On 8th July 2022 the Bishop of Durham brought forward his Universal Credit (Removal of Two Child Limit) Bill, to be debated in the House of Lords. His speech introducing this Second Reading debate is below, followed by those of other Peers and the Government Minister responding:
The Lord Bishop of Durham:
My Lords, I am glad to bring before you this Bill, which would abolish the two-child limit to universal credit. In doing so, I declare my interest as patron of the North East Child Poverty Commission.
When this policy was originally debated, I made it clear that we would seek to hold the Government to account for its impact. Working with others, including the Child Poverty Action Group, the Joseph Rowntree Foundation and many others, I have sought to do this. Before the policy was rolled out, its impacts were predicted—notably, that many children would pay the price. They are, with more families affected every year.
Children are a gift, not only to their parents but to the wider family and to society. Every child should be treated as of equal value. I believe this is recognised across all Benches of this House. Sadly, this policy directly contradicts that.
This policy is the biggest driver of the increase in child poverty. Families falling into difficulty are discovering that the social security system is not supporting their whole family as they expected where they are a larger family. People are discovering that not every child is of equal value. The third child is ignored and thus the whole family suffers. This policy punishes children. Further, it does not even live up to the terms on which it was initially defended. I feel for the Minister in her difficult task today.
The original terms were, in the Government’s own words, that
“families on benefits will have to make the same financial decisions as families supporting themselves through work.”
This line has been repeated often. Although the Government have denied that the intention of this policy is to influence the fertility rates of those claiming universal credit, it is acknowledged in their own impact report. The IFS report cited by the impact assessment, Does Welfare Reform Affect Fertility?, demonstrated a significant increase in fertility rates of people whose benefits were increased.
So when academics looked at the trends resulting from this policy, they were surprised to find the very small decrease in fertility rates in the relevant group. This is bad news for the effectiveness of the policy. Following its logic, a successful outcome would be adults, in full knowledge of the consequences of the two-child limit, making different decisions than they otherwise would about having children. They may be more financially stable as a result, more likely to progress into work and less likely to need the social security system to stay afloat. This would, in addition to the money saved solely restricting support to two children per household, save the Government money in the long term. The money-saving factor of this policy is another term on which it was presented.
However, if there is not a significant trend to say that adults’ decisions to have a child are being affected, how is the two-child limit influencing anything at all? I pay tribute to the Benefit Changes and Larger Families project, which has been an invaluable resource on this subject. Its recent conclusion to this question is that
“the two-child limit’s main outcome is to drive financial hardship and often destitution.”
This is unacceptable. It is enough reason for the policy to be scrapped.
But, following the Government’s logic again, the cost to the public purse of such high levels of poverty in early childhood is likely to be far greater than the money saved through withholding support. Professor Donald Hirsch’s ground-breaking research on this subject highlights that children who have experienced poverty are less likely to pay tax, less likely to have high-paid jobs and more likely to need support from public services. More important are the unquantifiable impacts: the suffering of living in an overcrowded home, or not being able to join in with costly school activities and the shame that sometimes accompanies that. The truth is that this policy, designed in part to save public money, will likely increase the long-term cost to the public purse.
Why has this policy failed to level out the financial decision-making playing field? The Benefit Changes and Larger Families project, the CPAG and others agree that the policy works on the assumption that everyone is aware of it and its consequences and, further, that everyone has the tools to make a decision in this way about having a child. The director of the North East Child Poverty Commission recently sent me some relevant stories of clients from Citizens Advice Newcastle. “Stephanie” is a full-time carer for her three children, aged six, four and 11 months. She was unaware of the limit and was informed only when she claimed support for her youngest. She had no savings. The Government’s response to the Work and Pensions Committee in 2020 that claimants are free to have
“as many children as they choose, in the knowledge of the support available”
shows a lack of understanding about people’s lives and the way this policy actually works.
