Scrapping two-child benefit cap ‘not a silver bullet for solving poverty’

The report published by the IFS about the impact of benefit policies on poverty doesn’t contain any recommendations, but does set out a range of estimates for costs.

Here are the big numbers:

• Dropping the two-child would bring 540,000 children out of absolute poverty – defined as households below 60% of the median income in 2010/11.
• Such a move would come at an initial cost of £1.7 billion a year, but this would rise to £2.5 billion.
• For 70,000 of the poorest households, the scrapping would make little to no difference because they would become newly subject to the benefit cap.
• If both the two-child limit and the benefit cap were dropped, it would lift around 620,000 children out of absolute poverty.
• This would come at a cost of more than £3 billion.

Anna Henry, an IFS research economist, said: ‘The recent rise in measured child poverty is entirely driven by higher rates of poverty among families with three or more children.

‘Scrapping the two-child limit would be a cost-effective way of reducing child poverty, at a lower cost per child lifted out of poverty, than all the other obvious changes to the benefits system, but it is not a silver bullet.

‘Scrapping the two-child limit would eventually cost the government a significant sum, about £2.5 billion a year. It would do nothing for households affected by the household benefit cap, who are among the poorest.

‘In fact, removing the two-child limit would lead to 70,000 more households being affected by the household benefit cap, wiping out some or all of its effect for those households.’