week’s New Economy Brief, concerns remain about the government’s overall level of ambition in tackling poverty. In particular, its approach to other parts of the benefits system risks undermining the progress promised by the strategy.
Delivering on a ‘moral mission’
No child should have to grow up in poverty. But that is far from the reality in the UK today. JRF’s annual Poverty in the UK report – which we covered earlier this year – finds that as of 2022/23 30% of children in the UK were in poverty, rising to 44% in single-parent households, and to 45% in those with three or more children.
Labour’s 2024 manifesto made a commitment to bring down child poverty in the UK, arguing that it ‘not only harms children’s lives now, it damages their future prospects, and holds back our economic potential as a country’. The government’s resulting strategy should, according to its own calculations, lift 550,000 children out of relative child poverty by 2029 (relative poverty is defined as having a household income less than 60% of the median).
Abolishing the two-child limit
The two-child limit covers means-tested benefits including Universal Credit, and on average cuts incomes by £4,300 a year. The Conservative government first announced the policy in its 2015 budget as a cost-saving measure and to ensure claimants “face the same financial choices about having children as those supporting themselves solely through work”.
Those advocating for children and families in the UK have described the policy as morally wrong, and a major driver of child poverty, particularly amongst those most at risk of hardship. Even on its own terms the policy has failed, according to Professor Ruth Patrick, having “neither substantively affected fertility rates among lower-income households nor supported transitions into employment”. The Centre for Analysis of Social Exclusion also found that children from Black, Asian and mixed ethnic families are all more than twice as likely to be affected by the two-child limit as children from white families.
Of all the measures in the new strategy, abolishing the two-child limit has the biggest impact – lifting 450,000 children out of poverty by 2030. According to IPPR, the North West is set for the biggest reduction in hardship. The government’s decision comes after years of campaigning from charities and think tanks, including a recent open letter from leaders across anti-poverty charities. New Economy Brief covered the debate as far back as 2023; agreeing to remove the limit marks a shift for the government who last July removed the whip from seven of its MPs voting against the limit.
From increasing incomes to investing in services
The strategy also includes a range of other policies to tackle child poverty. The government has committed to removing the income threshold for access to free school meals by children in households receiving Universal Credit - this measure is anticipated to raise a further 100,000 children out of poverty. And there are new funds for pilot schemes to move families out of temporary accommodation within six weeks, free breakfast clubs expansion, and financial support and better information around baby formula.
A foundation but not a finish line
Campaigners across the third sector have welcomed the headline policies as first steps which will ‘improve the lives of children up and down the country.’ However, much more would be needed to eradicate child poverty completely, with millions of children expected to be left in relative poverty under this strategy - the most recent figures put overall child poverty at around 4.5 million.
Many are keen to ensure this government goes further than rolling back the previous one’s policies, and there has been no shortage of calls for more ambition. Some, including the Women’s Budget Group and the Children’s Commissioner, have called for the strategy’s policies to be applied more universally, including an expansion of free school meals to all children, not just those whose families receive Universal Credit.
More to be done within our social security system
There are two particularly glaring omissions in the new strategy. The first is the benefit cap – an upper limit on the total income a family can receive from the social security system unless they meet a certain income from paid work. This affects an estimated 300,000 children in the UK. In anticipation of the Child Poverty Strategy, Impact on Urban Health called for the cap to be abolished, as have many others since its implementation in 2013. Nearly 40,000 households are affected by both the two-child limit and the benefit cap, and despite the removal of the two-child limit will therefore not receive any additional income for third and subsequent children while the benefit cap endures.
Beyond lifting the benefit cap, the government can look to Scotland for more ambitious ways to tackle child poverty. In 2021 the Scottish Child Payment was introduced with the specific aim of reducing child poverty. It provides around £27 a week for each child in a household receiving Universal Credit or related benefit. The payment has reduced the level and depth of child poverty without disincentivising work. Supporting families of all sizes, it shows how people can be provided with adequate income through the social security system.
Housing costs remain unaddressed
The second big gap is action on housing costs. Since 2016 successive governments have intermittently frozen Local Housing Allowance (LHA) – the rate used to calculate the amount private renters on benefits can receive towards their housing costs. The current freeze, upheld in this year’s Autumn Budget, leaves households out of pocket as average rent increases outpace incomes. Citizens Advice analysis of demand for their services concludes that the need to uprate LHA is ‘urgent’.
Calls for further support for migrant families
Before the strategy’s publication, IPPR set out seven measures to support the 1.75m children facing additional barriers due to their immigration status. Coram notes that the strategy does well to include reference to families with no recourse to public funds, but argues wider Home Office policies undermine the financial security of those with precarious immigration status.
The Child Poverty Strategy cannot be viewed in isolation
While the Child Poverty Strategy marks a meaningful step forward, it sits alongside a wider approach to the benefits system that remains troubling. Proposals affecting disability and incapacity benefits, in particular, risk pulling in the opposite direction to the strategy’s stated aims. The Chancellor is looking for savings to the welfare budget, the Prime Minister is pushing for welfare reform and the Health Secretary has raised concerns about the number of people claiming disability benefits, ordering a review of mental health diagnoses earlier this month. The ongoing Timms review into Personal Independence Payments (PIP) will conclude in 2026 with recommendations for disability-related benefits, and there are concerns that it will result in cuts.
Ultimately, these tensions and inconsistencies in the government’s approach to social security point to the need for a clearer and more positive narrative about the system as a whole. If negative attitudes and stigmatising rhetoric about some benefits and claimants persist, the progress made on child poverty will remain limited and vulnerable to attack. As NEF’s Max Mosely writes: “this government’s decision to remove the limit was commendable, but now it must win the war of detoxifying the welfare state itself.”
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