This policy also assumes that those claiming benefits and those who do not are divided along employment lines. Actually, the majority of those subject to the limit are in work. I quote again from the impact assessment: the limit is about
“ensuring those on benefits face the same financial choices around the number of children they can afford as those supporting themselves through work.”
In more recent times the reasoning has changed to those supporting themselves “solely” through work, but that does not change the intention of the policy and is indicative of its outworking. It is simply not always possible for people in either group to increase their incomes. The social security system is designed to be a safety net for any of us who unexpectedly fall into financial difficulty through loss of work, sickness or disability.
I pay tribute to the Member for Glasgow Central, with whom I have worked on the resistance to this policy. It is very unusual for the Church of England and the Scottish nationalists to work quite so closely together. In her recent Westminster Hall debate, she laid out the stunning inconsistencies with which exemptions to the policy are applied. Although the exemptions are designed to mitigate the assumptions made, they do not account for the disproportional impact on people of ethnic-minority and faith backgrounds, who are more likely to have larger families. Some faith groups are penalised because, for them, contraception and termination are simply not valid options.
Another result of the policy lies within a survey taken by the British Pregnancy Advisory Service during the pandemic. It spoke to women who were aware of the two-child limit and likely to be affected, 57% of whom said that the policy was
“important in their decision-making around whether or not to continue the pregnancy.”
The fact that some women could feel pressured by a government policy to terminate a pregnancy that they may have otherwise wanted seems abhorrent.
I would like to correct the Minister in the other place who, when taking part in the recent Westminster Hall debate, argued that the lack of significant change in fertility rates refutes the impacts of the policy that we have heard through the BPAS survey about women’s experiences. These experiences cannot be refuted, and we must recognise both impacts.
It is clear to me that this policy is ineffective, devastating in impact and essentially immoral in character. The Minister has encouraged me to keep presenting evidence on the impact of the policy. With the wonderful help of the groups I have mentioned and many others, I have done so, and I pay tribute to the Minister for the fact that she regularly meets me when we are looking at this.
Rather than taking this evidence seriously, the defence of the policy has remained unaltered. It is a policy which is defended on terms that do not add up. It should be embarrassing that the price paid for its fallacies are our children. I pay tribute to those working constantly to try to ameliorate the entrenched, long-lasting poverty that is affecting families, but they can only ease the pain, not heal the wound. The Resolution Foundation’s Living Standards Outlook 2022 concluded that even in the context of the pandemic recovery and the war with Ukraine,
“the level of absolute and relative poverty in the UK each year is to a large extent a policy choice.”
If the Minister cannot commit to supporting this Bill today, will she commit to carrying out an impact report of the policy by the end of this year? Will she further commit to speaking with the Minister in the other place—I think it is still the same person—the department and the Cabinet about this debate and the evidence we have put forward? We could keep debating this for years, but ultimately it is a choice; a choice for this Government and, today, a choice for this House. I beg to move.
Baroness Bennett of Manor Castle (GP)
My Lords, I offer the strongest possible Green Party support for the Bill, which has just been so powerfully introduced by the right reverend Prelate the Bishop of Durham. He clearly and powerfully demonstrated that this is an inhumane and illogical policy, and I commend him on his long-term campaigning on this issue.
As we debate a succession of Private Members’ Bills today, it is telling how many of them address either health or simple humanity. The next Bill up is the Refugees (Family Reunion) Bill from the noble Baroness, Lady Ludford. Where the Government are failing, heading in the wrong direction and creating a hostile environment for both children and the vulnerable, in the Department for Work and Pensions as well as the Home Office, your Lordships’ House is trying to steer them in a somewhat better direction. I cannot avoid noting, as I look across to the other side of your Lordships’ House, that there is not a single Tory Back-Bencher here to defend this policy, which I think is rather telling.
The two-child limit is a policy targeted specifically at newborn babies—the very definition of absolute innocence. It has been pernicious since it was introduced in 2017 and, given the cost of living crisis that is squeezing families harder and harder by the day, it is becoming more pernicious every day. We know that people are struggling to put food on the table and keep a roof over their head. Do we really think that people who have just had another baby in the family should be told, “Go down to the food bank”? That should not be government policy.
