Britain’s declining birth rate could be reversed not through costly cash incentives but through economic liberalisation, according to a new study by the Institute of Economic Affairs (IEA). The report argues that labour market flexibility, housing reform, and welfare restructuring could help women achieve their desired family sizes.

Official data from the Office for National Statistics show that the UK’s total fertility rate fell to a record low of 1.44 children per woman in 2023. Yet women’s intended fertility has remained stable at around 2.2 children since 1979. The IEA report notes that British women are falling at least 0.4 children short of their own family goals, with this gap likely widening as fertility continues to fall while desired family size remains constant.

If women were able to meet their stated intentions, the UK’s fertility rate would exceed that of the US, which currently stands at 1.62, and nearly all other high-income nations. The study describes this widening “fertility gap” as a policy failure rather than a cultural shift, warning that it contributes to fiscal strain, labour shortages, and frustration among those unable to realise their family aspirations.

The report, Mind the Fertility Gap: Why people stopped having babies and how economic freedom can help, is authored by Dr Clara E. Piano, a Visiting Assistant Professor of Economics at the University of Mississippi. It draws on international evidence to show that countries and US states with greater economic freedom tend to have smaller fertility gaps.

According to Dr Piano, pro-natal policies centred on cash handouts, baby bonuses, or subsidised childcare have limited and short-lived effects. The study argues that removing structural barriers in labour and housing markets would be more effective and sustainable. US data suggest that flexible labour markets give parents more scope to adjust work schedules to family needs, helping them to balance employment and parenthood rather than choose between them.

The research also highlights the influence of housing and land use regulation. Families are more likely to have children when they can access spacious and affordable homes with multiple bedrooms—what economists call a “child complement”. Yet strict planning rules and restricted housing supply keep prices high and deter family formation. Studies cited in the report show that restrictive housing policies are particularly harmful to fertility among women in their twenties.

Dr Piano further notes that even small regulations can have significant unintended effects. For instance, stringent car seat requirements in the US have indirectly reduced total births by 145,000 since 1980 by forcing families to purchase larger vehicles once they have more than two children.

To address these issues, the report outlines several recommendations:

• Labour market deregulation. Remove restrictive employment laws that prevent flexible working and independent contracting, enabling parents to fit work around family life.
• Housing and planning reform. Ease land use and building restrictions to increase housing supply and affordability.
• Reform welfare systems. Adjust public pension and welfare programmes so they do not disproportionately burden parents who fund future taxpayers.
• Support religious freedom. Allow faith-based organisations to promote pro-family values and communities that naturally support child-rearing.
• Avoid costly short-term schemes. Refrain from pursuing expensive baby bonuses and subsidies that have little long-term impact on fertility.

The report also suggests giving parents proxy votes for their minor children, ensuring that family interests are directly represented in policymaking.

Dr Piano said: “Restricting the term pro-natal to explicit transfer policies obscures the broader policy landscape that shapes family decisions. Policies affecting economic and religious freedom, in particular, have profound effects on fertility through their impact on work–family compatibility and personal beliefs.”