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

Mitigating the two-child cap in Scotland

On 4 December 2024 the Scottish Government set out plans to mitigate the two-child cap in Scotland as part of the annual budget statement to the Scottish Parliament^[5]. The proposal is for a payment equal to the UC child element for each third and subsequent child in Scotland impacted by the two-child cap – currently £287.92 each month, rising to £292.81 in April.

The SFC estimates that the mitigation will be paid to 42,000 children at a cost of £3,609 per child per year in 2026-27 (equivalent to UC child element payments for a year), rising to 49,000 children and £3,845 in 2029-30. The forecast includes £3 million in 2026-27, rising to £9 million in 2029-30, for behavioural change: for example, families choosing to work fewer hours to remain eligible for UC, or parents choosing to receive a mitigation payment from the Scottish Government instead of applying to DWP for an exception. On this basis the SFC estimates the total cost of the policy for 2026-27 at £155 million, increasing to £198 million in 2029-30^[6].

Mitigation of the cap is not a straightforward task. It will require significant policy and technical work to develop and implement an appropriate solution. This includes cooperation from the UK Government around systems development, data sharing and legislation. For context, the Scottish Government’s initial roll-out of Scottish Child Payment for under-6s was delivered in around 18 months from its announcement to its delivery; such a timescale for benefit delivery is unprecedented in the UK.

The technical delivery of the mitigation must carefully consider risks, issues and dependencies such as data sharing with DWP. A design for the payment must be agreed, built, tested and released, all while ensuring that the 15 benefits that Social Security Scotland is already delivering continue to be paid on time, and that vital upcoming work to deliver Pension Age Winter Heating Payment and priority improvements in Carers Assistance takes place as planned.

The £3 million announced in the budget statement will fund the work necessary to begin designing the mitigation payments, and that work has already begun. The Social Security Programme has commenced the ‘discovery’ phase of the project, which will impact delivery options, including joint work with DWP to agree, build and test additional data sharing functions and create a joint delivery plan.

The responses to this consultation, alongside the outputs of that discovery process, will inform the Scottish Government’s approach to drafting the legislation that will be necessary to deliver the payments, with draft regulations to be shared with the Scottish Commission on Social Security and laid in the Parliament later this year.