Remove the two-child limit: note

Central fiscal result

+£2.8bn - Net fiscal impact in 2028-29

Low case: +£2.4bn. High case: +£4.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Models remove the two-child limit by 2028-29.
• Baseline is current policy or published departmental plans.
• Central case uses published party or official anchors where available.
• Wider manifesto interactions are excluded unless stated.

Affected population

• Affected units are people, firms, households or providers depending on policy.
• Direct exposure follows the manifesto or government target group.
• Indirect exposure includes suppliers, workers, consumers and taxpayers.
• Weakest counts are widened in the low and high cases.

Gross impact

• Published anchor or scenario central is +£2.8bn in 2028-29.
• Gross costs or receipts are adjusted for behaviour and delivery risk.
• Tax, benefit or procurement offsets are separated in the fiscal build-up.
• The range is deliberately wider where implementation detail is thin.

Fiscal build-up, central case

• Gross programme or delivery cost: +£3.2bn
• Tax and receipt offsets: -£0.2bn
• Administration and evaluation: +£0.1bn
• Behavioural and pass-through effects: -£0.3bn

Central net impact: +£2.8bn in 2028-29.

Behaviour and pass-through

• Low case assumes stronger delivery or receipts than central.
• Central case applies moderate behavioural leakage and pass-through.
• High case allows weaker delivery, larger take-up or higher costs.
• Output effects follow incidence, capacity and investment channels.
• Distributional gains do not automatically imply GDP gains.

Phasing

• 2026-27: +£0.3bn. Phased implementation and take-up.
• 2027-28: +£1.5bn. Phased implementation and take-up.
• 2028-29: +£2.8bn. Phased implementation and take-up.
• 2029-30: +£2.8bn. Phased implementation and take-up.

Main source groups

• HM Treasury, "Budget 2025 policy costings" (2025): Costings provide scored fiscal impacts for the two-child limit, salary sacrifice and EV mileage charge; used where government costings exist.
• HM Treasury, "Budget 2025" (2025): Budget 2025 sets out implemented welfare, energy, motoring and tax-threshold measures; used for current government delivery policies.
• Card, Kluve and Weber, "What Works? A Meta Analysis of Active Labor Market Programs" (Journal of the European Economic Association, 2018): Employment programmes often perform better over the medium term than immediately, with design varying sharply; supports scepticism about quick employment savings.
• Chetty, "Moral Hazard versus Liquidity and Optimal Unemployment Insurance" (Journal of Political Economy, 2008): Benefit generosity can affect search behaviour, but liquidity and hardship channels also matter; relevant to welfare changes and conditionality.
• Labour Party, "Change: Labour Party Manifesto 2024" (2024): Used to define the pledge wording, policy scope and implementation scenario being modelled.