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

Impact Assessments

An Impact Assessment is an evidence-based process used by the Scottish Government during the development of proposals to consider the possible effects and outcomes on people, businesses and communities. A range of Impact Assessments are undertaken to consider the impacts proposals will have on different groups of people, different communities and different businesses.

Undertaking impact assessments helps to address any unintended consequences at an early stage and develop proposals to mitigate any potential negative impacts.

Any legislation for mitigating the two-child cap in Scotland will be subject to the full suite of impact assessments. The Scottish Government wants to make sure it captures as much information as possible, including through this consultation process and associated events, and using any existing research and evidence.

Equalities Impact Assessment

In developing its plans to mitigate the two-child cap the Scottish Government has looked at equalities information to identify where changes could affect some groups more than others, either positively or negatively, and where there are opportunities to make changes which would improve equality. It paid particular attention to groups of people with protected characteristics as identified in the Equality Act 2010. The protected characteristics covered are age, disability, gender reassignment, pregnancy or maternity, race, sex, sexual orientation and religion and belief.

Commitment to equalities is central to the Scottish Government’s approach to delivering new benefits in Scotland. The Scottish social security principles state that social security is a human right and essential to the realisation of other human rights. As indicated by the high prevalence of women claiming the five family payments – a range of payments for low-income families delivered by Social Security Scotland, including SCP – poverty and gender are inextricably linked.

The first Tackling Child Poverty Delivery Plan highlighted that women are more likely than men to be in poverty, more likely to access the social security system and more likely to be lone parents^[11]. Analysis of the latest client survey data for the five family payments shows that 82% of respondents identified as women^[12].

The people likely to benefit from mitigation of the two-child cap will be people in receipt of Universal Credit who have more than two children in their household and who do not have any exceptions to the two-child cap applied by DWP.

From DWP data it is known that in August 2024 (latest available data) there were 30,535 families in Scotland that had 3 or more children with their youngest being aged 7 or younger and therefore likely to be affected by the two-child cap^[13]. Of these families 59% (18,046) were single parent families, 29% (8,844) have a disabled child and 16% (4,759) have an adult with limited capacity for work/related activity^[14].

The Scottish Government is aware that limited data is available on the equalities impacts of the two-child cap. The Scottish Government would therefore like to hear suggestions about the potential equalities impacts of the proposed approach, and would like to receive any available evidence in support of those suggestions.

Childs Rights and Wellbeing Impact Assessment

The Scottish Government is committed to ensuring that children's rights, as determined by the United Nations Convention on Rights of the Child, are recognised, respected and promoted.

In order to facilitate this, new legal requirements to extend and protect children’s rights came into effect on 16 July 2024, under the United Nations Convention on the Rights of the Child (Incorporation) (Scotland) Act 2024 – also known as the UNCRC Act. The Act places duties on all Scottish Ministers to take steps to give better or further effect to the rights of children.

A Child Rights and Wellbeing Impact Assessment helps ensure that policies and measures protect and promote the wellbeing of children and young people. A child is defined as anyone under the age of 18 as per Article 1 of the United Nations Convention on the Rights of the Child.

Mitigating the two-child cap will have a significant positive impact on children in Scotland. The mitigation is forecast to benefit around 42,000 children in Scotland, according to the SFC’s forecasts. This is expected to have a knock-on effect in reducing the number of children in poverty in Scotland, with CPAG estimating around 15,000 children could be lifted out of poverty as a result.

The Scottish Government considers that this interacts with the following UNCRC articles:

• Article 2 - Non-discrimination. Children should not be discriminated against in the enjoyment of their rights. No child should be discriminated against because of the situation or status of their parent/carer(s)
• Article 3 - Best interests of the child. Every decision and action taken relating to a child must be in their best interests. Governments must take all appropriate legislative and administrative measures to ensure that children have the protection and care necessary for their wellbeing – and that the institutions, services and facilities responsible for their care and protection conform with established standards.
• Article 4 - Protection of rights. Governments should undertake all appropriate legislative, administrative, and other measures for the implementation of the rights recognised in the UNCRC.
• Article 18 – Parents or legal guardians to have primary responsibility for the upbringing of the child. Parents, or legal guardians, have the primary responsibility for the upbringing and development of the child, and should always consider what is best for the child. Governments must provide appropriate assistance to parents and carers to help them.
• Article 23 – Children with disabilities. A disabled child has the right to enjoy a full and decent life in conditions which ensure dignity, promote self-reliance and facilitate the child’s active participation in the community. Governments must recognise the right of the disabled child to special care, and ensure the disabled child has effective access to education, training, health care, rehabilitation, preparation for employment, and recreational opportunities.
• Article 26 – Social security. Every child has a right to benefit from social security, taking into account the resources and circumstances of those who have responsibility for the child.
• Article 27 – Adequate standard of living. Every child has a right to a standard of living adequate to their physical, mental and social development. Governments should take measures to assist parents and carers who cannot afford to provide this, and in particular to provide assistance and support with food, clothing and housing.

No negative impacts on children’s rights have been identified at this stage of the policy development, however the development is ongoing, and the Scottish Government will continue to consider as the exact detail of the policy is refined and it engages further with relevant stakeholders and those affected by the policy.