I am sure the Government will say that this is targeted not at the babies but at the parents. But as the right reverend Prelate outlined, that is clearly not working. I am drawing on LSE research under the title Benefit Changes and Larger Families. It used birth records from England and Wales from 2015 to 2019 and the annual population surveys to show that the probability of people having a third or subsequent child has reduced only 5% since the policy was introduced. The nature of any social science research is that it is impossible to control for any other variables. If we think of the fact that the cost of living crisis is not a new thing created by the Russian attack on Ukraine but a long-term trend that has seen households struggling more and more every year simply to survive, we can easily imagine that that 5% might well have happened anyway, even without the two-child policy. That means 5,600 fewer births per year.
I am probably about to be accused, as I often am, of showing a characteristic of my nation of birth—Australian bluntness. I will definitely display that now because the fact is—the right reverend Prelate touched on this in quoting the BPAS statistics, but I will be even blunter—that 45% of the pregnancies in the UK are unplanned, as are around a third of births. As a feminist, I believe as an absolute foundational principle that people should have the right to control their own bodies. It is a great tragedy that US women have just lost that right—although on the positive side I note that it looks as if Sierra Leone is heading in the opposite direction. The right to control your own body should also be the right to securely, without fear or poverty, continue a pregnancy—to bear and rear a child in decent conditions. This government policy pushes pregnant people who may not wish to do so into having an abortion. I ask whether anyone in the Tory party believes they can defend that position.
I am just about out of time. We need to look at the issue that having a child should not be a luxury available only to the rich. People do not have a child because of money. I will quote the LSE research, in which Sara, a mother of four children, said:
“I don’t … have kids to get benefits and stuff like that, I have kids because I love ‘em and stuff like that.”
Surely the Government should be supporting people like Sara, not deliberately and wilfully putting them into impossible financial situations.
Lord Desai (Non-Afl)
My Lords, I support the right reverend Prelate’s nice, short Bill. In my five minutes, I shall talk about the history of why welfare states are always cruel to their claimants. That is a long tradition. I have a book coming out very soon, which I wrote during the pandemic, on why sound economics are always against the poor. Tax cuts are meant for the rich and are always good for the rich and for the economy, while benefit cuts are good for the poor and are somehow always good for the economy.
This all started in the late 18th century. Until then, we had rates collected by the Church and the poor were looked after at the level of the parish. Then of course the Reverend Malthus decided that this was too much. The rates were raised by Speenhamland magistrates in the late 18th century, but the reverend decided that he could not possibly afford to pay the extra rates so he wrote a book, An Essay on the Principle of Population, in which he made up the “fact” that populations grow geometrically while subsistence grows arithmetically—which I have shown to be a complete falsity.
The idea is that if you pay the poor money then they will breed children, and there is no limit to what they will do. Under universal credit, if you get a job then there is a taper and your income will be taken back. It is not called “income tax”; indeed, it is higher than the income tax rate. The poorest people pay more for getting a job under universal credit than anyone else. There are lots of anomalies like that, and the anomaly that you cannot have more than two children is exactly of that sort. The modern welfare state, established by rational political economy since the early 19th century, constantly goes after and attacks the poor because it has been centralised and modernised, and because sound economics tells you that you should not waste your money on the poor; it should all go to the rich. Unfortunately, we have waited a great many years to improve this.
Universal credit has been shown by a report of your Lordships’ Economic Affairs Committee to be full of anomalies and not actually fit for purpose. I do not think we will get comprehensive reform of the universal credit system, but even this morning we have seen people trying to improve it by bits and pieces in different Bills so that the universal credit system becomes slightly more humane than it is.
I strongly support the right reverend Prelate’s Bill and will do anything that I can to improve it or make it more acceptable. As an economist, though, I plead guilty that it is my science that has made the poor miserable. We ought to do something better than this.
