Child poverty and the two-child benefit cap: explained

Ahead of the Budget there’s been widespread speculation that Chancellor Rachel Reeves could scrap or change the two-child benefit limit—a policy which prevents most families from claiming means-tested benefits for a third and any additional children born after April 2017.

Although government sources had previously signalled a reluctance to commit to changing or removing the limit, earlier this year it was reported that the Prime Minister Sir Keir Starmer is keen to scrap it, while several Labour MPs, including deputy leader Lucy Powell and education secretary Bridget Phillipson, have publicly called for it to be removed.

In its manifesto, Labour pledged to “develop an ambitious strategy to reduce child poverty”. A child poverty taskforce, co-chaired by Ms Phillipson and science secretary Liz Kendall, was expected to publish this strategy in spring 2025, but the government said in May that it would be delayed to “later this year”. The Department for Work and Pensions has not yet confirmed when it will be published.

This explainer looks at how child poverty is measured, how many children are impacted by the two-child benefit limit, and what campaigners and experts have said about the policy.

How is poverty measured?

‘Poverty’ means different things to different people. There’s no single agreed-upon definition, and the statistics we have on poverty can vary significantly, depending on what measures the people collating the numbers have used.

When politicians talk about poverty statistics, they’re often referring to figures published by the Department for Work and Pensions (DWP) as part of the Households Below Average Income (HBAI) statistics. This data is collected through the Family Resources Survey, and since 2002/03 has covered the entirety of the UK (data prior to 2002/03 excludes Northern Ireland).

HBAI data includes figures for the number and percentage of households and various demographics (including children and pensioners) on ‘relative low income’ and ‘absolute low income’.

• Relative low income (or relative poverty) measures the number of people in households where the income is below 60% of the national median average that year.
• Absolute low income (or absolute poverty) measures the number of people in households where the income is below 60% of the median level in 2010/11, adjusted for inflation.

Put more simply, absolute poverty tracks how many people are below a fixed standard of living, using a set year (the 2010/11 financial year) as a benchmark, while relative poverty tracks inequality—how many people are falling behind compared to others in any given year.

These statistics also split both of these measures into “before housing costs” (BHC) and “after housing costs” (AHC), so we end up with four different ways of measuring poverty using this data—relative poverty (BHC), relative poverty (AHC), absolute poverty (BHC), and absolute poverty (AHC).

The figures are published as both numbers of individuals and percentages—the latter accounts for population growth over time.

By these measures, in 2023/24—the most recent year we have data for—the number of children in poverty in the UK was:

• relative poverty (BHC): 3.4 million children (23%)
• relative poverty (AHC): 4.5 million children (31%)
• absolute poverty (BHC): 2.9 million children (20%)
• absolute poverty (AHC): 3.9 million children (26%)

We’ve fact checked various claims from politicians about how the number of children in poverty has changed over time, and in many cases claims about trends in child poverty can be correct based on one measure, but not correct based on others.

Other indications of child poverty

The government also publishes figures on the percentage and number of children in ‘material deprivation’—based on whether a child lives in a family with access to a specific list of goods and services.

But the way material deprivation is assessed changed in 2010/11, and again in 2023/24, so figures are not directly comparable across the entire period for which they’re available.

In more recent years the government has also used the Family Resources Survey to estimate the scale of food insecurity and food bank use. It currently estimates that in 2023/24 18% of children lived in a “food insecure” household (defined as a household with “a risk of, or lack of access to, sufficient, varied food”). An estimated 7.7% of UK children lived in a household that had accessed a food bank within the 12 months prior to being interviewed for the survey, and 2.7% lived in a household that had accessed one in the last 30 days.

Two-child benefit limit

Much of the discussion over Labour’s efforts to reduce child poverty has been dominated by calls to end the two-child benefit limit.

The two-child benefit cap, as it’s also known, was introduced by the then-Conservative government in 2017. Low-income families are typically eligible to receive an additional £3,455 a year of universal credit or child tax credit per child, but the two-child benefit limit means third or additional children born after April 2017 are not eligible for this support (with some exemptions).

Government data published in July 2025 estimated that 453,600 households were not receiving the child element of Universal Credit for at least one child because of the policy. The report found there were more than 1.6 million children living in these households.

The Child Poverty Action Group (CPAG), End Child Poverty, the Resolution Foundation and the Institute for Fiscal Studies (IFS) have all described ending the policy as the most “cost-effective” way for the government to reduce the number of children living in poverty.

But estimates of exactly how many children are in poverty as a result of the two-child benefit limit vary depending on which measure of poverty is used, as well as the time period—this is why you may see different figures circulating about the policy’s impact.

For example, ahead of the budget CPAG said lifting the limit would “instantly pull 350,000 children out of poverty and stop another 150,000 being drawn into poverty over this parliament, as well as reducing the depth of poverty for a further 700,000 children”. Its figures are based on relative poverty (AHC) statistics.

The IFS, meanwhile, uses absolute poverty (AHC) figures to estimate that removing the limit would lead to 630,000 fewer children in poverty “in the long run”.

The Resolution Foundation estimates that removing the two-child benefit limit would result in 480,000 fewer children growing up in relative poverty (AHC) by 2029/30 compared to if the limit was retained. It has also called for the government to end the separate benefit cap, and estimates that doing this alongside scrapping the two-child benefit limit and relinking the Local Housing Allowance to local rents would mean a total of 660,000 fewer children in poverty by 2029/30 compared to if the policies remained in place.

An alternative measure of child poverty

The government is currently working to develop a new measure of poverty, building on the work of the Social Metrics Commission (SMC)—an independent panel of experts formed to develop a new approach to poverty measurement.

In an update published in January 2025, the DWP said the measure, called “Below Average Resources” (BAR), “provides a more expansive view of available resources (both savings and inescapable costs) than the income measurement adopted under HBAI, and also includes some methodological changes proposed by the SMC”.

According to the DWP, the closest existing measure to the new metric is relative low income (AHC). It says: “Both are relative measures accounting for housing costs, with BAR additionally accounting for liquid assets (i.e. accessible savings) as a form of income, and other deductions due to inescapable costs (i.e. childcare, disability and mortgage capital repayments), as well as the methodological changes”.

The update included the first published experimental statistics showing the number of people in poverty under this measure from 2000/01 to 2021/22, and how these figures compare to the existing HBAI relative and absolute poverty (AHC) estimates.

Under the new metric, a higher number of children are estimated to be in poverty compared to the HBAI figures, but it’s not clear how removing the two-child benefit limit might impact the number of children estimated to be in poverty under the new measure.