Child poverty cumulative impact assessment: update

7. Welfare reforms

The Scottish Government has produced a series of reports on the impact of UK Government welfare reforms on households in Scotland. This section briefly refreshes the last report in order to provide estimates that are up-to-date and consistent with our wider analysis.^[12]

In particular, it considers the impacts of two selected policy proposals on child poverty in Scotland: firstly, the removal of the two-child limit and the reintroduction of the family element in Universal Credit; and secondly, the introduction of an Essentials Guarantee as set out by JRF and the Trussel Trust.^[13] These impacts would be over and above those of the Scottish Government policies analysed in Section 4.

7.1 Removal of the two-child limit and reintroduction of the family element

The two-child limit restricts Child Tax Credit and the child element of Universal Credit (UC) to two children per household. The family element, a premium for the first child in the household, was removed in 2017, at the same time as the two-child limit was introduced. These policies directly target children in low-income households and the Scottish Government has called for the two-child limit to be removed.

Our latest analysis shows that removing the two-child limit and reinstating the family element could result in 10,000 fewer children in Scotland living in relative poverty in 2024-25, with around the same impact on absolute child poverty. As more children are affected by the limit over time, with an increasing proportion being born after the April 2017 cut-off, this impact will continue to grow until the policy is fully rolled out in 2035.^[14]

7.2 Introduction of an Essentials Guarantee

The Scottish Government has called on the UK Government to adopt an Essentials Guarantee in UC. To ensure that claimants can afford basic necessities, JRF analysis shows that the standard allowance should be raised to £120 per month for a single person and £200 for a couple in 2023-24. Besides reducing poverty, this would address the age discrimination present in the system by allocating the same standard allowance to under-25s as older claimants, rather than the lowered rate that they currently receive.

Uprated by inflation, we estimate that introducing an Essentials Guarantee as proposed by JRF could result in 30,000 fewer children in Scotland living in relative poverty in 2024-25, with around the same impact on absolute child poverty.^[15] If additionally the two-child limit was abolished and the family element reinstated, the cumulative impact would be around 40,000 fewer children living in relative poverty and 30,000 fewer in absolute poverty.