DWP policy at odds with Labour promise | Personal Finance | Finance

A record 1.6 million children are now living in families penalised by the Government’s controversial two-child benefit cap – a policy campaigners say is driving more families into poverty.

New figures from the Department for Work and Pensions (DWP) reveal that 1,665,540 children were affected by the rule as of April this year, a 2% increase on the previous 12 months.

Critics say the policy is ‘at odds’ with the Government’s stated ambition to end child poverty, and claim it is exacerbating the UK’s debt crisis by pushing already struggling families into financial ruin.

The two-child limit, introduced in 2017, restricts Child Tax Credit and Universal Credit payments to a household’s first two children, unless exceptional circumstances apply.

Peter Tutton, Director of Policy, Research and Public Affairs at StepChange Debt Charity, said families with more than two children were among the hardest hit by cost-of-living pressures and were more likely to fall into serious financial difficulty.

He said: “People with dependent children are at greater risk of problem debt and financial hardship, which has only worsened in recent years as cost of living pressures have intensified.

“Our data show parents with more than two children are disproportionately represented among StepChange clients seeking debt advice and are significantly more likely to be behind on priority bills.”

The charity said that in 2024, 11% of its clients had three or more dependent children – and nearly three quarters (73%) of these families were behind on essential bills like rent, energy and council tax.

Mr Tutton said the link between larger families and poverty had grown ever stronger since the policy was first rolled out.

“Since the introduction of the two-child limit, the number of families with more than two children living in poverty has relentlessly increased – the Government must use the new child poverty strategy to end the policy,” he said.

“We’re calling for a more compassionate social security system, one that helps families cover essential costs and build long-term financial resilience.”

The comments come as Labour ministers prepare to publish a new strategy to tackle child poverty later this year. While the two-child cap was retained under the last government, Rachel Reeves and Keir Starmer have so far refused to confirm whether they will scrap the policy amid wider concerns over public finances.

Campaigners warn the cap disproportionately affects families from ethnic minority backgrounds and households where one or both parents are working but still on low incomes.