Baroness Brinton (LD) [V]
My Lords, I thank the right reverend Prelate the Bishop of Durham for bringing forward this important Private Member’s Bill and for his excellent introduction to it. I add support for it from the Liberal Democrat Benches.
I thank the Library for its helpful briefing and the Centre for Analysis of Social Exclusion at the London School of Economics for its report on the fertility effects of the two-child limit on universal credit, while the noble Lord, Lord Desai, has just given us a useful reminder of the history of benefits, including far too many anomalies in universal credit.
As other noble Lords have pointed out, this is a very short Bill with a clearly defined aim to remove the two-child limit, which was brought in in the Welfare Reform and Work Act 2016. As the noble Baroness, Lady Bennett, said, it was pernicious. It was legally challenged almost as soon as it was introduced in 2017. In 2021, the Supreme Court decided that the two-child limit does not breach human rights law, but it considered that Articles 8 and 14 of the ECHR applied in the following ways. It said that, as more women than men are responsible for bringing up children, the two-child limit has a greater impact on women than men and arguably “indirectly discriminates against women”. It also said that it arguably
“discriminates against children living in households containing more than two children, by comparison with children living in households containing one or two children”.
But the Centre for the Analysis of Social Exclusion at the LSE gives more worrying evidence about the effect of the two-child limit, which I suspect was not fully understood when the Government changed the law in 2016. As the right reverend Prelate the Bishop of Durham said, the Government were clear that there were two objectives when this was introduced. The first was fiscal prudence and the second was stated in a 2015 DWP impact assessment:
“In practice people may respond to the incentives that this policy provides and may have fewer children. There is no evidence currently available on the strength of these effects although the Institute for Fiscal Studies found a relationship between support for children in the benefit system and childbearing.”
However, the more recent case research suggests that the probability of having a third or subsequent child declined by 0.36 percentage points after the reform. It goes on to say:
“This is a much smaller effect than one would expect given existing evidence on welfare and fertility … qualitative research by our sister project, Benefit Changes and Larger Families, suggests that lack of information about the policy may be a factor. Approximately half of participants affected by the two-child limit did not know about the policy before having their affected child … If families don’t know about the policy prior to pregnancy, fertility effects are unlikely.”
This is the problem. It is perhaps not surprising that prospective parents are not familiar with the detail of the rules relating to universal credit until they affect them. Frankly, many recipients of benefits find the complex rules hard to understand at the best of times.
Current levels of child poverty should also force us to rethink this policy. Much has changed in the six years since the introduction of the two-child limit. The IFS found that inflation for those on low incomes is three percentage points above the national average. If the national average is currently just under 10%, the poorest in our society are facing around a 13% increase. The current cost of living increases in energy, food and many other items mean that families reliant on universal credit are finding life not just difficult but impossible.
Action for Children reports that, even before the pandemic, 4.3 million children were living in poverty in the UK, up by 200,000 from the previous year and by half a million over the past five years. That is 31% of children. In London, the figure is 38% and, in Newcastle upon Tyne, child poverty rose from 28.4% to 41.2% over those five years.
Can the Minister explain why the two-child limit for universal credit should continue, given that the original IFS research, quoted in the government impact assessment, has not been borne out in practice, and given that child poverty has increased substantially, even before the very large increase in living costs this year? From the Liberal Democrat Benches, we strongly support the right reverend Prelate the Bishop of Durham’s Bill, because all the evidence shows that the reasons behind the Government introducing the two-child limit have not worked and that, instead, child poverty has increased substantially.
Baroness Sherlock (Lab)
My Lords, I thank the right reverend Prelate the Bishop of Durham for introducing his Bill so clearly and all noble Lords who have spoken. Although it is a Private Member’s Bill, and therefore has little chance of becoming law, it gives us a really good opportunity to explore the impact of the two-child limit and to turn the spotlight on the way the Government have failed to support families with children, especially during these very difficult times.
