DWP Analysis Reveals Thousands Will Miss Out on Benefit Cap Removal Gains
An official impact assessment from the Department for Work and Pensions has revealed that approximately 50,000 low-income families currently affected by the two-child benefit limit will see no financial gain whatsoever when the policy is lifted in April. The analysis further indicates that an additional 20,000 households will experience only partial increases to their income following the change.
Benefit Cap Creates Barrier to Financial Improvement
The primary reason for this lack of improvement stems from the separate benefit cap policy, which limits the total amount of welfare support a household can receive. According to the DWP's assessment, this cap will prevent the 50,000 families from gaining any additional financial support after the two-child limit removal takes effect.
For the further 20,000 families identified, their income increases will be limited as their benefits will simply rise to meet the existing cap level, rather than providing meaningful additional support.
Government's Poverty Reduction Strategy Faces Challenges
Chancellor Rachel Reeves announced the end to the two-child benefit limit during last year's Labour Budget, with the Office for Budget Responsibility estimating the move would increase benefits for 560,000 families by an average of £5,310 annually. The government projects this policy change will reduce the number of children living in poverty by approximately 550,000 by 2030.
However, the benefit cap itself will remain frozen throughout the 2026/27 financial year, marking the fourth consecutive year it has not increased in line with inflation. The current cap levels stand at £1,835 monthly (or £22,020 annually) for most couples and claimants with children, with higher rates of £2,110.25 monthly (or £25,323 annually) applying in Greater London.
Charity Warns of Persistent Child Poverty Concerns
The official assessment follows recent warnings from the Joseph Rowntree Foundation, which indicated that without further government action, approximately 4.2 million children would still be growing up in poverty by 2029, despite the removal of the two-child benefit limit.
Iain Porter, Senior Policy Adviser at the Joseph Rowntree Foundation, commented: "While the removal of the two-child limit for Universal Credit represents a positive step toward reducing child poverty, it remains insufficient on its own. Our analysis indicates child poverty will decrease initially in April, then stagnate. By the end of the parliamentary term, approximately 4 million children could still be living in poverty unless additional measures are implemented."
The charity has specifically called for:
- The creation of a protected minimum floor within Universal Credit to limit payment reductions from debt deductions or the benefit cap
- The implementation of an 'essentials guarantee' to ensure benefit payments always cover basic living costs
There is a statutory requirement for the government to review the benefit cap every five years, with the next review scheduled for November 2027. However, ministers retain the authority to make decisions regarding the cap before this statutory review date.
The Department for Work and Pensions has been approached for comment regarding these findings and the ongoing concerns about the benefit cap's impact on poverty reduction efforts.
