Child poverty in London – and how to tackle it

One in three children in London are growing up in poverty. That’s more than half a million children, going without basics and going to school or bed hungry – all in one of the wealthiest cities in the world.

Growing up in poverty damages children’s life chances, health and wellbeing. It must be a priority for the government to tackle it. So far, the new Labour government has made some of the right noises on this: in July, it announced it would set up a new child poverty taskforce.

But there’s no time to waste. Many of the causes of our country’s shamefully high levels of child poverty are complex, and will require time and effort to tackle. But there are two policies that could be lifted immediately, improving the lives of hundreds of thousands of children: the two-child limit and the benefit cap.

Why the two-child limit must be scrapped

If it’s serious about tackling child poverty, scrapping the two-child limit is a clear starting point. This policy caps the number of children that families can receive means-tested benefits for at two. It affects households with a third or subsequent child born after 6 April 2017.

There’s no evidence that the policy incentivises people into work. And in fact, a majority of households affected by the limit already have at least one member in work.

In total the two-child policy affects 1.6 million children in the UK. In London, 67,000 households were affected in April 2024. That’s 2% of all households in London – and at least 200,000 children living in households affected by the two-child limit.

The number of children affected by the policy increases every year, as more children are born after the 2017 cut off. Simply, the longer the policy is in place, the more children may be born into poverty.

Our modelling suggests that by lifting the two-child limit, 40,000 people would be lifted out of poverty London. Many more future children across the city could be prevented from being born into poverty.

And across the country, Child Poverty Action Group estimate that scrapping the policy would lift 300,000 children out of poverty and 700,000 children would be in less deep poverty. No other action would help so many children so quickly, or be such a cost-effective way to do so.

But the benefit cap must be scrapped at the same time

Pressure is hotting up on the government to end the two-child limit, and we’re hopeful that it will make the decision to do so.

But if the two-child limit is lifted in isolation, some of the positive impact of getting rid of it will be negated.

This is because of the benefit cap – a policy which limits the amount of money that most working-age people can receive from benefits. In London, it limits households to £25,000 a year.

In London the cap currently affects 27,000 households, depriving these households of vital income. Single parents, large families and families with young children are the most likely to be affected.

The two policies must be lifted together, because if the two-child limit is lifted without lifting the benefit cap:

• Many families would have their benefits capped more. In 2022 more than 30,000 households across the country were affected by both the benefit cap and two-child limit – an estimated 110,000 children. Instead of seeing the benefit of the two-child limit lifting, they would just find their incomes reduced more by the benefit cap.
• Many more households would be impacted by the benefit cap, that currently aren’t. These families’ incomes would still be limited – just by a different policy.

Because of these two factors, our modelling suggests that by lifting both the two-child limit and the benefit cap, 55,000 people would be lifted out of poverty in London. That’s 15,000 more people than just lifting the two-child limit on its own.

Across the country, many thousands more children would be lifted out of poverty, or into less deep poverty.

Lifting the two-child limit without lifting the benefit cap wouldn’t just be a missed opportunity. It would be a failure in the mission to end child poverty. To really tackle child poverty, you can’t remove one without the other.

This musn’t be the end – but a first step

The government must follow up this action with an ambitious strategy to tackle the underlying issues that result in far too many children living in poverty.

Several London boroughs have among the highest levels of child poverty in the country – and in Tower Hamlets, almost half of all children (48%) are growing up in poverty. In 31 out of 32 boroughs, one of five children or more are growing up in poverty.

Although ending the two-child limit and benefit cap together is a vital step to make a dent in child poverty, far too many children would still be growing up in poverty.

Ending the two policies would lift 55,000 people out poverty in London. Even if all 55,000 of those were children, this would reduce child poverty in London by less than 10%. More than half a million children would still be in poverty.

The actual reduction in child poverty would be significantly lower than this, as many of those lifted out of poverty would be parents. Because of the high living costs in London, actions that might work elsewhere in the country to tackle poverty may have less impact in the capital.

Housing is the key driver behind this. For example, the number of children in poverty that live in private rented accommodation has nearly tripled in the last two decades.

Housing costs have a bigger impact on poverty rates in London than any other region. And on average, one child in every London classroom is homeless and in temporary accommodation.

So being serious about ending child poverty means tackling London’s housing crisis.

It also means strengthening the social security system: going beyond just repealing the two policies outlined here, and reimagining the system so that it helps to protect all of us, especially when we need it most.

These actions will be expensive, and will require political ambition. But in time they will pay the treasury back. Every child lifted out of poverty is an investment in the future.