Universal Credit: Two-child Limit

Wednesday 9th July 2025 Lords Chamber

Question

16:01

Asked by

[Baroness Lister of Burtersett]

To ask His Majesty’s Government what assessment they have made of the cost of abolishing the two-child limit for Universal Credit.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, the Government do not routinely publish costings of policy alternatives. However, estimates have been produced by independent think tanks, including the IFS, the Resolution Foundation and IPPR. Their costings range from £2.5 billion to £3.5 billion a year in steady state. This Government are committed to tackling child poverty and will publish an ambitious child poverty strategy in the autumn.

[Baroness Lister of Burtersett (Lab)]

My Lords, it is generally accepted that the abolition of the two-child limit and, many would argue, the benefit cap must be, in the words of the Children’s Commissioner, “the foundation” of the much-anticipated child poverty strategy. Does my noble friend therefore agree with charities in the field and former Prime Minister and Chancellor Gordon Brown that the immediate cost to the Exchequer must be weighed against the economic, financial and social costs of this key driver of child poverty, including the cost to the NHS, education, children’s care services, homelessness provisions, local economies and, indeed, to the Government’s own missions?

[Baroness Sherlock (Lab)]

My Lords, my noble friend mentioned the Children’s Commissioner. She will be aware that the Government commissioned the Children’s Commissioner to look at the experience of children in poverty. I am sure that, like me, she has read their comments, and they make for uncomfortable reading. But we cannot tackle child poverty in this country if we are not willing to look in the face the reality of the lives of our children. Importantly, having set up a Child Poverty Taskforce, the Government have pledged to look at the full range of the underlying causes of poverty and will continue to do that work.

I reassure my noble friend that the Child Poverty Taskforce is continuing to look at all available levers to lift our children out of poverty. We are looking at everything, including social security measures, housing, education and health, and the Government will bring forward an ambitious child poverty strategy in the autumn. But I want to reassure her that the last Labour Government lifted the best part of 1 million kids out of poverty, and we have a manifesto commitment to tackle child poverty. The Prime Minister set up this task force very early in his time in office. We are determined to tackle this scourge in our country.

[Lord Brownlow of Shurlock Row (Con)]

I apologise to your Lordships for not being in as often as I would like; I have had some health issues, but I have been watching the proceedings of your Lordships’ House and the other place on television. Given everything that the Minister has just said could be brought forward, does she think she will have the backing of the Back Benches on the other side of the House?

[Baroness Sherlock (Lab)]

I am sorry to hear about the noble Lord’s health; we are very pleased to see him here today, and as often as he is able to make it. I wish I could be in two places at once, because then I would watch what is happening down the other end of the Corridor, as well as at the better end, but so be it.

Noble Lords will be aware that the Government set out a Bill looking at reforming support for sick and disabled people. It came in two parts, addressing PIP and the extra cost benefit, and universal credit. As the result of the proceedings in the Commons last week, the Government, having listened to comments from around and beyond the House, will now look again at the PIP part after the review being led by my right honourable friend Sir Stephen Timms, co-produced with disability charities and disabled people.

However, down the other end they are discussing a Bill, which will soon arrive in this House, dealing with important issues such as rebalancing universal credit. We will be looking at producing the biggest sustained increase in the basic standard allowance of universal credit since it was set up, but also at how to balance that by making sure the gap between that and the amount people get as a health top-up is less. It will introduce lots of other things, including a right to try, bringing forward regulations so that trying a job will never mean in and of itself that you get reassessed. There is a lot of welfare reform to be done yet. It is tough going but we are determined to keep doing it, and I hope to see the noble Lord at the debate, if he is well enough, in the next few weeks.

[Lord Palmer of Childs Hill (LD)]

I thank the Minister for explaining the Government’s position, but it always seems to be that the real position is how much money we can save and how we can make the system financially viable. What analysis has the department conducted of the effects of the policy on children’s life chances, educational achievements and mental health? You cannot measure it all in how much money is saved.

[Baroness Sherlock (Lab)]

If the noble Lord is referring to the two-child limit, he will be aware that the policy was introduced not by a Labour Government but by a Conservative Government, and it is not a policy we would have introduced. We are working our way through the entire landscape we inherited. In tackling child poverty, we are setting out not to save money but to make children’s lives better. We understand that poverty is not just about one thing. Look at the things we have already done. We have announced a fair repayment rate to try to make sure that being in debt to the Government does not drive you further into poverty. Some 100,000 children will be lifted out of poverty by extending free school meals to all those on universal credit. We have raised the minimum wage by so much that an average full-time worker on the national living wage will get a pay rise of £1,400 a year on average. We are looking at the full range, and we have already taken steps to try to make the lives of our citizens better, particularly of our children. The child poverty strategy is not about money; it is designed to make children’s lives better, and I commend it to him.

