Reinstate the two-child benefit cap: calculation note

Central fiscal result

-£3.2bn - Net fiscal impact in 2028-29

Low case: -£3.5bn. High case: -£2.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Model reinstating the two-child cap by 2028-29.
• Central saving uses the party's £3.2bn claim.
• Baseline assumes the cap has been removed or materially loosened.
• No pensioner-benefit changes are included.

Affected population

• Affected population is low-income families with three or more children.
• Direct loss is lower Universal Credit or tax-credit entitlement.
• Indirect exposure includes children, schools, councils and charities.
• Savings depend on the counterfactual policy baseline.

Gross impact

• Central saving: £3.2bn lower benefit spending.
• Spillover public-service costs reduce savings only in high case.
• Low case assumes full saving and limited spillover.
• No labour-supply gain is scored.

Fiscal build-up, central case

• Lower child-related benefit spending: -£3.4bn
• Hardship and local support costs: +£0.2bn
• Administration: £0.0bn
• Tax and employment offsets: £0.0bn

Central net impact: -£3.2bn in 2028-29.

Behaviour and pass-through

• Low case assumes the cap is fully reinstated and savings materialise.
• Central case follows the £3.2bn claim.
• High-cost case assumes exemptions and spillovers reduce net savings.
• Family-size responses are not assumed to produce near-term fiscal gains.
• Child-poverty costs are tracked separately from fiscal totals.

Phasing

• 2026-27: -£1.0bn. Preparation or partial implementation.
• 2027-28: -£2.9bn. Main ramp-up year.
• 2028-29: -£3.2bn. Target-year central estimate.
• 2029-30: -£3.2bn. Continuation at steady-state assumptions.

Main source groups

• Department for Work and Pensions, "Benefit expenditure and caseload tables" (2026): DWP forecasts UK social-security spending and working-age, disability and housing-cost components; anchors welfare-scale assumptions.
• Office for Budget Responsibility, "Economic and fiscal outlook: March 2026" (2026): The OBR forecast sets the macro, borrowing and receipts baseline used for broad fiscal context; prevents treating tax cuts or spending changes as self-financing.
• Chetty, "Moral Hazard versus Liquidity and Optimal Unemployment Insurance" (Journal of Political Economy, 2008): Unemployment insurance affects job search through both liquidity support and work incentives; shows welfare cuts can raise search pressure but also remove useful income smoothing.
• Card, Kluve and Weber, "What Works? A Meta Analysis of Active Labor Market Program Evaluations" (Journal of the European Economic Association, 2018): Training and activation programmes vary widely; impacts are often stronger over medium horizons than immediately; relevant where savings rely on moving claimants into sustained work.
• Conservative Party, "Our Plan for Britain" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.