How scrapping the two-child benefit cap could stop divorcing families sliding into poverty

The scrapping of the two-child limit in last week’s budget has rightly been much welcomed as it has the potential to lift hundreds of thousands of children out of poverty.

In particular, it presents a crucial opportunity to improve the lives of the UK’s two million single-parent households, who are currently twice as likely to live in poverty than couple-parent households.

Although most of the UK’s financial policies implicitly favour two-parent households – ignoring these two million families who are struggling more than most – scrapping the two-child limit will be a significant help to families who are going through the often unnecessarily expensive process of divorce or dealing with the aftermath.

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The divorce process is more adversarial and costly than it needs to be, fuelled by lawyers working to secure the best results for their clients as individuals rather than the best result for the family as a whole.

The cost of applying for a divorce in the UK is £612 and the cost of applying for a consent order (a legally binding document that details your financial agreement during or after a divorce or dissolution) is £60 in England and Wales.

However, our inherently adversarial legal system means that couples often pay many times that amount, with research suggesting that the average cost of separation is around £14,500 per couple.

That is enough to destroy savings and send newly single parents and separated families sliding towards poverty. So, for newly single parents and separated families with three or more children, scrapping the two-child limit is huge.

Around 560,000 families are expected to gain from the end to the two-child limit on benefits, and they will receive around £3,500 extra per third child and any subsequent children. The government estimates around 450,000 children could be lifted out of poverty.

This means that families reeling from the often-devastating financial impact of divorce will still be able to pay for food, heating, school shoes and other necessities.

It is one of the most powerful child-poverty decisions any chancellor has taken in years.

There is still much more that could be done, and the benefit cap itself hasn’t been lifted – so some of the very poorest single-parent families will still not feel the full benefit of this change.

Policy in Practice estimate one in 10 children hit by the two-child limit won’t gain at all, and another one in 10 only gain partially, because the benefit cap cuts them off.

On top of that, we still have frozen tax thresholds pulling more low-paid parents into tax, expensive childcare in school holidays, and housing costs that swallow up income.

So, in some ways scrapping the two-child limit is like turning on the tap with one hand while the other is still firmly on the stopcock.

The budget also failed entirely to address child maintenance and co-parenting support, which is astonishing given we know that if all maintenance were paid, up to 60% of children in separated families could be lifted out of poverty.

We still have tens of thousands of children getting nothing at all through the child maintenance collect and pay system each quarter, and parents continue to see fees taken out of the money that should be reaching their children.

There’s no new money for early help when couples separate, either, which could have an enormous positive impact by helping couples keep communication going and maintenance flowing, stopping families from falling off a financial cliff.

So, although the budget puts more money into the benefits system, it doesn’t fix the basic problem that too much child maintenance simply never reaches children.

Scrapping the two-child limit will be a huge helping hand for single-parent households, and especially those working hard to get back on steady ground financially after navigating divorce.

But there is much more to be done in this area, and it is something Rachel Reeves should pay attention to. The welfare bill goes down when people divorce kindly. As the chancellor looks for ways to address the deficit, supporting couples to separate amicably should be high on the agenda.

Kate Daly, co-founder of amicable and host of The Divorce Podcast.

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