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

Options for delivery

The Scottish Government’s priority is to make payments as soon as possible, given the immediate impacts that the two-child cap is having on peoples’ lives. It considers that inequality is bad for Scotland’s health, its communities and its economy, and that social security is an investment in its people, its communities, and its future.

The Scottish Social Security Principles provide the foundation of the Scottish system of social security, and the Scottish Government has considered its approach to the delivery of mitigation payments against the background of those principles.

The eight core principles deliberately correspond to some of the fundamental aspects of the right to social security, as set out in key human rights instruments such as the International Covenant on Economic, Social and Cultural Rights, the Universal Declaration of Human Rights and the European Social Charter.

The principles are set out on the face of the 2018 Act, with strong stakeholder and public support, with the intention of embedding the more positive, supportive ethos of the Scottish system from the outset.

The principles include:

• the Scottish social security system is to contribute to reducing poverty in Scotland, and
• the Scottish social security system is to be efficient and deliver value for money.

Within this framework, the Scottish Government has considered whether it should ask to pay for the two-child cap to be disapplied in Scotland ‘at source’ as part of the Universal Credit system controlled by DWP, whether mitigation payments should be delivered by local authorities in a similar way to Discretionary Housing Payments (DHPs), or whether Social Security Scotland should deliver mitigation payments.

If DWP removed the two-child cap in Scotland at source in Universal Credit it would have multiple positive effects. If it returned to the position prior to the introduction of the two-child cap then earnings limits would rise in line with the real size of a household, which would likely make some people who are currently not in receipt of Universal Credit eligible for payments, and the traumatic experiences suffered by many women as a result of the ‘rape clause’, which forces mothers to disclose painful past experiences to qualify for benefit, would no longer be necessary. The Scottish Government has continued to press the UK Government to do this.

DWP removing the two-child cap in Scotland would require extensive work. It would require the UK Government to introduce legislation and make system changes in order to remove the two-child cap from Universal Credit calculations for families in Scotland. The introduction of the these payments would depend on the UK Parliamentary process, as well as DWP’s timescales for making the necessary technical changes, which could mean slower progress toward delivering payments.

The Scottish Government already mitigates the UK Government ‘benefit cap’ using Discretionary Housing Payments, which are administered by local authorities. The Scottish Government has consistently opposed the benefit cap which unfairly restricts the amount of money a household can receive through the benefit system.

The draft budget contains £97m made available to local authorities to spend on Discretionary Housing Payments, an increase of nearly £7m over 2024/25. This is made up of £79.7m to fully mitigate the bedroom tax, helping over 94,000 households in Scotland sustain their tenancies, 14,000 of which are families with over 20,500 children, more than £9.4m to mitigate the UK Government’s benefit cap as fully as possible within devolved powers, supporting around 3,400 families, with nearly 11,000 children, and £7.9m to mitigate against the impact of UK Government welfare cuts, including shortfalls in Local Housing Allowance rates.

There would however be a number of disadvantages to adopting a similar approach for mitigation of the two-child cap. The existing Discretionary Housing Payment scheme was not designed for mitigation of the two-child cap.

It is currently legally limited to housing costs, which means that some families would be excluded from receiving the payment. Finally, making payments through Social Security Scotland will allow for a consistent approach across Scotland, without putting further pressure on local authorities’ resources.

The Scottish Government therefore considers that the best way to achieve its urgent aim of reducing child poverty through mitigating the two-child cap in Scotland is to deliver a payment through Social Security Scotland. The agency has a strong track record of delivery of payments at pace, such as the Scottish Child Payment.

The Scottish Government will also retain more control of the implementation timetable if the mitigation payments are delivered by Social Security Scotland, rather than by DWP, as implementation would not depend purely on being accommodated within UK-wide parliamentary processes and UK delivery mechanisms. Delivery through Social Security Scotland will however still depend on engagement with DWP to provide the data and pass any necessary legislation in Westminster.

The knowledge and experience built up by the Social Security Programme and Social Security Scotland can be utilised, in order to build the necessary systems and administer the payments. Social Security Scotland is committed to putting clients first, and the Scottish Government wants to make sure that, as far as possible, its approach gets money into peoples’ pockets quickly and easily, while minimising any unnecessary administrative burden.