Scottish Child Payment: Business and Regulatory Impact Assessment

Purpose and intended effect

The Scottish Child Payment (SCP) is a new benefit being introduced by the Scottish Government to tackle child poverty for low income families in receipt of reserved benefits. It will pay the equivalent of £10 a week per child every four weeks in arrears to families with no cap on the number of eligible children a family can claim for. Early payments of the SCP will be made to families with children under the age of 6 – recognising that, of all children in poverty, almost 60% live in a household where the youngest child is aged under 6^[1]. The early years are key to improving long term outcomes with socioeconomic differences in early childhood having implications in later decades^[2]. This is ahead of the payment being rolled out to children under 16. Recognising the need to get money to families quickly, the SCP will be introduced through secondary legislation, using the powers to top up a reserved benefit contained in Section 79 of the Social Security (Scotland) Act 2018.

This impact assessment focusses on the early payment being made to children under 6, and a further set of impact assessments and regulations will be in place for the launch of the full payment to under 16s.

Background

The Child Poverty (Scotland) Act 2017^[3] sets ambitious interim (2023) and final (2030) targets for the reduction of child poverty, Scottish Ministers are required to publish child poverty delivery plans at regular intervals, with annual reports to measure progress. The first Tackling Child Poverty Delivery Plan (TCPDP)^[4] was published in March 2018 (and will run until 2022), setting out the range of policies and proposals to help us make strong progress towards the targets. Recognising the key role of social security, the delivery plan committed the Scottish Government to work towards the introduction of an 'income supplement' – a new benefit to support families with children.

Since the publication of the delivery plan, significant work has been undertaken to develop the income supplement, now called the SCP. The SCP will pay £10 a week to low income families with eligible children who are in receipt of reserved benefits – Universal Credit, the legacy benefits it replaces, and Pension Credit. It will be a four weekly payment, and there will be no cap on the number of eligible children a family may claim for. The payment will be delivered through an application based process by Social Security Scotland.

As a result of COVID-19, the Scottish Fiscal Commission (SFC) expect there to be more eligible children than previously projected due to the increase in numbers of families applying for qualifying benefits, such as Universal Credit. As of 9 July 2020 there were around 470,000 people on Universal Credit. This compares to 243,000 people claiming Universal Credit in January 2020, meaning that the caseload has almost doubled in that time^[5]. The SFC have published a new set of forecasts (including numbers eligible and expenditure) to accompany the SCP regulations, these can be found here. As a demand led benefit, the SG guarantees that all those who are eligible and apply for the payment will receive their entitlement.

Further information on the policy and delivery detail, including three position papers published by the Scottish Government following the announcement, is available on the Scottish Government's website^[6].

Objectives of the Scottish Chid Payment

A range of policy options were considered for delivery of the income supplement, these are set out in the Analysis of Options for the Income Supplement^[7] report. It was determined that the preferred option should meet the following policy objectives:

• Achieve a minimum reduction in child poverty (relative, after housing costs) of 3 percentage points when the SCP is fully rolled out.
• Reduce the depth of poverty and provide support to those who need it most. This ensures we support people across the lower deciles of income distribution, rather than simply getting those closest to the poverty line over the threshold.
• Help to support a sustainable and lasting reduction in poverty for families with children. This ensures outcomes beyond redistribution, supporting people to access wider services and support should they want and require it – for example, fast-tracked access to a financial health check or employment support.

Rationale for Government intervention

As identified in the TCPDP, there is a strong rationale for intervention to tackle child poverty and improve children's outcomes. It is estimated that 24% of Scotland's children (230,000 children each year) were living in relative poverty after housing costs in 2016-19^[8]. Prior to the outbreak of COVID-19 it was predicted that if no further action were taken to tackle child poverty one in three children in Scotland will grow up in poverty by 2030, damaging society and the economy^[9]. Whilst the full impacts of the pandemic are not yet known, it is likely to have a negative impact on child poverty levels. Children in low income households tend to experience a range of disadvantages including lower educational attainment and poorer health which will shape their future life. Poverty can have lasting impacts long into adulthood such as increased risk of homelessness, lower earning potential and greater likelihood of limiting illness. The growing evidence in developed economies suggests that gaining additional income has positive causal effects on health, behavioural development and educational attainment for children in households at the lower end of income distribution^[10].

The TCPDP identifies three main drivers of child poverty reduction: increasing incomes from work and earnings; reducing household costs; and maximising incomes from social security and benefits in kind^[11]. As a result, social security was identified as one of the most immediate ways to boost family incomes utilising the new social security powers under the Social Security (Scotland) Act 2018^[12].The COVID-19 pandemic has only increased the importance of using the devolved social security powers to tackle child poverty, with early data showing an increased reliance on the social security system.

The SCP policy is supportive of the National Outcomes in the Scottish Government's National Performance Framework^[13].

The provision of financial resources to low income families with children under 6 contributes to the priority of inclusive growth set out in Scotland's Economic Strategy^[15], in particular the tackling of inequality and promoting equality. The SCP is an investment in children ensuring they grow up to be well-skilled, healthy and resilient.