Two-child benefit cap findings raise questions over scrapping policy

An Institute for Fiscal Studies analysis finds the two-child benefit cap has no significant effect on a third child's school readiness, challenging arguments that scrapping the policy would boost early education outcomes. The study, which used official data on about 90,000 children, compared those born just before the policy's introduction in April 2017 with those born shortly after and found no difference in school readiness at age five across a range of domains, including communication and language, personal, social and emotional development, physical development, literacy and mathematics. The cap, introduced by the previous Conservative government, prevents families on universal credit from receiving some extra benefits for a third child or subsequent children.

Researchers caution that the study cannot address all potential effects of the policy. They note there was no evidence of adverse effects even among children in the most deprived areas or in families eligible for free school meals. However, the authors stress that the IFS analysis does not assess other dimensions such as child health or parental stress. The policy's fiscal impact, on the other hand, is clear: lifting the cap would come at a substantial cost, with estimates around £3 billion per year.

Labour's Deputy Leader bid has put the cap at the heart of its policy debate. Education Secretary Bridget Phillipson has described the two-child cap as spiteful and said it pushes children into hardship, signaling that scrapping the cap is 'on the table' as she seeks the party's deputy leadership. Prime Minister Keir Starmer has pledged to raise the share of children deemed school-ready from about 68% to 75% by 2028, a target that would be supported by a range of measures, though the IFS study suggests that removing the cap alone would not achieve that outcome.

The IFS analysis notes that removing the cap would likely reduce child poverty by easing family budgets, but it would not necessarily translate into improved early educational performance compared with other cost-effective policies. The report emphasizes that the cap has made benefits less generous for larger families, with a typical five-year entitlement drop of about £18,300 for a child in families receiving means-tested benefits.

Policy observers say the findings add a layer of nuance to the debate over welfare reform and early education, highlighting that financial support is only one factor in school readiness. The government and opposition alike are weighing how best to allocate limited resources as they pursue broader aims around child development and poverty reduction. The study covers the period before and after the cap's introduction but does not speak to longer-term outcomes beyond age five.