The two-child benefit cap

What is it?

Introduced in 2017 by the Conservative government, the cap prevents parents from claiming Universal Credit or child tax credit for more than two children, with a few exemptions, including a child born out of a “non-consensual conception”. It means families cannot claim around £3,200 a year per extra child. The government said it would encourage parents to go back to work.

How many people are affected by the cap?

The number of families affected by the two-child cap has grown over the years. Last year, there were around 440,000 households and 1.6 million children affected across the UK. That is up from around 73,500 households in April 2018.

According to the Child Poverty Action Group, abolishing the policy would cost around £1.7bn but would be “the most cost-effective way to start to reduce child poverty”, lifting 300,000 children out of poverty and pulling 700,000 more out of “less deep” poverty.

What is the ongoing row with Labour?

Initially, Labour stood against the policy. In 2020, deputy leader Angela Rayner called for the “obscene and inhumane two-child cap” to go.

But in 2023 Keir Starmer confirmed a Labour government would not scrap the policy, claiming it would not be financially possible to get rid of it.

Estimates by the Institute for Fiscal Studies show that the cost of scrapping the policy would rise to £3.6bn once it is fully rolled out. And, although the thinktank agreed that it would be a cost-effective way to bring children out of poverty, it added that such a policy change is “not a silver bullet”.

The UK Government – now led by Labour – instead launched a taskforce to tackle child poverty shortly after the election. This is set to report back in the spring.

However, Starmer’s refusal to get rid of the policy immediately led to a small rebellion in his party. Several MPs urged the prime minister to reconsider his decision, while north of the border, Scottish Labour leader Anas Sarwar and deputy leader Jackie Baillie said they remained against the cap.

In July, the SNP tabled an amendment to the King’s Speech calling for the policy to be scrapped. The party said the policy was “nothing short of a disgrace” and was “pushing thousands of Scottish children into poverty”.

A total of 103 MPs from various political parties voted for the SNP’s motion to end the policy, including seven Labour MPs. Forty other Labour MPs abstained from the vote.

Consequently, Starmer gave a six-month whip suspension to the Labour MPs, including former shadow chancellor John McDonnell, who sided with the SNP.

Starmer’s decision came under fire from Labour members such as Nottingham East MP Nadia Whittome, who called his approach “appalling”, claiming it “does not breed a healthy culture”.

So, will the cap remain in Scotland?

Since it’s a UK policy, the cap will remain in place in Scotland. However, the Scottish Government has indicated it will work to mitigate it.

Delivering the budget in December, finance secretary Shona Robison said “the cap will be scrapped”. However she caveated that with the fact the UK Government would need to provide data on the families affected for Scottish ministers to carry out the plan.

Reacting to the announcement, Rayner described it as “one little slogan” without funding. Sarwar dubbed it a “policy without a penny”.

How much will that cost?

The Scottish Fiscal Commission has said getting rid of the policy would cost £155m in 2026-27, rising to almost £200m by 2029-30.

What do people think of it?

A YouGov poll revealed around six in 10 Brits believe the cap should remain.

What’s next?

Scottish secretary Ian Murray has said the Department for Work and Pensions is “not quite sure” what data the Scottish Government requires on the cap, adding it had “no policy” on the issue.

However, Swinney said social justice secretary Shirley Anne-Somerville sent a letter to the UK’s work and pensions secretary Liz Kendall “before Christmas” outlining the “data requirements” Holyrood would need to mitigate the cap.

An exact date on when payments would begin is yet to be announced. Swinney said: “If we are able to safely get the systems up and running in this coming year, the first payments will be made in this coming year.”

The first minister is also still to clarify where the extra cash needed to fund the payments would come from.