No evidence that capping child benefits increases employment

Introduction: About Law Centre NI

Law Centre NI is the secretariat of the Cliff Edge Coalition Working Group. The Cliff Edge Coalition is a group of over 100 members who have successfully campaigned for change in the social security system. In March 2020, the Cliff Edge secured commitment from the Department for Communities (DFC) to ensure the continuation of mitigations payments for claimants affected by the Bedroom Tax and the Benefit Cap. The closure of loopholes which prevented some claimants from receiving support, was also achieved with legislation eventually passed in 2022.

In light of the current cost of living crisis and the detrimental effect on families in Northern Ireland, the Cliff Edge relaunched its campaign with three renewed asks:

• Resolving the Universal Credit five-week wait;
• Mitigating the two-child limit;
• Providing support to private renters affected the by Local Housing Allowance.

The Two Child Limit

Welfare Reform changes to the Social Security system through the introduction of The Welfare Reform (NI) Order 2015, saw the implementation of the two-child limit on 6 April 2017.

The policy meant that families who had third and subsequent children born after 6 April 2017 no longer had entitlement to a child element – payments designed to provide additional financial assistance to families.

The rationale for this policy was to incentivise employment for larger families, encouraging them to undertake further work to compensate for the loss in benefit income.

The CASE publication

Analysis by CASE has found that:

• those who had larger families tended to have ‘strong preferences’ to care for their own children, attributing significant barriers to childcare and logistics as some of the reasons given as to why they were not more economically active.[1]
• the two-child policy is in practice causing the opposite effect to the original Government intention, by increasing financial strain and harming mental health – which in turn is ‘pushing parents away from the labour market’ despite the financial implications.
• there is ‘no evidence’ that capping child benefits increases employment or that there were any significant changes in the birth rate of third and subsequent children.

Conclusion

According to the report, the effects of this policy on social welfare are unclear.[2] Therefore, it is reasonable to deduce that the justification of the two-child policy is limited. Instead, the policy is arguably creating further hardship and continuing to increase the already stark statistics of child poverty in Northern Ireland. This is evidenced by the Joseph Rowntree Foundation ‘Report on Poverty’ in 2022, which highlighted that over 100,000 children in Northern Ireland are living in poverty.[3]

The findings of this report further compound the reason why mitigation of the two-child limit is one of Cliff Edge Coalition’s key asks. Law Centre NI and the Cliff Edge Coalition are therefore continuing to call for the urgent introduction of mitigation payments to relieve the hardship experienced by so many families in Northern Ireland.

For more information on the Cliff Edge Coalition’s key asks, go to the Cliff Edge Coalition NI Members Briefing May 2023.

[1] Making work pay? The labour market effects of capping child benefits in larger families June 2023 | sticerd.lse.ac.uk

[2] Making work pay? The labour market effects of capping child benefits in larger families

[3] Poverty in Northern Ireland 2022 | JFR