Universal Credit (Removal of Two Child Limit) Bill [HL]

Baroness Sherlock Excerpts

2nd reading
Friday 8th July 2022 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the right reverend Prelate the Bishop of Durham for introducing his Bill so clearly and all noble Lords who have spoken. Although it is a Private Member’s Bill, and therefore has little chance of becoming law, it gives us a really good opportunity to explore the impact of the two-child limit and to turn the spotlight on the way the Government have failed to support families with children, especially during these very difficult times.

Before looking at the Bill in detail, I thank the noble Lord, Lord Desai, for giving us his characteristic economist’s view of the welfare state, with all its inefficiencies, and for drawing attention to one thing that is always interesting: that the effective tax rate, or the marginal deduction rate, on the poor is so much higher than it is on the rich. This is something that is rarely attended to, so I thank him for reminding us of that today.

In looking at the impact of the policy, we need to remind ourselves, as the right reverend Prelate the Bishop of Durham has done, of what Ministers said the policy was designed to do. They gave a number of reasons. First, the policy was to save money to reduce the deficit. Secondly, it was to be fairer to those who are not eligible for benefits and to the taxpayer. Thirdly, the policy would ensure that

“those on benefits face the same financial choices around the number of children they can afford as those supporting themselves through work”.

Like the right revered Prelate, I seethe every time a Minister says that and want to shout from the Back Benches, “Most people affected are in work already because these are in-work benefits”. He got there before me, which allowed me to have a little rant without feeling like I am alone again in this, so I am grateful for that.

Let us look at each of these in turn. First, this policy was part of an ongoing package of so-called austerity measures which began under the coalition Government and continued under the Conservative Government. We were told this package of policies was needed to save money to reduce the deficit and make social security spending more sustainable. I take the point of the right reverend Prelate the Bishop of Durham that it may in fact create costs down the line, but even taking it within its own light, the Minister will be aware—I know because I have cited it—of a detailed study by Ruth Lupton et al of the coalition Government’s tax and spend. It found that:

“Perhaps surprisingly, overall the ‘welfare’ cuts and more generous tax allowances balanced each other out, contributing nothing to deficit reduction.”


The strategy of austerity cuts, of which this was clearly a part, was never about reducing the deficit. In practice, it was about taking money from the poorest to pay for tax cuts. Tax cuts do not target those who need help most because even if you increase the personal tax allowance, someone earning £80,000 a year gets all of it and a single mum working 30 hours a week during term time at minimum wage does not earn enough to benefit at all.

On the question of the sustainability of social security spending, in April the OBR said that spending on universal credit and its predecessors was expected to fall to 3% of GDP by next year—the same level as in 1985-86. Can the Minister tell the House what level of spending on social security the Government believe would be sustainable as a proportion of GDP?

Secondly, it was argued that limiting benefits to the first two children is fairer to those not eligible for benefits and to the taxpayer. Benefits for children represent a transfer of resources from taxpayers as a whole to families with children—something discussed in the previous debate. That is by definition what they are. Those who do not have children subsidise the upkeep of all children because they are a public and a private good; we all benefit from having our next generation thriving and succeeding. The reality is that those who have children but are not eligible—usually it is because they are higher earners—will, in most cases, get child benefit, childcare support, free education and healthcare for their children, and much more besides. If they lose their jobs or get sick, or their circumstances change, greater support will be there waiting for them too. Can the Minister tell the House how the Government decided that two children was the right limit? Why not one or three? What was the rationale?

Then there is the motivational element to ensure that those on benefits face the same financial choices around the number of children they can afford as those supporting themselves through work. The noble Baroness, Lady Brinton, quoted a crucial part of the impact assessment:

“In practice people may respond to the incentives that this policy provides and may have fewer children.”


The impact assessment admitted there was no clear evidence, but the policy could only ever have had two effects: either the poor would have fewer children or families with more than two children would become poorer. It could do only one or the other; there was no other possible outcome.

As the right reverend Prelate and other noble Lords have said, we now have evidence from the study by Mary Reader et al, Does Cutting Child Benefit Reduce Fertility in Larger Families? Evidence from the UK’s Two-Child Limit. Has the Minister read that study? The research suggests that the two-child limit has had a minimal impact on fertility rates, as we have heard. Interviews with larger families subject to the two-child limit reveal some of the reasons, many of which have been mentioned—for example, pregnancies are not always planned. I take very clearly the point made by the right reverend Prelate and the noble Baroness, Lady Bennett, about the awful position of somebody having to terminate a pregnancy—a child who was wanted—because they could not afford to have it. I think the whole House will be grieving over that consequence.

Then there is the fact that so many parents did not know about the limit until the child was born, such as “Stephanie”, mentioned by the right reverend Prelate. Further, some people, including but not exclusively in certain religious and ethnic communities, place a high value on having larger families and would therefore have them whatever the consequences—but the consequences for many would now be poverty for all the children in those families.

