Scottish Child Payment: where next?

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The Scottish Child Payment was introduced in February 2021 and is one of the main elements of the Scottish Government’s plans to reduce child poverty.  As part of its child poverty strategy, the Scottish Government has set targets to reduce child poverty to 18% by 2023-24 and 10% by 2030-31.  These targets are set in law through the Child Poverty (Scotland) Act 2017. Other targets are also set out in the legislation, but these specific ones relate to child poverty in relative terms, measured after housing costs.  The different measures of child poverty are explained in further detail in the Scottish Government’s Child Poverty Update.

Where are we now in terms of child poverty?

The latest estimate for 2019-20 shows that child poverty (relative, after housing costs) in Scotland was 26%, representing around 260,000 children living in poverty.  SPICe modelling suggests that this figure has fallen to 23% in 2021-22.  This fall in poverty will in part reflect the impact of changes to other benefits that have been introduced by the UK government in response to the pandemic, such as the uplift to Universal Credit.  As these uplifts are withdrawn later in the year, an increase in poverty is likely to be seen. 

Children in relative poverty in Scotland (after housing costs) and targets for reduction

Source: Scottish Government (2021) Child Poverty Update, SPICe calculations

What are the current plans for the Scottish Child Payment?

At the moment, the Scottish Child Payment is paid at a rate of £10 per week for each eligible child under the age of 6.  Eligible children are those in families who are in receipt of qualifying benefits (including Universal Credit, Working/Child Tax Credit and Income Support – see the SPICe briefing on the Scottish Child Payment for full details).

The Scottish Government plans to widen eligibility to include all children aged under 16 in qualifying families by the end of 2022, although there are currently some challenges with accessing the data to enable this roll out to happen (see SPICe briefing for further details).

In addition, all of the parties represented in the Scottish Parliament included a commitment in their manifestos to doubling the amount of the Scottish Child Payment to £20 per week.  The Scottish Government has committed to doing this by the end of the Parliamentary term (May 2026), although many MSPs, the Poverty and Inequality Commission and campaign groups have called for action to be taken immediately. The Scottish Government has committed to doing this by the end of the Parliamentary term (May 2026), although many MSPs, the Poverty and Inequality Commission and campaign groups have called for action to be taken immediately.

What difference will the proposed changes make? 

SPICe has undertaken modelling to look at the effect of various changes to the current Scottish Child Payment.  For illustrative purposes only, this modelling is undertaken for the current year (2021-22) as this reduces the number of assumptions that must be made about the future state of the economy and UK/Scottish Government decisions on other benefits.  The modelling was undertaken using UKMOD and more details on the approach can be found in the SPICe briefing.

Source: SPICe modelling using UKMOD

The modelling shows that, in 2021:

  • The Scottish Child Payment, at £10 per week for eligible children aged under 6, means child poverty in Scotland is around 1 percentage point lower than it would otherwise have been.  This equates to roughly 10,000 children being taken out of poverty.  The cost for the first full year (2021-22) is estimated at £68 million by the Scottish Fiscal Commission.
  • A doubling of the payment, to £20 per week for eligible children aged under 6 would result in a further 1 percentage point reduction in child poverty, or another 10,000 children taken out of poverty.  This would double the annual costs to an estimated £136 million (an additional £68 million over and above the existing costs).
  • Extending eligibility to under 16 year olds in qualifying families (and keeping the rate of payment at £10 per week) would also reduce child poverty by 1 percentage point, taking another 10,000 children taken out of poverty.  The additional cost over and above the costs of the existing policy are estimated at £80 million.
  • A combination of doubling the payment to £20 per week AND extending to eligible under 16 year olds would reduce child poverty to an estimated 19%.  This is 4 percentage points lower than under the current policy and would take a further 40,000 children out of poverty.  The additional cost is estimated at around £220 million.

All of the modelling has assumed an 80% take-up rate for families with children aged under 6 and 75% for those with children aged 6-15.  This is in line with the latest Scottish Fiscal Commission assumptions on take-up for when the policy is fully implemented.  This is in line with the latest Scottish Fiscal Commission assumptions on take up for when the policy is fully implemented.  Initial data suggest that take-up might be lower than this at present, but it remains to be seen if this situation will change as the payment becomes more established.  This is discussed further in the SPICe briefing.

What are the prospects for the 2023-24 interim target?

Future SPICe modelling will consider the potential path for child poverty through to 2023-24, when the interim target of 18% is due to be met.  Other organisations, such as the Joseph Rowntree Foundation and the Fraser of Allander Institute have considered various scenarios and the potential for the interim target to be met.  Both have concluded that it would require an uplift in the weekly payment per child to £40 per week to achieve the interim target (assuming roll out to under 16s as planned, and the removal of the current uplifts to Universal Credit and Working Tax Credits).  However, it is important to note that the Scottish Government has never intended that the targets will be achieved through the Scottish Child Payment alone and other measures should also work to support progress towards the target.

Another important consideration is the impact of the planned removal of the £20 per week uplift to Universal Credit (and associated uplifts to Working Tax Credits).  This will also be the subject of future SPICe modelling.

Nicola Hudson, Senior Analyst, Financial Scrutiny Unit