Before looking at the Bill in detail, I thank the noble Lord, Lord Desai, for giving us his characteristic economist’s view of the welfare state, with all its inefficiencies, and for drawing attention to one thing that is always interesting: that the effective tax rate, or the marginal deduction rate, on the poor is so much higher than it is on the rich. This is something that is rarely attended to, so I thank him for reminding us of that today.
In looking at the impact of the policy, we need to remind ourselves, as the right reverend Prelate the Bishop of Durham has done, of what Ministers said the policy was designed to do. They gave a number of reasons. First, the policy was to save money to reduce the deficit. Secondly, it was to be fairer to those who are not eligible for benefits and to the taxpayer. Thirdly, the policy would ensure that
“those on benefits face the same financial choices around the number of children they can afford as those supporting themselves through work”.
Like the right revered Prelate, I seethe every time a Minister says that and want to shout from the Back Benches, “Most people affected are in work already because these are in-work benefits”. He got there before me, which allowed me to have a little rant without feeling like I am alone again in this, so I am grateful for that.
Let us look at each of these in turn. First, this policy was part of an ongoing package of so-called austerity measures which began under the coalition Government and continued under the Conservative Government. We were told this package of policies was needed to save money to reduce the deficit and make social security spending more sustainable. I take the point of the right reverend Prelate the Bishop of Durham that it may in fact create costs down the line, but even taking it within its own light, the Minister will be aware—I know because I have cited it—of a detailed study by Ruth Lupton et al of the coalition Government’s tax and spend. It found that:
“Perhaps surprisingly, overall the ‘welfare’ cuts and more generous tax allowances balanced each other out, contributing nothing to deficit reduction.”
The strategy of austerity cuts, of which this was clearly a part, was never about reducing the deficit. In practice, it was about taking money from the poorest to pay for tax cuts. Tax cuts do not target those who need help most because even if you increase the personal tax allowance, someone earning £80,000 a year gets all of it and a single mum working 30 hours a week during term time at minimum wage does not earn enough to benefit at all.
On the question of the sustainability of social security spending, in April the OBR said that spending on universal credit and its predecessors was expected to fall to 3% of GDP by next year—the same level as in 1985-86. Can the Minister tell the House what level of spending on social security the Government believe would be sustainable as a proportion of GDP?
Secondly, it was argued that limiting benefits to the first two children is fairer to those not eligible for benefits and to the taxpayer. Benefits for children represent a transfer of resources from taxpayers as a whole to families with children—something discussed in the previous debate. That is by definition what they are. Those who do not have children subsidise the upkeep of all children because they are a public and a private good; we all benefit from having our next generation thriving and succeeding. The reality is that those who have children but are not eligible—usually it is because they are higher earners—will, in most cases, get child benefit, childcare support, free education and healthcare for their children, and much more besides. If they lose their jobs or get sick, or their circumstances change, greater support will be there waiting for them too. Can the Minister tell the House how the Government decided that two children was the right limit? Why not one or three? What was the rationale?
Then there is the motivational element to ensure that those on benefits face the same financial choices around the number of children they can afford as those supporting themselves through work. The noble Baroness, Lady Brinton, quoted a crucial part of the impact assessment:
“In practice people may respond to the incentives that this policy provides and may have fewer children.”
The impact assessment admitted there was no clear evidence, but the policy could only ever have had two effects: either the poor would have fewer children or families with more than two children would become poorer. It could do only one or the other; there was no other possible outcome.
As the right reverend Prelate and other noble Lords have said, we now have evidence from the study by Mary Reader et al, Does Cutting Child Benefit Reduce Fertility in Larger Families? Evidence from the UK’s Two-Child Limit. Has the Minister read that study? The research suggests that the two-child limit has had a minimal impact on fertility rates, as we have heard. Interviews with larger families subject to the two-child limit reveal some of the reasons, many of which have been mentioned—for example, pregnancies are not always planned. I take very clearly the point made by the right reverend Prelate and the noble Baroness, Lady Bennett, about the awful position of somebody having to terminate a pregnancy—a child who was wanted—because they could not afford to have it. I think the whole House will be grieving over that consequence.
