PolicyLens

Methodology note

Reinstate the two-child benefit cap: calculation note

Scenario assumptions behind the Reinstate the two-child benefit cap estimate. The figures are illustrative and exclude unrelated Conservative pledges.

View main policy page: Reinstate the two-child benefit cap

Central fiscal result

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

Low case: -GBP 3.5bn. High case: -GBP 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 GBP 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: GBP 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: -GBP 3.4bn
  • Hardship and local support costs: +GBP 0.2bn
  • Administration: GBP 0.0bn
  • Tax and employment offsets: GBP 0.0bn

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

Behaviour and pass-through

  • Low case assumes the cap is fully reinstated and savings materialise.
  • Central case follows the GBP 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: -GBP 1.0bn. Preparation or partial implementation.
  • 2027-28: -GBP 2.9bn. Main ramp-up year.
  • 2028-29: -GBP 3.2bn. Target-year central estimate.
  • 2029-30: -GBP 3.2bn. Continuation at steady-state assumptions.

Main source groups

  • con-plan-2026: Conservative live policy page; used to identify current pledge wording.
  • dwp-benefit-2026: DWP benefit expenditure tables; welfare spending scale.
  • obr-efo-mar-2026: OBR March 2026 forecast; fiscal and macro baseline.
  • chetty-2008-ui: Welfare and job search; informs behavioural and incidence assumptions.
  • card-kluve-weber-2018: Active labour market programmes; informs behavioural and incidence assumptions.