Parents of under-fives may be exempted from UK’s two-child benefit limit

Parents of under-fives could be exempted from the government’s two-child benefit limit under a range of options UK ministers are considering as they try to bring down child poverty numbers without removing the rule altogether.

Ministers are trying to find ways to alleviate the impact of the two-child limit for universal credit or child tax credits, which was imposed by the Conservatives in 2017, without spending £3.6bn to remove it entirely, according to those briefed on the discussions.

Among the options is applying the limit only to those with children who are five and over, exempting parents of disabled children, exempting parents in work and increasing child benefit payments for parents of young children. A separate proposal to move to a three-child limit has also been discussed, but is understood not to be under serious consideration.

Ministers hope the plans will answer criticism that Labour is not doing enough to tackle child poverty. But their publication this spring could be another flashpoint in relations between the government and Labour backbenchers, many of whom want the cap abolished completely.

One person briefed on the discussions said: “Officials are keen to mitigate the impact of the cap, if not lift it entirely. They have been discussing a range of options to do so, but at the moment, helping parents of under-fives seems to be one of the most likely.”

Another said: “Everything is on the table. The important thing is to have chid poverty falling by the end of the parliament.”

A spokesperson for the Department for Work and Pensions said: “We do not comment on speculation. Our ministerial taskforce is exploring all available levers across government to give every child the best start in life.”

Ministers and officials are in regular talks with thinktanks and child poverty experts as they put the finishing touches to their strategy, and have asked several organisations to work up models for how many children they could lift out of poverty under various scenarios.

The argument for lifting the cap for parents of very young children has been bolstered by a analysis from the Fabian Society, which shows 1.2 million children aged up to four are living in a household with less than 60% of the median income, after housing costs have been accounted for.

Just under half of those are classified as living in “deep poverty”, on less than 40% of the median income, excluding housing. The figures come from a new analysis of the government’s Family Resources Survey.

Ben Cooper, a research manager at the Fabian Society, said: “As the government prepares its child poverty strategy, they must focus relentlessly on lifting babies and toddlers out of poverty – and ensuring they have the support needed to thrive.

“Over a third of very young children in England and Wales live in poverty. More than a million babies and toddlers risk having their life chances, health and wellbeing harmed as a result.

“The government must show voters they can deliver change and turn the tide on child poverty in the early years.”

As well as exempting parents of under-fives and raising the cap to three children, officials have also spoken about the option of increasing universal credit payments for parents of babies and toddlers, and introducing a “child benefit lock” to make sure it goes up each year in line with earnings or inflation.

Any of these options, however, will have to be approved by the Treasury, which is already trying to find billions of pounds’ worth of cuts from DWP and other departments to avoid breaking its fiscal rules later this year.

Meanwhile, a separate analysis published on Wednesday by the Resolution Foundation shows that pushing ahead with existing plans to reduce the welfare bill by £3bn would contribute to a rise in overall child poverty from 31% to 33% by 2030. That would raise the number of children living below the poverty to an all-time high of 4.6 million.

The thinktank added, however, that scrapping the child benefit cap and the overall welfare cap would lift 500,000 children out of poverty, albeit at a cost of £4.5bn.

Adam Corlett, a principal economist at the Resolution Foundation, said: “A government that is serious about reducing child poverty will need to undo some of the policies announced by previous governments, such as scrapping the two-child limit.”