The change, confirmed by Downing Street, sees millions of families receive significantly higher Universal Credit payments from this month. Under the new rules, households claiming for three children get an extra £304 each month, while those with four children receive a £608 top-up. The move follows Labour's decision to scrap the two-child benefit cap, a policy originally introduced by the Conservatives that limited support to just two children per household.
How the two-child cap worked
Before the change, families could claim Universal Credit or Child Tax Credit for a maximum of two children, regardless of how many children they actually had. This meant larger families often faced financial shortfalls, with the government refusing to provide additional support for third or subsequent children born after the cap was introduced. The policy was widely criticised by anti-poverty campaigners, who argued it disproportionately affected low-income families and pushed children into poverty.
Labour's decision to abolish the cap fulfils a key manifesto pledge. Prime Minister Andy Burnham has long opposed the measure, describing it as arbitrary and harmful. The Treasury estimates the change will lift hundreds of thousands of children out of relative poverty, though exact figures have not yet been published.
What families will receive now
The additional payments are already being applied to current Universal Credit claims, according to the Department for Work and Pensions. For a family with three children, the monthly boost of £304 equates to an annual increase of £3,648. Those with four children will see their Universal Credit rise by £608 per month, or £7,296 per year. The extra money is added to the standard allowance and any other elements families already receive.
However, not all households will see an immediate change. The cap is being lifted for all existing claimants, including those who had previously been denied support for a third or fourth child. Backdated payments are not expected, but families will see the increase from their next assessment period. Child benefit rules for those born before 2017 are unaffected, as the cap applied only to new claims for those children.
Burnham defends the decision
Speaking about the policy last year, Burnham said: “I never supported it, its introduction. It can’t be defended, because it’s arbitrary.” He went on to explain why the cap was personally significant to him: “Why does the third kid just get cut out or get less or why do all three if you’ve got three kids? I’m one of the three kids. My mum got child benefit for all of us … My parents always said to me something that has definitely guided me in my life – you can never visit the sins of the parents on the kids.”
The Prime Minister has remained steadfast in his support for scrapping the cap, despite mounting pressure from some Conservative MPs and fiscal hawks. He argues that the welfare system should support all children equally, and that the cap was a punitive measure that punished larger families already struggling with the cost of living.
Critics warn of rising welfare bill
Opponents of the change argue that Labour is paying too much in welfare, contributing to what they term a “benefits Britain”. They claim the policy creates a perverse incentive, where families might have more children specifically to receive higher state payments. Some economists have echoed these concerns, suggesting that the cost of scrapping the cap could add billions to the public finances at a time when the government is trying to reduce debt.
Burnham, however, has rejected such claims, pointing to the moral case for reform. He has also noted that the overwhelming majority of families receiving Universal Credit are in work, and that the extra support is vital for covering the costs of raising children. The government has said it will monitor the impact of the change on employment and birth rates, but insists there is no evidence that the cap has encouraged family planning decisions.
What happens next
The scrapping of the two-child cap is part of a broader Labour agenda to reduce child poverty. Further reforms to the benefit system are expected in the coming months, including changes to the local housing allowance and the benefits taper rate. Meanwhile, the government is under pressure to address the overall welfare budget, which has risen sharply since the pandemic.
For now, families will welcome the additional money, though charities warn that more needs to be done. The Child Poverty Action Group has called on the government to also remove the benefit cap, which still limits the total amount of benefits a household can receive. Burnham has not ruled out further changes, saying that the government will “keep the system under review” to ensure it is fair and sustainable.
