The ‘two-child limit’ has had no significant effects on school readiness at age 5

Since April 2017, the ‘two-child limit’ has meant that families on universal credit (or, previously, child tax credit) no longer receive an uplift to their benefits for their third and subsequent children. This substantially lowers the incomes of larger families with children and increases child poverty. The government has pointed to the risk that child poverty has effects on children’s life chances.

However, new research by the IFS, funded by Nesta, finds that the introduction of the two-child limit has had no significant effect on the proportion of third and subsequent children in England achieving a good level of development at age 5. This is the measure of ‘school readiness’ assessed at the end of the reception year, and is the focus of the government’s ‘Opportunity Mission’ target.

The research compares the outcomes of third and subsequent children born shortly before April 2017 (who are not affected by the policy) with those born shortly after (who are affected), using data covering all children attending reception in state schools in England. The scale of the data means that researchers can rule out even relatively small effects on school readiness. Outcomes such as child health, educational performance at older ages, well-being and parental stress were not studied. This means that these findings do not rule out other effects of the policy on children, or indeed on their parents.

The research also finds:

• The introduction of the two-child limit made the benefits system significantly less generous to larger families. At any given time, the benefit entitlements of around 60% of families with a third or subsequent child aged under 5 were reduced by the two-child limit. Families entitled to means-tested benefits in all the first five years of the child’s life would typically have seen an £18,300 fall in their entitlements for that child in total over those five years. Those entitled in only some years would have seen a lower fall in entitlements.
• There is no evidence of adverse effects on school readiness even for children whose families were most likely to have seen the largest income losses – for example, those born in the most deprived areas, or those in families already eligible for free school meals.
• Reversing the two-child limit would cost around £3 billion a year, and previous IFS research suggests this could lift 500,000 children out of absolute poverty. This may therefore be a useful tool for a government focused on reducing child poverty itself. But today’s research suggests that scrapping the two-child limit would not be a cost-effective policy specifically for improving children’s early educational performance, compared with other policies that have proven cost-effective positive effects.

Tom Waters, an Associate Director at IFS and an author of the report, said:

‘The government has set the dual objectives of raising children’s school readiness levels and reducing child poverty. Reversing the two-child limit, at a cost of £3 billion a year, would be one of the most effective ways to target the latter goal. However, our research shows that the two-child limit has had no adverse impact on children’s development as measured by their teachers at the end of the reception year. This suggests that it might be hard for the government to “kill two birds with one stone” – simultaneously reducing child poverty and raising school readiness – through scrapping the two-child limit.’