Then there is the fact that so many parents did not know about the limit until the child was born, such as “Stephanie”, mentioned by the right reverend Prelate. Further, some people, including but not exclusively in certain religious and ethnic communities, place a high value on having larger families and would therefore have them whatever the consequences—but the consequences for many would now be poverty for all the children in those families.
Although the policy did not reduce family size, CPAG points out that it has had a significant impact on the well-being of children in larger families. It says that every year about 50,000 children are pushed into poverty as a result of the limit and a further 150,000 children already living in poverty see their circumstances deteriorate further. To quote CPAG:
“If the central aim of the two-child limit was to reduce the number of people deciding to have a third child it has largely failed. The most sizeable impact of the policy has been to increase child poverty.”
Will the Minister tell the House what she believes this policy has achieved and whether she is pleased with this outcome?
Above all, there is the situation of people who have children, confident they can afford them, and then their circumstances change, including the millions of people who ended up on universal credit during the pandemic. Most of those people would never have expected to need government support and would have been shocked to find they were given support only for the first two children in their household. Did that give the Government any pause for thought about this policy?
The bigger picture is that having previously inflicted huge cuts in benefits to children, when times got really tough and Ministers realised that they had to take action, the steps they took were, once again, deeply unfair to families with children. They went for flat-rate payments which took no account of the presence of children in a household. The universal credit uplift during the pandemic, which was welcome, did not include an uplift in the elements relating to children. The latest package in the Social Security (Additional Payments) Act will give the same amount to a single person as to a family with three children, even though their costs are radically different.
I hope the Minister will take this opportunity to tell us whether she thinks the two-child limit has been a success. I am with the right reverend Prelate: it will not be enough simply to rehearse the arguments that were used before the Bill was introduced and when there was no evidence. The House deserves to see the evidence of the impact this policy has had on children and their parents. If the Government are not minded to reverse it, will the Minister tell the House what steps they will be taking to deal with growing child poverty, especially in larger families? I look forward to her reply.
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)
I thank the right reverend Prelate the Bishop of Durham for introducing this Bill and for the opportunity to debate again a subject dear to his heart and to those of others in the House.
My department is committed to supporting families and helping parents into work. This requires a balanced system that provides strong work incentives and support for those who need it, but also ensures a sense of fairness to the taxpayer and to the many working families who do not see their incomes rise when they have more children. We judge that the policy to support a maximum of two children is a proportionate way to achieve these objectives. Our overall approach is working, as evidenced by the fact that, between 2016 and 2021, the number of couples in employment who have children increased by 460,000—a 2.3 percentage point increase in the employment rate for this group.
The two-child policy was introduced five years ago and, since 6 April 2017, families have been able to claim support for up to two children. There may be further entitlement for other children if they were born before that 6 April or if an exception applies. The child element of universal credit is worth £290 for the first child born before 6 April 2017. It is worth a standard rate of £244.58 per child for the second and any other eligible children. Child benefit continues to be paid for all children, plus the additional element in child tax credit or universal credit for any disabled children. Additional help for eligible childcare costs through working tax credit and universal credit are also available, regardless of the total number of children in the household.
We recognise that some claimants are not able to make the same choices about the number of children in their family. That is why exceptions have been put in place to protect certain groups. Exceptions apply to third and subsequent children who are: additional children in a multiple birth, where an extra amount is payable for all children other than the first child; or likely to have been born as a result of non-consensual conception, which for this purpose includes rape or where a claimant was in a controlling or coercive relationship with the child’s other biological parent at the time of conception. An exception also applies to any children in a household who are: adopted when they would otherwise be in local authority care; living long-term with friends or family and would otherwise be at risk of entering the care system; or where a child under 16 living with their parents or carers has a child of their own, until they make a separate claim upon turning 16.
