- Families on full handouts to get £18,000 a year more than living wage neighbours post tax following Budget welfare splurge
- With family of five children, £90,000 a year now needed to match jobless household’s combined benefit income
- Health benefits on course to hit 1.9% of GDP by 2030 with five million now written off as unable to work
- Damning new report, The Benefits Budget, lays bare scale of “welfare crisis” wracking Britain following last week’s £26 billion tax hike
Jobless families on combined benefits will now take home £18,000 more per year than the post-tax wages of a working family, following the abolition of the two child limit, a new analysis reveals.
A family with three children, with at least one parent claiming the average rates of Universal Credit, housing and health benefits including Personal Independence Payment, will now receive £46,000 by 2026/27. For a family of five children, this rises to £55,000.
This compares to the £28,000 taken home after tax by a family where one adult works full-time and another works part-time on the national living wage.
To take home the same amount as a three-child family with combined benefits would now require a salary of roughly £71,000 before tax – rising to £90,000 to match the benefits of a family of five children.
A single out of work parent on the same combined benefits with three children would be paid £43,000 – over £22,000 more than someone would net after tax from working full-time on £20,600.
Meanwhile, a single parent of three with a child receiving an allowance for a condition (such as ADHD or autism) will now receive £38,000 – over £17,000 more than the take home pay of a living wage job.
The analysis by the Centre for Social Justice, published in a new report, The Benefits Budget, highlights the “worsening of deeply perverse incentives” in the welfare system following the Government’s decision to abandon welfare reform and expand benefit spending by raising £26 billion in taxes at the Autumn Budget.
According to the DWP, two in five households affected by the two child limit were in a household with a claim for health benefits, making them exempt from the overall benefit cap introduced in 2017 to establish fairness in the welfare system.
This translates into a total of a quarter of a million households (244,000) taking home substantially raised benefit incomes. While it is possible to claim PIP while in work, fewer than one in six claimants are employed.
The findings come as OBR found this week that child disability benefit spending is set increase by a further 76 per cent, or £3.4 billion, by 2030, following a surge in parents claiming for conditions such as autism and ADHD.
The working-age disability benefit caseload is up 1.3 million since the pandemic, with anxiety and depression claims up more than threefold since 2019. Around 5,000 people are signed off work and onto long-term sickness benefits every day.
In other findings:
- The out-of-work benefit population with no requirement to work now exceeds five million – almost double the pre-pandemic level – when taking “legacy benefit” claimants into account.
- Working-age health benefit spending is on course to reach 1.9% of GDP by 2030, the highest level in twenty years and almost double that of a decade ago.
- The number of children growing up in workless households has seen the fastest increase on record, at a total of 1.5 million.
The CSJ is calling on the Government to urgently return to welfare reform as part of a new “mission to repair broken Britain”. It has put forward costed plans to reform mental health benefits, saving £7 billion and using over £1 billion to radically expand NHS therapies and back to work help.
It has also advanced proposals for an effective tax cut helping employers hire thousands of “Neets”, as well as “frontloading child benefit” so that parents can opt to receive extra financial support during the critical early years.
Sir Iain Duncan Smith MP, former Conservative leader and Chairman of the CSJ, said:
“Good politics is about tough choices. Hiking taxes on working people to pay for £16 billion in extra welfare spending is a bad choice. After all, taking money from those who work hard to give to those who work not, is bad economics and bad politics.
“Pouring money into benefits is not the same as tackling the root causes of poverty. Children growing up without a parent in a job are four times as likely to be materially deprived.
“Work is not just a job but the key to a positive life one of hope and aspiration. We must want people to make that choice and be rewarded for doing so.
“Getting welfare spending under control is critical. We must make work pay and as this government loses control of a ballooning welfare budget it will ensure work does not pay.
“Bringing an end to the crisis of worklessness is the only way to transform life chances for good and restore consent for a functional welfare system, not one that is clearly now running out of control and eating up hard working taxpayers’ money.”
Joe Shalam, Policy Director at the CSJ, said:
“Work is the best route out of poverty, but our welfare system grows ever more riddled with perverse incentives that trap people on benefits and fail to help them towards financial independence.
“This failure ripples through the generations, with children twice as likely to be in absolute poverty when growing up without seeing a parent go out to work each morning.
“The Budget merely expanded welfare spending paid for by taxes on working people. But we had put forward costed proposals for reform that would have saved £7 billion, put £1 billion more into radically expanded NHS therapies, and helped hundreds of thousands of young people into work.
“For the sake of the public finances and the millions written off, we hope the government will return to welfare reform before we lose a generation for good.”
Note to Editors:
The full report can be found here.
Figure 1: Examples of combined benefit income and wages after tax (couple household, 2026/27)
Source: CSJ analysis of DWP, OBR, ONS, HMRC
Methodology: the CSJ produced a range of illustrative examples of claimant and working households in 2026/27 using the most recent publicly available data, including: the average UC housing element for out-of-work claimants with dependent children in England (DWP Stat-Xplore); the UC standard allowance and elements (GOV.UK); the average PIP awards (DWP Stat-Xplore; GOV.UK); the UC child elements (Universal Credit regulations 2013); the average Child DLA award (DWP Stat-Xplore). The CSJ used the Family Resources Survey to produce wage estimates for 2026/27, applying HMRC’s tax calculator for tax, student loan and national insurance deductions.
To examine the net pay of working households, we have assumed one parent in full-time work and the other in part-time work, with full-time as 36 hours (ONS, 2025) and part-time as 16 hours (ONS, 2025). The ONS finds that fewer than four in ten families with three or more children have both parents in full-time work (ONS, 2021).
To calculate the number of beneficiaries of the abolition of the two child limit who are claiming health benefits (and therefore also exempt from the benefit cap), we use data from the DWP which shows that 40 per cent of those affected by the two child limit had at least one claimant or child receiving health benefits (DWP, 2025) – translating to around 244,000 households when applied to the total 560,000 beneficiaries identified by the OBR. Almost three in ten (28 per cent) were in receipt of Child DLA (around 160,000 households), while 14 per cent claimed UC health or PIP (roughly 80,000 households). The latest data from the DWP shows that 70 per cent of UC health claimants were also claiming PIP (DWP, 2025).
