Universal Credit - mitigation of the two-child limit: consultation

The two-child cap in Universal Credit

Existing work-related benefits paid to people in Scotland remain reserved to the UK Government. Universal Credit (UC) is a means-tested benefit which is in the process of replacing six existing benefits and tax credits for working age households^[2]. The benefit is available to those who are in work on low incomes, as well as those who are unemployed or whose capability for work is limited by sickness or disability.

UC was introduced in 2013. It is administered by the Department for Work and Pensions (DWP) and has been available in every part of the UK since December 2018. Currently, it’s the only option for any working-age individual or family wishing to apply for a means-tested benefit.

Part of the UC payment people get relates to children they are responsible for, and this part of the payment is called the ‘child element’. The UK Government will however only pay the UC Child Element for the first two children in a family, except in some limited circumstances. If a third or subsequent child was born after 6 April 2017, then no UC child element will be paid in respect of that child, unless it was part of a multiple birth (for example, twins), part of a non-parental caring arrangement, or born as a result of non-consensual conception – known as the ‘rape clause’.

DWP statistics show that in April 2024 a total of 1.6 million children in the UK were affected by the policy. The number of households affected by the policy has increased since the first statistics were published in 2018, as more children have been born since 6 April 2017 into families with at least two children.

The latest statistics show that in April 2024, 42,000 Scottish households with three or more dependent children were receiving Universal Credit or Child Tax Credit, of which 27,000 were in scope for the two-child cap due to having children born after 6 April 2017. Exceptions were applied for at least one child in 1,700 of these households, and 26,000 households had a child for whom the two-child cap had been applied. Some of these households will have four or more children, with more than one child in scope for the cap^[3].

Allowing for some families having more than one child in scope, and for some children being exempt, the Scottish Fiscal Commission (SFC) estimates that in April 2024 there were around 32,000 children in Scotland recorded on claims for UC for whom no child element was being paid^[4]. The Scottish Government considers that the scale of the problem indicates that action is needed as soon as possible.