Two-child benefit cap 'doesn't harm kids' learning, study finds as Labour weighs scrapping

A new Institute for Fiscal Studies study finds the two-child benefit cap has no significant effect on a third child’s school readiness, challenging claims that scrapping the policy would boost early education outcomes. The analysis, which used official data for about 90,000 children, showed those affected by the cap began formal schooling at age five with development levels similar to peers not subject to the cap. The findings arrive as Labour’s deputy leadership hopeful signals the cap could be scrapped, a move that would cost about £3 billion annually.

The IFS study assessed school readiness by examining teachers’ end-of-Reception assessments across five domains: communication and language; personal, social and emotional development; physical development; literacy; and maths. It compared children born shortly before the policy’s 2017 rollout with those born soon after, focusing on families receiving means-tested benefits under universal credit. The report states that today’s research suggests scrapping the two-child limit would not be a cost-effective policy specifically for improving children’s early educational performance, compared with other policies with proven, cost-effective positive effects.

Since April 2017, the two-child limit has meant that families on universal credit no longer receive an uplift to their benefits for extra children after their second. The IFS compared the school readiness of third and subsequent children born just before the policy took effect with those born shortly after. The researchers note there was no evidence of adverse effects even among children in the most deprived areas or from families already eligible for free school meals. However, they caution that the study could not assess other potential effects of the policy, such as impacts on child health or parental stress.

The report notes that the introduction of the cap made the benefits system substantially less generous for larger families. For a child in the first five years of life, entitlements for families on means-tested benefits would typically have fallen by about £18,300 in total over those five years. While lifting the cap could help reduce child poverty more broadly, the IFS cautions that such a move would not necessarily translate into improved school readiness.

The policy remains a political flashpoint. Prime Minister Keir Starmer has pledged to raise the share of children deemed “school ready” from about 68 percent to 75 percent by 2028. Education Secretary Bridget Phillipson has framed the two-child cap as a focal point of her bid to lead Labour’s deputy leadership, describing the cap as spiteful and saying its scrapping is “on the table” for consideration as part of a broader review of family support. The new findings add complexity to the debate, suggesting that while addressing poverty is crucial, the cap’s direct link to early educational performance may be limited.

Further research would be needed to understand how the policy influences other outcomes, including health, parental stress, and long-term educational trajectories. In the meantime, the IFS analysis provides policymakers with a clearer view of school readiness as a dimension of child development that may not respond as readily to benefit structure changes as some advocates have argued. Policymakers will weigh the study against broader poverty-reduction goals and the potential fiscal costs of policy changes as Britain eyes improvements in children’s early development.