In April 2017, the UK government introduced two changes to family welfare benefits.

• The 'child element’ of Universal Credit and Child Tax Credit was limited to the first two children in each family. This reduced payments by approximately £3,000 per year for each child born after March 2017 in larger families. An estimated 1.5 million children are affected by this policy, most of whom live in working families.
• The ‘family element’ of Tax Credits and Universal Credit was removed. This removed £545 per year for all tax credit recipients with children.

This research looked at the impact of these changes on the educational outcomes of children in larger families. We will do this by analysing the Early Foundation Stage Profile (EYFSP) results – the national assessment of children's educational progress at the end of their first year of school in England. Although the changes to family welfare benefits applied in all UK nations, because we are using this English assessment data, this project focused on families living in England.

This research project explored how family income affects children’s chances in early education in England. Estimates suggest that if the two-child limit were removed there would be a quarter of a million fewer children in poverty. This research generated new evidence about the impact of this policy on early childhood development.

The fairer start mission goal is that, by 2030, we will have eliminated the school readiness gap between those born into deprivation and their peers in the UK.

Families’ economic circumstances, alongside other factors, are related to children’s school readiness. Experiences of poverty early in life are associated with poorer child development and educational outcomes. This means that lowering family income by reducing the amount of benefits families receive could not only push more families into poverty but could also potentially negatively impact how disadvantaged children learn and develop.

In the United Kingdom, the child poverty rate is particularly high for large families. In 2020/2021, 38% of children in families with three or more children were in poverty compared to 21% of children in families with one child. The proportion of children living in poverty from larger families has been increasing since 2012/2013 (DWP, 2020). There was a need to better understand how these increasing rates of poverty, and the two-child limit policy in particular, has impacted children’s educational outcomes.

The aim of this project was to begin to remedy that gap in evidence.

Nesta and the Institute for Fiscal Studies (IFS) collaborated on a mixed-methods research project, which had two main strands.

First, Nesta interviewed parents from families affected by the two-child limit about their experiences of the policy. We specifically asked them about how they think the policy might have impacted how they support their children to learn at home, in nursery and school as well as their access to different forms of early education. These interviews explored how the two-child limit is impacting children’s educational successes, if at all. Read the full report.

Second, the IFS used children’s health and educational records to look at the impact of the 2017 reforms on children’s school outcomes. They used the ECHILD database which joins together information about the health of all children in England (collected by the NHS) and the National Pupil database published by the Department of Education (DfE) which holds the EYFSP results.

We explored how children born in England in the 2016/17 school year do when they are five years old (reception year, in the EYFSP), comparing families potentially impacted by the two-child limit to those who were not. We also looked at school outcomes for older siblings of children potentially affected by these reforms. Read the full IFS report.

Our research topic was sensitive. Our team therefore invited a group of parent advisors who have themselves been impacted by the two-child limit, to give us feedback on our research process. This group was organised by the Child Poverty Action Group (CPAG), who are also supporting our research.