Benefit Cap Threatens Financial Relief for Thousands of Families
While the government's decision to abolish the controversial two-child benefit limit has been heralded as a major victory in the fight against child poverty, a significant number of households may find themselves still facing financial hardship due to another welfare rule. The move, which will allow families to claim child tax credit and universal credit for all children regardless of family size, is projected to lift approximately 450,000 children out of poverty by the year 2039. However, this positive development comes with a crucial caveat that could undermine its impact for many.
The Hidden Hurdle: The Household Benefit Cap
An estimated 60,000 families who qualify for the newly expanded support risk having some or all of their additional benefits clawed back because they are likely to breach the overall household benefit cap. This cap sets a strict upper limit on the total amount of benefit payments that most working-age individuals across the United Kingdom can receive annually. Currently, this ceiling stands at £22,000 per year, with slightly higher thresholds applicable in regions where living costs are particularly elevated.
According to a detailed impact assessment that was first brought to public attention by the i newspaper, around 50,000 households that would otherwise benefit from the scrapping of the two-child limit will see no financial improvement whatsoever due to this overarching benefit ceiling. A further 10,000 families will experience only partial benefits, meaning the promised relief will be significantly diluted for them.
Complex System Creates Unintended Consequences
The household benefit cap does not apply to households where at least one person earns a minimum of £846 per month through employment. Deven Ghelani, the founder of the social policy organisation Policy in Practice, warned ahead of last year's fiscal announcement that the intricate nature of Britain's benefits framework would "limit the impacts on larger families and prevent some from a change that could otherwise provide much-needed financial relief."
He elaborated further, stating: "Our analysis finds that one in ten children hit by the two-child limit won't benefit from it being abolished, and a further one in ten will only benefit partially, unless the Chancellor lifts the benefit cap too. This interaction highlights once again the complexity of the benefit system, and the complex analysis needed to ensure support on the frontline gets to those families who need it most."
Policy Background and Political Reactions
The reform, which was unveiled by Chancellor Rachel Reeves in her November Budget, means that from April 2025, households will be able to claim the child element of universal credit for all their children. Child poverty experts have long argued that the original two-child restriction, introduced by the Conservative-led coalition government back in 2013, has been a direct contributor to rising deprivation levels among larger families across the nation.
While the decision to axe the limit has been celebrated by campaigners as a "game-changing moment for children," it has also drawn sharp criticism from opposition parties. Tory leader Kemi Badenoch has vowed to restore the two-child cap should her party return to power, framing the current government's move as fiscally irresponsible.
Dan Paskins, executive director of Save the Children UK, welcomed the policy shift, saying: "The Government is right to recognise that children have paid the price of a poorly thought-out policy for far too long. We warmly welcome this momentous change and the leadership that the Prime Minister and Chancellor are showing."
The situation underscores a critical tension within the welfare system: a well-intentioned policy designed to alleviate poverty for hundreds of thousands is being partially thwarted by the existing architecture of benefit caps, leaving tens of thousands of vulnerable families in a precarious financial position. The coming months will reveal whether further adjustments to the benefit cap will be considered to ensure the full potential of this poverty-reduction measure is realised.