Statistics from the Office for National Statistics show that in 2020, of all families with dependent children, 85% had a maximum of two in their family. For lone parents, this was 83%. On the latest figures, 62% of households with a third or subsequent child who are in receipt of universal credit or child tax credit are not affected by the two-child policy.
This Government have always believed, and continue to believe, that the most sustainable way to lift children out of poverty is by supporting parents into work and, importantly, to progress in it, wherever possible. As I said, there has been a significant rise in the number of couples with children in employment between 2016 and 2021. I take the point the noble Baroness made that many of these people are in work, but one of the ways that we can help them is by them getting a better job and earning more income. That is a policy of this Government and one that we will be pursuing vigorously.
With 1.3 million vacancies across the United Kingdom, our focus remains on continuing to support parents into work and to progress in work, as I have already said. This approach is based on clear evidence about the importance of parental employment, particularly where it is full-time, in substantially reducing the risks of poverty and improving long-term outcomes for children.
Baroness Sherlock (Lab)
Does the Minister accept that encouraging parents to get better jobs and allowing them to have benefits for all their children are not mutually exclusive?
Baroness Stedman-Scott (Con)
I think it is fair to say that the Government have a differing view from that of the noble Baroness and people on the Opposition Benches. It is exactly that our helping people to get a better job, if they can, and more income—plus all the support that we are putting through the welfare system—is the policy that the Government are pursuing. We want everybody to be able to find a job, progress in work and thrive in the labour market, whoever they are and wherever they live. Our support for people out of work is tailored—
Baroness Bennett of Manor Castle (GP)
The Minister just said “wherever they live”. Does she agree that the two-child benefit policy has different impacts in different parts of the country, and that there are parts that are supposed to be subject to the government’s levelling up agenda where it is much more difficult to get a higher paying job?
Baroness Stedman-Scott (Con)
Of course we accept that there are regional variations, which is why, with the levelling-up agenda, we are doing our very best to improve the work opportunities for people in those areas and to support them. That is, again, another policy of this Government that we are actively pursuing. Our support for people out of work is tailored to individual circumstances, recognising the different issues that people face in the labour market, notwithstanding the points that the noble Baroness, Lady Bennett, made about the regional differences.
Improving work incentives was a key design criterion for universal credit. We have cut the universal credit taper rate from 63% to 55%—a major step forward—and increased the universal credit work allowance by £500 per year. These two measures mean that 1.7 million households will keep, on average, an extra £1,000 a year. These changes represent an effective tax cut for low-income working households in receipt of universal credit worth £1.9 billion a year in 2022-23. This will allow working households to keep more of what they earn and strengthen incentives to move into, and progress in, work.
The noble Baroness, Lady Brinton, raised the issue of the cost of living, which is a subject on all our hearts and minds. Millions of households across the UK are struggling to make their incomes stretch to cover the cost of living. The Government have stepped up to the plate in order to make sure that we support people, providing £37 billion, which includes the £650 payment, as I have regularly repeated in the House—I do not intend to do today, as I want to get on to some of the other issues that noble Lords have raised.
The right reverend Prelate the Bishop of Durham raised the issue of poverty increasing due to policy choices. Again, providing £22 billion of funding in 2022-23 to help families with the cost of living, including through universal credit changes, means that working families and households are much better off, as I have already said.
The delicate subject of abortion has been raised, which I completely understand. Research from the Nuffield Foundation larger families consortium of researchers published this month has outlined that fertility rates for those claiming or eligible to claim benefits have changed very little since the introduction of this policy. This evidence refutes earlier evidence from the British Pregnancy Advisory Service, which suggested that people were having abortions in response to the policy. The report argues that this was in fact a small and self-selected sample. This wider, more robust study takes evidence from administrative data on births and the annual population survey and uses a difference-in-differences approach to compare before and after the policy for different groups. It concludes that, while fertility rates have fallen, this has been the case for all socioeconomic groups.
