How might the two-child limit policy be affecting children’s early learning?

By Simran Motiani, Analyst (A Fairer Start) at Nesta

Implemented in 2017, the two-child limit policy restricts support for families via Universal Credit or Child Tax Credits to the first two children in a household. As of April 2023, around 1.5 million children live in households affected by this policy, which results in an estimated annual financial loss of up to £3,235 per child for affected families.

Researchers from the Larger Families study have investigated the impacts of the two-child limit policy thus far. Their findings paint a stark picture: families grappling with the limit are facing severe financial strain, struggling to afford even the most essential items and resorting to accumulating debts to make ends meet.

These results are deeply troubling on several fronts. Firstly, no child should have to grow up under severe financial stress. Moreover, existing research tells us that lower family income is associated with poorer child development. Given this evidence, Nesta has collaborated with the Institute for Fiscal Studies to undertake a comprehensive mixed methods study, aiming to understand if and how the two-child limit policy is shaping children’s early development.

Recently, we published the qualitative findings of our research, based on interviews with a diverse sample of 35 affected parents across England. We explored their overall experiences with the policy and their challenges in parenting and accessing early learning opportunities for their children.

Key findings:

From our discussions with parents, in became clear that:

• Children in affected households are losing out on opportunities to learn and play. Parents reported that their younger children, ineligible for the child element of Universal Credit, experience a dearth of early learning opportunities compared to their older siblings. This includes reduced time in formal childcare, limited access to learning resources, fewer enriching activities like days out or extracurriculars, and diminished opportunities for socialisation due to financial constraints.
• Parents are struggling to provide for their family and be the parent they want to be, which affects their own mental health. Many parents described how coping with immense financial pressures caused them constant stress and worry. Some parents felt that their financial pressures contributed to them developing mental health difficulties or had exacerbated pre-existing difficulties. They were concerned about how their mental health was in turn affecting their ability to parent.
• Parents view the two-child limit policy as unfair, punishing and a hindrance to children’s early development. Parents felt the two-child limit is a deeply unfair policy because it denies support to parents who are doing the best they can to provide for their families, but whose children are suffering because their income is insufficient to meet their most basic needs.

Our takeaways:

Our findings provide evidence that the severe financial hardship families affected by the policy are experiencing could be impacting negatively on children’s early development either by increasing parental stress or curbing families’ investment in goods and services that promote children’s development.

These findings are concerning as the two-child limit could be acting to widen educational inequalities in the early years. If this is true, the policy could also have an impact on affected children’s life trajectories, given that children’s early developmental outcomes can predict later life outcomes, with educational inequalities widening over time.

Millie¹, a mum of three who participated in our study, summarises the potential long-lasting impact of the policy on children’s lives:

“At the end of the day the people that it [the two-child limit] affects the most are the children, and it’s not their fault…And it just means that we are setting some kids up to be disadvantaged, or to have a harder life, or not to have the experience that others do for factors that are way beyond their control or influences.”

¹This is a pseudonym to protect the identity of our participant.

Next steps:

In the next part of our study, we will continue learning about the early development of children affected by the policy. The Institute for Fiscal Studies will analyse administrative data, to investigate whether there is evidence of a relationship between children being affected by the two-child limit and their outcomes in the Early Years Foundation Stage Profile at age five. We look forward to publishing these findings later in 2024.

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This article is featured in our 22 May newsletter.

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