Chancellor Rachel Reeves has faced a political storm after announcing the abolition of the controversial two-child benefit limit, a move immediately branded a 'Budget for Benefits Street' by opponents.
However, a leading think tank has robustly defended the policy shift, arguing that the statistics prove it is a targeted, sensible, and fair measure designed to support low-income working families.
Who Really Benefits from Scrapping the Cap?
The key change means that from April 2026, parents claiming Universal Credit will receive the child element of the benefit for every child in their family, not just the first two. This could mean an extra £300 per month for each additional child. For a family with five children, this translates to a significant £900 monthly increase in support.
Conservative leader Kemi Badenoch led the criticism, accusing the Chancellor of delivering a "Budget for Benefits Street, paid for by working people," claiming it would increase benefits for 560,000 families by an average of £5,000.
But the Institute for Public Policy Research (IPPR) has dismissed these claims. Their new analysis reveals a different picture:
- 70% of the additional cash from abolishing the cap will go to households where at least one adult is in work.
- The policy represents less than a 1% increase in the total annual benefits bill.
- It is projected to lift 450,000 children out of poverty.
The Long-Term Economic Case
The IPPR makes a powerful economic argument for the change, stating that the long-term benefits are likely to outweigh the initial costs. They highlight that the wider economic burden of child poverty is estimated at a staggering £39 billion per year.
By lifting a significant number of children out of poverty, the policy is expected to reduce future pressures on public services and boost long-term economic participation. Evidence consistently shows that reducing child poverty leads to:
- Better educational outcomes
- Improved health
- Higher earnings in adulthood
Professor Ashwin Kumar, IPPR's Director of Research and Policy and a former advisor to Gordon Brown, stated: "This is not a Budget for Benefits Street – it is a Budget for working parents who are doing their best in increasingly tough circumstances."
Addressing a Decade of Inequality
The two-child limit, introduced in 2017, has profoundly affected larger families. IPPR analysis shows the stark reality of its impact:
- Almost one in three large families now report food insecurity.
- 44% of larger families live in relative poverty, a far higher rate than smaller families.
The think tank argues the policy has entrenched inequality by "penalising children for circumstances beyond their control." Professor Kumar added that for too long, "children have been punished for the so-called sins of their parents," calling the original policy both "ineffective and unjust."
The IPPR also clarified that overall welfare spending as a percentage of GDP is set to remain flat, and accusations of a £10 billion welfare splurge are misleading, with only £3 billion allocated to new policies.
