The impact of the two-child limit in Universal Credit

Universal Credit awards can include additional amounts for children or “qualifying young people” in full-time, non-advanced education up to the age of 19 in a claimant’s household. These amounts are designed to help with the costs of bringing up children, and to reduce child poverty.

In the Budget after the 2015 General Election the Government imposed a “two-child limit” on additional amounts to make savings in the welfare system, and to ensure households on means-tested benefits would “face the same financial choices about having children as those supporting themselves solely through work.”

How does the two-child limit work?

Households with a third or subsequent child born from 6 April 2017 claiming Universal Credit or Child Tax Credit no longer receive additional amounts for these children. Plans to apply the two-child limit to all new Universal Credit claims from February 2019, including to children born before April 2017, were abandoned.

Exceptions to the two-child limit are made for some claimants who did not choose to have a third or subsequent child, for example due to multiple births and non-consensual conception. Exceptions also allow child elements to be paid for some children in non-parental caring arrangements where they might otherwise be looked after by a local authority.

The two-child limit does not apply to Child Benefit.

How many families are affected by the two-child limit?

The policy only applies to children born from 6 April 2017, so not all families with a third or subsequent child claiming Universal Credit will be affected until the mid-2030s. In April 2023, the two-child limit affected 422,000 (55%) of the 772,000 families with three or more children claiming Universal Credit or Child Tax Credit. 22,000 households had an exception.

How much does the two-child limit save?

The Resolution Foundation think tank has estimated that the two-child limit will save the Government an estimated £2.5 billion in 2024/25; this would rise to £3.6 billion in 2024/25 prices if the two-child limit applied to all families claiming Universal Credit.

How has the two-child limit affected families?

As more children have been born since the limit was introduced, more families have been affected, and evidence has begun to emerge of the effects of the two-child limit, including:

• Relative poverty among families with three or more children, which has been rising since 2013, has continued to increase since April 2017. The Government points to falling absolute poverty over the period and questions the use of relative poverty measures.
• Employment rates among larger families with low earnings, the group most likely affected by the two-child limit, have not significantly changed since the policy was introduced.
• Fertility rates among larger families, which some had expected to be impacted by the two-child limit, have not decreased significantly in the years from 2017.

Debate around the two-child limit

The two-child limit has been controversial since it was introduced, both because of its impact on household finances and the way exceptions are administered. The prospect of the Government having to verify whether a child was conceived non-consensually, sometimes characterised as the “rape clause”, has been particularly controversial. A separate Commons Library briefing explores the debates surrounding the introduction of the two-child limit in tax credits and Universal Credit.

In 2019 the Work and Pensions Committee recommended that the two-child limit should be abandoned, citing concerns that the limit would increase the number of children in poverty and disproportionately affect minority groups. They also argued that it would penalise families that need to claim benefits unexpectedly when they already had three or more children or that had an unplanned pregnancy. The Government defended the policy by reiterating the original justifications, stressing the “considered and compassionate” exceptions, and pointing to other policies designed to help families with the cost of living.

The policy has resulted in significant savings, and the prospective cost of reversing it has prompted the leader of the Opposition, Keir Starmer, to say that Labour would not reverse the two-child limit.

Legal challenges

Two single mothers and their children argued that the two-child policy unlawfully discriminates against certain groups, in breach of the European Convention on Human Rights (ECHR). Following an earlier unsuccessful appeal of the policy to the Court of Appeal, the case was unanimously dismissed by the Supreme Court in July 2021.

Two different families filed complaints with the European Court of Human Rights in December 2021.