DWP warning issued as 250,000 to be hit by 'unfair' benefits cap over next year

A further 250,000 children will be impacted by the two child benefit cap over the next year

A major warning has been issued as an extra 250,000 children will be affected by the two-child benefit cap over the next year.

The Institute for Fiscal Studies (IFS) said 670,000 more children across the UK will be impacted by the end of the next parliament. The two-child benefit cap, which restricts Child Tax Credit and Universal Credit to the first two children, currently affects two million children, with more hit each year because it applies to those born after April 5 2017.

It was brought in by the Conservative government in 2017 and campaigners have long called for it to be abolished as it could potentially lift thousands of children out of poverty. Poverty is defined as living in a household earning below 60% of median income after housing costs.

According to the IFS research, when fully rolled out, the cap will affect one in five children, rising to 38% of those in the poorest fifth of households. It reports that 43% of children in households with at least one person of Bangladeshi or Pakistani origin will be affected. Alongside this, affected households on average will lose around £4,300 a year which represents 10% of their income.

The IFS said removing the cost of the limit would cost the Government about £3.4billion a year. This is roughly the same as freezing fuel duties for the next parliament. Both Labour and the Conservatives have both said the cap would remain if they are voted in, while the Liberal Democrats and the Green Party have pledged to remove it.

IFS research economist Eduin Latimer said: “The two-child limit is one of the most significant welfare cuts since 2010 and, unlike many of those cuts, it becomes more important each year as it is rolled out to more families.”

Mubin Haq, chief executive of the abrdn Financial Fairness Trust, which funded the research, said: "The limit has been a significant contributor to child poverty amongst large families during a period when poverty for families with one or two children fell. If the next government is serious about tackling child poverty, it will need to review the two-child limit. There is an inherent unfairness in the policy as it affects only those children born after April 5, 2017. The majority of families affected are in work or have caring responsibilities for disabled relatives or young children."