Business and Regulatory Impact Assessment

A Business and Regulatory Impact Assessment analyses the potential costs, benefits and risks of policy changes that may impact on the public, private or third sector. The aim is to use evidence to identify the proposal which best meets the objectives while keeping costs and burdens to a minimum.

The Scottish Government is considering the potential impact on the public sector, third sector and businesses of creating and delivering a payment to mitigate the two-child cap. It recognises that there is likely to be a small impact on these sectors as a result of this proposal.

The Scottish Government considers there may be some impacts on the public sector, including the DWP, HMRC and Social Security Scotland, due to the potential introduction of additional administrative burdens due to the development of systems needed to deliver the payment. There may also be the need for training of staff in these organisations in order to ensure they are aware of the mitigation and able to carry out any tasks necessary to deliver this.

It should be noted that the policy is still at the early stages of development and as such the exact delivery mechanism has still to be agreed, therefore the impacts to each of these organisations may vary dependent on the final agreed solution. The Scottish Government does not expect there to be any impacts on local authorities.

It is possible there may be a small impact on welfare rights organisations once more information around the mitigation of the two-child cap is made public, as individuals may seek advice on their entitlement. There may also be an additional impact on these Welfare Rights organisations, in upskilling staff about the new payment. The Scottish Government intends to utilise appropriate communications to inform individuals about entitlement and delivery, which would aim to reduce the impact on welfare rights organisations and on Social Security Scotland via incoming queries.

The payment is targeted at low income families and larger families living in poverty, which includes marginalised and seldom heard groups. It is envisioned that giving these families additional funds, which can be spent on any number of essential or non-essential items, could result in a small positive impact for businesses.

The payment may result in more money being spent in local economies thereby creating a more stable environment for businesses.

As the options for delivery are considered and developed the Scottish Government will pay close attention to the potential burdens, costs and benefits to these businesses. It aims to work with stakeholders to better understand any potential impacts on their businesses and to ensure that, in advance of future changes, it provides sufficient information in order to reduce any potential impacts.

The Scottish Government does not foresee the proposals having any impact on the legal aid fund, as it intends to work to ensure that the payment is disregarded as income when calculating assistance to legal aid.

Fairer Scotland Duty Impact Assessment

The Fairer Scotland duty places a legal responsibility on particular public bodies in Scotland to actively consider how they can reduce inequalities of outcome caused by socio-economic disadvantage, when making strategic decisions.

The Scottish Government is considering how the proposals set out in this paper could help to reduce the challenges that people can face as a result of socio-economic disadvantage – which includes having a low income, low wealth, living in an area of deprivation, or having a background which gives them fewer advantages.

The Scottish Government expects that the policy to mitigate the two-chid cap will have positive impacts on reducing child poverty in Scotland. The Tackling Child Poverty Delivery Plan^[15] identifies three main drivers of poverty reduction: increasing income from employment, reducing costs of living, and increasing income from social security and benefits in kind.

The Tackling Child Poverty Delivery Plan identifies six ‘priority families’, more likely to experience poverty and are therefore more likely to require social security support: lone parents; disabled people; families with more than three children; minority ethnic groups; families with a child under one; and mothers under 25.

The SFC estimates that 42,000 children in Scotland will benefit from mitigation of the two-child cap in 2026-27. Child Poverty Action Group estimate that the policy could lift around 15,000 children out of poverty. The policy also has the potential to reduce the depth of poverty faced for many more.

As there is limited data published by the DWP on the demographics of those affected by the two-child cap, the Scottish Government is unable to assess exactly how the mitigation payment will interact with the priority groups outlined in the Tackling Child Poverty Delivery Plan. It is considering which data sources can be utilised as a proxy for this information, and how to best monitor the impact.

Consumer Duty Impact Assessment

There is expected to be a small impact on consumers as a result of mitigating the two-child cap. The payment may affect the goods and services market due to a small sub-section of the population having more money to spend.

The payment does not: affect essential services; market competitiveness; involve changes in how consumer data is used; increase opportunities for consumers to be targeted by unscrupulous suppliers; affect the information available to consumers; or affect routes for consumers to seek advice or raise complaints.

Island Communities Impact Assessment

The Scottish Government recognises the importance of considering the unique needs of our islands when developing any new policy, strategy or service that may have a significantly different effect on island communities.

Completing an Island Communities Impact Assessment helps identify any particular considerations or challenges for those living on the islands, and make sure that these perspectives are captured as part of the policymaking process.

Mitigating the two-child cap is likely to have positive impacts for families living in island communities who have lost the child element for at least one child. Although there is limited DWP data on the demographics of those affected by the two-child cap, across the Shetland Islands, Orkney Islands and Na h-Eileanan Siar, there are 240 households not in receipt of the child element for at least one child.^[16]

Increasing the rate of social security assistance available to impacted households by mitigating the two-child cap is expected to lift families out of poverty across Scotland, and this enhanced financial support could have a positive impact for island communities, where the cost of living may be considerably higher and where barriers to leaving poverty may be greater.

The Scottish Government has not identified any adverse impacts or barriers for its proposal that are specific to the islands at this stage. It will take care to consider any challenges or constraints for islanders as the proposals develops, and will take action to improve and mitigate any barriers identified, drawing from consultation findings, stakeholder engagement, and existing research and evidence.