Although the policy did not reduce family size, CPAG points out that it has had a significant impact on the well-being of children in larger families. It says that every year about 50,000 children are pushed into poverty as a result of the limit and a further 150,000 children already living in poverty see their circumstances deteriorate further. To quote CPAG:

“If the central aim of the two-child limit was to reduce the number of people deciding to have a third child it has largely failed. The most sizeable impact of the policy has been to increase child poverty.”


Will the Minister tell the House what she believes this policy has achieved and whether she is pleased with this outcome?

Above all, there is the situation of people who have children, confident they can afford them, and then their circumstances change, including the millions of people who ended up on universal credit during the pandemic. Most of those people would never have expected to need government support and would have been shocked to find they were given support only for the first two children in their household. Did that give the Government any pause for thought about this policy?

The bigger picture is that having previously inflicted huge cuts in benefits to children, when times got really tough and Ministers realised that they had to take action, the steps they took were, once again, deeply unfair to families with children. They went for flat-rate payments which took no account of the presence of children in a household. The universal credit uplift during the pandemic, which was welcome, did not include an uplift in the elements relating to children. The latest package in the Social Security (Additional Payments) Act will give the same amount to a single person as to a family with three children, even though their costs are radically different.

I hope the Minister will take this opportunity to tell us whether she thinks the two-child limit has been a success. I am with the right reverend Prelate: it will not be enough simply to rehearse the arguments that were used before the Bill was introduced and when there was no evidence. The House deserves to see the evidence of the impact this policy has had on children and their parents. If the Government are not minded to reverse it, will the Minister tell the House what steps they will be taking to deal with growing child poverty, especially in larger families? I look forward to her reply.

[The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)]

I thank the right reverend Prelate the Bishop of Durham for introducing this Bill and for the opportunity to debate again a subject dear to his heart and to those of others in the House.

My department is committed to supporting families and helping parents into work. This requires a balanced system that provides strong work incentives and support for those who need it, but also ensures a sense of fairness to the taxpayer and to the many working families who do not see their incomes rise when they have more children. We judge that the policy to support a maximum of two children is a proportionate way to achieve these objectives. Our overall approach is working, as evidenced by the fact that, between 2016 and 2021, the number of couples in employment who have children increased by 460,000—a 2.3 percentage point increase in the employment rate for this group.

The two-child policy was introduced five years ago and, since 6 April 2017, families have been able to claim support for up to two children. There may be further entitlement for other children if they were born before that 6 April or if an exception applies. The child element of universal credit is worth £290 for the first child born before 6 April 2017. It is worth a standard rate of £244.58 per child for the second and any other eligible children. Child benefit continues to be paid for all children, plus the additional element in child tax credit or universal credit for any disabled children. Additional help for eligible childcare costs through working tax credit and universal credit are also available, regardless of the total number of children in the household.

We recognise that some claimants are not able to make the same choices about the number of children in their family. That is why exceptions have been put in place to protect certain groups. Exceptions apply to third and subsequent children who are: additional children in a multiple birth, where an extra amount is payable for all children other than the first child; or likely to have been born as a result of non-consensual conception, which for this purpose includes rape or where a claimant was in a controlling or coercive relationship with the child’s other biological parent at the time of conception. An exception also applies to any children in a household who are: adopted when they would otherwise be in local authority care; living long-term with friends or family and would otherwise be at risk of entering the care system; or where a child under 16 living with their parents or carers has a child of their own, until they make a separate claim upon turning 16.

Statistics from the Office for National Statistics show that in 2020, of all families with dependent children, 85% had a maximum of two in their family. For lone parents, this was 83%. On the latest figures, 62% of households with a third or subsequent child who are in receipt of universal credit or child tax credit are not affected by the two-child policy.

This Government have always believed, and continue to believe, that the most sustainable way to lift children out of poverty is by supporting parents into work and, importantly, to progress in it, wherever possible. As I said, there has been a significant rise in the number of couples with children in employment between 2016 and 2021. I take the point the noble Baroness made that many of these people are in work, but one of the ways that we can help them is by them getting a better job and earning more income. That is a policy of this Government and one that we will be pursuing vigorously.

With 1.3 million vacancies across the United Kingdom, our focus remains on continuing to support parents into work and to progress in work, as I have already said. This approach is based on clear evidence about the importance of parental employment, particularly where it is full-time, in substantially reducing the risks of poverty and improving long-term outcomes for children.

[Baroness Sherlock (Lab)]

Does the Minister accept that encouraging parents to get better jobs and allowing them to have benefits for all their children are not mutually exclusive?

[Baroness Stedman-Scott (Con)]

I think it is fair to say that the Government have a differing view from that of the noble Baroness and people on the Opposition Benches. It is exactly that our helping people to get a better job, if they can, and more income—plus all the support that we are putting through the welfare system—is the policy that the Government are pursuing. We want everybody to be able to find a job, progress in work and thrive in the labour market, whoever they are and wherever they live. Our support for people out of work is tailored—