The right reverend Prelate asked if I could commit to carrying out an impact assessment and to taking all this back to the Government. To be truthful and straightforward, I cannot commit to an impact assessment. I do not believe, with what I know, that the Government would welcome from me the request that he has made; however, having said that, I will make sure that they understand that it is in Hansard.
The right reverend Prelate also asked about policy exemptions not accounting for those from ethnic backgrounds. The Government’s published impact assessment noted that ethnic minority households may be more likely to be impacted by the policy. This is because they are, on average, more likely to be in receipt of tax credits and universal credit and, on average, have larger families.
The noble Baroness, Lady Brinton, raised the issue of half of all children living in lone-parent households living in relative poverty. The latest available data on in-work poverty shows that, in 2019-20, children in households where all adults were in work were around six times less likely to be in absolute poverty, before housing costs. Through our plan for jobs campaign, the department is providing broad-ranging support for all jobseekers with our sector-based work academy programme and job entry targeted support scheme.
The right reverend Prelate the Bishop of Durham and the noble Baroness, Lady Brinton, raised the important point, as did others, about claimants being aware of the policy. There is information on the GOV.UK website, but this is something I am absolutely content to take back to the department to review how we communicate it and see if there are other things we can do to promote it. The noble Baroness, Lady Sherlock, and the right reverend Prelate the Bishop of Durham talked about paying childcare costs up-front being a barrier to moving into and progressing in work. Where people need up-front childcare costs on universal credit, the flexible support scheme is used and will continue to be so; if anybody knows of anybody who has been denied that, let me know and I will sort that out.
The noble Baroness, Lady Sherlock, asked me what level of spending on benefits is sustainable. I can only tell her that in 2021-22 we spent around £244 billion on welfare, with £41 billion on UC specifically. On the exam question, “How did the Government decide on two children?”—for which I thank her—I will need to write to her. She made a point about the two-child limit increasing policy and punishing families, so I say that the Government have a range of policies which support children and families across the tax and benefit system and public services. We remain committed to supporting families on low incomes and will spend around £108 billion through the welfare system, as I have already said.
In conclusion, the most sustainable way to lift children out of poverty—I keep going on and on about this, but it is government policy—is by supporting people and parents to progress in work wherever possible. This Government have a range of policies to support children and families across the tax and benefits system and public services. The policy to support a maximum of two children must strike a balance between providing support for those who need it and ensuring a sense of fairness to taxpayers, which I know noble Lords have already raised. I am quite sure that the answers I have given today have not been well received, but I am sure the debate will continue.
The Lord Bishop of Durham
I thank the Minister for her full response, for giving us an answer and for repeating some of the stuff around the exemptions and so forth. However, she is right: I am disappointed, and I know that others will be. I am very grateful to those who have spoken; I thank the noble Baroness, Lady Bennett, for her tireless support in this, and I thought her point about there not being a single Conservative Back-Bencher here to speak for the policy did say something.
I thank the noble Lord, Lord Desai, for his reminder about economics and even going back all the way to Reverend Malthus, who I remember reading when I was doing my degree. The noble Baroness, Lady Brinton, highlighted—as did others—the increase in child poverty, and that is really one of the reasons I am disappointed. We are seeing an increase in child poverty, yet there seems to be a lack of willingness to address that where it is growing. I accept that some action is being taken, but it is not stopping some getting poorer and poorer and some becoming in danger of falling into destitution. The noble Baroness, Lady Sherlock, made a point about the funding balance and tax cuts, which I thought was very well made and very helpful.
I look forward to the letter around how the number of two children was arrived at. I remember sitting with Iain Duncan Smith and having that conversation with him where he gave me a convoluted explanation which I still do not think makes any sense. But I am grateful; the Minister is right that we will not stop having this debate. Simply, I am not going to stop until this policy is scrapped.
Bill read a second time and committed to a Committee of the Whole House.