The impact of the two-child limit in Universal Credit

Universal Credit awards can include additional amounts for each child or “qualifying young person” in education up to the age of 19 in a claimant’s household. This is similar to Child Tax Credit, which it is replacing. Child-related additions have long existed in the benefits system, and are designed to contribute to the extra costs of bringing up children, and to reduce child poverty.

As part of a series of measures announced in the Budget after the 2015 General Election to make savings in the welfare system, a “two-child limit” was imposed on these additional amounts. The policy was designed both to reduce the cost of the benefit 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.”

With some exceptions, 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 are made for some claimants who did not choose to have a third or subsequent child, for example due to multiple births or non-consensual conception, and to encourage adoption where children might otherwise be looked after by a local authority.

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 2021, 317,500 (38%) of the 836,020  families with three or more children claiming Universal Credit or Child Tax Credit were affected.

Child Benefit, and help with childcare costs for working claimants in Universal Credit and Working Tax Credit, is not impacted by the policy.

Debate and evidence of impact

The two-child limit, and the operation of the exception for non-consensual conception in particular, has been controversial since it was introduced. The debates surrounding the introduction of the policy are explored in the Commons Library’s briefing covering the introduction of the two child limit in tax credits and Universal Credit.

In 2019 the Work and Pensions Committee published two reports looking into the policy, the second of which recommended that it be abandoned. The Committee questioned the rationale, noting that many families would not know whether they might have to claim benefits in future when they have children, and that many pregnancies are not planned. They also worried that problems accessing affordable childcare would prevent families from making up shortfalls in income through work.

At the time of the Committee’s inquiries, little quantitative research had been published looking at the impact of the two-child limit. However, the Committee heard predictions from expert groups that it would lead to significant increases in the numbers of children living in poverty, and that certain minority groups would be disproportionately impacted. 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.

Since then more families have been affected, and evidence has begun to emerge of the impact of the two-child limit, including:

• Relative poverty among larger families with three or more children, which has been rising since 2013, has continued to increase since April 2017. The Resolution Foundation estimates that nearly half of families with three or more children were in relative poverty in 2021/22, up from a third in 2012/13. The Government points to falling absolute poverty over the period, and questions the use of relative poverty measures.
• Fertility among larger families, which some had expected to be impacted by the two-child limit, has not decreased significantly in the years from 2017.
• Some evidence has been published noting increasing abortion rates among larger families since 2017, though a conclusive link to the two-child limit has been questioned.

A challenge to the lawfulness of the two-child policy was brought by two single mothers and their children, arguing that it 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.