A common refrain over the years from the government is that parents, particularly of larger families, need to work harder or longer hours to finance their family’s lifestyle. Such “encouragement” came from former Chancellor George Osborne during the “austerity” years. The first was the “Benefit Cap” introduced in 2013 which limited the total amount of state benefits a family could receive. The second policy prevented parents from claiming child tax credit or universal credit for any third or subsequent child born after April 2017. Parents of children born prior to April 2017 would continue to receive benefits.
The political background
These policies were significant because they broke the link between assessed need and entitlement to support. In 2010, when it was claimed that 100,000 households received benefits totalling more than the average wage, Employment Secretary, Chris Grayling said: “We will make work pay so that the system is fair – fair for those who need a hand up and fair for the taxpayer who pays for it.”
In 2013 Iain Duncan Smith, then Work & Pensions Secretary, said “people who are on benefits should not be earning more than those, for example, on average earnings.” The Daily Mail reported that a minister had “suggested that parents should think twice about having so many children if they cannot support them without the help of benefits”.
So what is the impact of the austerity benefit reform after 10 years?
Over the past 3 years, since February 2020, a research project has tracked the lives of 45 parents with three or more children living in London and Yorkshire. During their research 112 interviews were conducted.
The project identified that the benefit cap affected 114,000 households and an estimated 280,000 children in February 2023, with families losing £50 on average a week. As the two-child limit applies to children born since 6 April 2017 the number of children affected increases every year. Hence by April 2023, 1.5 million children (equivalent to 1 in 10) are subject to the policy.
An estimated 32,000 households, containing 110,000 children, are subject to both benefit cap and two-child limit. The overall conclusion is that the impact of these two policies has contributed to rising levels of child poverty.
We can confidently conclude that neither policy meets its aims and that both cause extreme hardship. These policies should end.Larger Families Study
The report acknowledges that larger families were already at risk of poverty before these two policies came in. Larger families, those living in private rented accommodation, and those less able to increase their income through employment, such as single parent households and families with younger children, are disproportionately affected.
Have the policies encouraged employment or smaller families?
The project found no evidence of any increases in employment among families affected by the two-child limit. Similarly very few of the capped families moved into paid work. They often faced considerable barriers to paid work. Care-giving responsibilities and reductions in benefit entitlement with increased work hours sometimes had counterproductive effects.
Did the two-child limit cause families to “think twice” about pregnancy? The interviews revealed that many families only discovered the limit after the birth. Similarly parents learn of the limit when claiming benefits for the first time, say after a relationship breakdown or job loss. Consequently the authors of the report state “Both policies ignore the everyday realities of people’s lives, and how choices are often constrained by circumstances, such as accidental pregnancy or a child with additional needs that make working more hours impossible.”
The hidden consequences
Inflationary pressures and the cost-of-living crisis have added to the extreme hardship caused by the two policies. The interviews revealed that parents did not have adequate income to cover basic living costs – food, clothing, essential bills. Debts are accruing to councils, utility companies, catalogue and credit cards, as well as to families or friends who loan money.
Unsurprisingly, these financial stresses are causing anxiety and having a negative impact on parents’ mental health. Where money is tight, children are excluded from extracurricular, cultural, leisure and costly family activities. This can cause children to experience social exclusion and bullying. The long term consequences for the children will probably affect cognitive and emotional development, school achievement, etc. But more research is required.
The report recommends: “We can confidently conclude that neither policy meets its aims and that both cause extreme hardship. These policies should end.”
The End Child Poverty coalition of over 80 organisations is also calling for two-child limit for those claiming Universal Credit to be scrapped. Quoting recent government figures , ECP state 4.2 million children, 29% of the UK’s children, were living in poverty between April 2021 and April 2022.
Across East Anglia incidences of poverty vary with nearly 40% of children estimated to be in poverty in 20/21 in Luton and over 30% in Ipswich, Great Yarmouth, Fenland, Norwich and Peterborough.
The devolved nations of Scotland and Northern Ireland have taken steps to mitigate the consequences of the benefits cap. Whilst Westminster, and even Keir Starmer, continue defending the two-child limit, the Scottish Government has introduced a means-tested Scottish Child Payment.
Outside Scotland, the prognosis looks bleak and the political will to end child poverty absent. Prem Sikka is Emeritus Professor of Accounting at the University of Essex, and a Labour peer. He best sums up the gloomy future that many face. He tweets:
“Bankruptcy of UK politics. 4.2m children live in poverty. Just £1.3bn would lift 250,000 out of poverty, reduce poverty for another 850,000. £39.5bn annual economic gain. Govts handed £1 trillion Quantative Easing to speculators but won’t help children. Labour also refuses.”
Sadly, it appears politicians remain unwilling to address the causes of child poverty.