[Lord Londesborough (CB)]

My Lords, is there any evidence that the two-child benefit cap has contributed to the rapid decline in our total fertility rates? In its latest Fiscal Risk and Sustainability report, the OBR highlights this as one of the UK’s daunting challenges—and, notably, the shrinking of our future workforce in an ageing society. What policies, if any, are the Government considering to address this disturbing decline in birth rates?

[Baroness Sherlock (Lab)]

The noble Lord raises a really important point. I am not aware of any evidence connecting those but, if he is, I would be interested in it. I periodically survey the global evidence. If the noble Lord has looked into this, he may know that a declining birth rate is a common problem in many developed economies. A number of different countries have tried different strategies to tackle it, but they have been remarkably unsuccessful. So I am not aware of evidence of clear policies that Governments can use to tackle this.

It is my personal view that women have children for all kinds of reasons. While it is possible to remove barriers, it is never about just a single thing. It will be about things like childcare, so the Government are investing heavily in providing childcare for working families to make it possible for families to do that. It is about making sure that work pays enough to support a family, so we are investing in the minimum wage. We are doing a number of different things, but this is a House full of expertise and if any noble Lord has good ideas or evidence on this, I am open to it.

[Viscount Younger of Leckie (Con)]

Following on from the question from my noble friend Lord Brownlow, what decisions are being made and what coherent plan will there be to tackle the welfare Bill? It is extraordinary that the Timms review will report—before any legislation —two years and three months after the last general election, with no meaningful progress having been made at all.

My question is on the two-child cap. Can the Minister remind the House what the exceptions are to that policy, meaning that difficulties or hardship arising for those who have chosen to have more than two children can be mitigated substantially with extra funding from the taxpayer?

[Baroness Sherlock (Lab)]

My Lords, since the noble Viscount’s Government brought in the policy, he probably does not need me to remind him there are exceptions—for example, those involved in kinship care and those who have produced a child as a result of non-consensual conception, who can be exempted if they can produce evidence of having been raped and the conception being the result of that, or if they can find another way to account for that. However, this is not the driver behind the Government’s action. This Government want to make the lives of children and families better. I make no apologies for starting off by looking at the terrible rise in child poverty over the last 14 years, and I cheered the Prime Minister when one of his early actions was to set up a cross-government child poverty task force and a unit to look at the full range of drivers of that. If our children grow up in poverty, it has a scarring effect that they do not recover from. If we do nothing else in our time in government, we need to find a way to address this, and I hope this could eventually be the cross-party view.

During the last Labour Government, I worked in the Treasury advising Gordon Brown and had to tackle child poverty. We set up Sure Start and invested in all kinds of programmes, and I sat in this House and watched many of them being dismantled when I went into opposition. If we are going to find a way to make the country better for all our children, we surely need to agree on how we tackle child poverty and stop it recurring generation after generation.

[The Lord Bishop of Leicester]

My Lords, reference has already been made to the Children’s Commissioner’s report published yesterday, which gives voice to the experiences of children and young people in poverty. It makes for harrowing reading, including one boy who was faced with the choice of going hungry or eating mouldy food, and many other such difficult stories. Will the Minister commit to ensuring that all the Government’s work on welfare will be based on the human dignity and equal value of every person in this country?

[Baroness Sherlock (Lab)]

I thank the right reverend Prelate for that, and, indeed, for the work that he and his colleagues do in this area. Like him, one of the reasons I was so glad to see the report, even though it is hard reading for the Government and for everyone, is that it talks about individual stories and the experience of individuals. There is always a risk when we are trying to make decisions at a macro level that we forget how they are experienced at the micro level of the individual. One of the things the task force has done is to have lots of encounters with families and children. It has worked with Save the Children to hear from children, and it has worked with the Children’s Commissioner. I was very grateful that, as part of the process, his colleague the right reverend Prelate the Bishop of Derby welcomed me to Derby to meet a range of faith organisations working on many different aspects and trying to join up the support given to families with children. His point about, in essence, the inalienable worth of every individual is one I am very happy to approve.