Universal Credit (Removal of Two Child Limit) Bill [HL]: HL Bill 7 of 2022-23

Universal credit (UC), introduced in 2013, currently restricts the payment of additional child elements to the first two children in a household, if the third or subsequent children were born after April 2017. Some exceptions apply, for example for multiple births or for children born through non-consensual conception. The policy was introduced by the Conservative government in the July 2015 budget. The government said the policy was intended to reduce the welfare budget and to be fair to “working families who don’t see their budgets rise when they have more children”. In 2015, the government estimated that the policy would save £1.4bn a year by 2020/21. 

As the two-child limit only applies to children born after April 2017, not all households on UC are affected by the policy. As of April 2021, there were 836,000 households with three or more children claiming either UC or child tax credit (which UC is replacing). Of those, 318,000 households, containing around 1.1 million children, were affected by the two-child limit. 

The two-child limit has been controversial since it was announced. Critics argue that it has contributed to an increase in child poverty and that it disproportionately affects certain communities, in particular some religious groups and ethnic minorities. 

In 2019, a House of Commons Work and Pensions Committee report recommended that the two-child limit be abolished. It challenged the assumptions which underpinned the government’s objectives for the policy, and it found no evidence that the two-child limit had encouraged parents of larger families to work more hours.

In recent months, academic studies of poverty in larger families and of the effect of the two-child limit on fertility rates have been published. Their findings suggested that:

• Almost all the increase in child poverty in the UK since 2012/13 was driven by poverty in households with three or more children and changes to social security benefits were the biggest contributor to the increase in poverty.
• Fertility rates in households impacted by the two-child limit have not decreased significantly.

Opposition parties are opposed to the two-child limit. The 2019 general election manifestoes of both the Labour Party and the Liberal Democrats committed to abolishing the policy. The current government has defended the policy as “sustainable and fair” to claimants and taxpayers.