Universal credit overhaul could end child poverty in Scotland

10 May 19

Child poverty remains one of Scotland’s most stubborn public policy conundrums – but new research suggests the key may lie in an overhaul of the universal credit system, which would target the country’s most deprived families.

Analysis carried out for the Scottish Parliament has found that removal of the two-child limit, an increase of the child element to £417 a month and the reintroduction of a family element of £545 a year would cut relative poverty by five percentage points by 2023-24.

The changes, at an estimated annual cost of £0.8bn, would be a more effective response to child poverty than spending an equivalent sum on either a substantial increase in child benefit or reducing to zero the starter rate of income tax, according to the Institute for Economic and Social Research at the University of Essex.

“Reducing the starter rate of income tax results in an increase in relative child poverty and has no impact on absolute child poverty, while increasing child benefit… has a positive impact on child poverty, but less effective than the changes to universal credit modelled,” it said.

Welcoming the findings, Emma Congreve, senior economist at the Joseph Rowntree Foundation, in Scotland, said the report showed how a significant financial commitment to tackling child poverty could make a big difference. “The Scottish Government should be ambitious in its plans to invest in Scotland’s children using the social security powers it has,” she said.

According to the latest figures, up to one in four children in Scotland live in poverty. Without action, that could reach one in three by 2030. Even if it implemented changes to universal credit, the Scottish Government will fall short of its ambitious interim target of reducing relative child poverty to under 18% by 2023-24.

Last year, ministers published a four-year child poverty delivery plan, setting out actions including development of an income supplement to provide extra support for low-income families.

Although it is yet to determine how the scheme would work, the Scottish Government has said additional resources will be targeted towards those in greatest need while minimising bureaucracy. This could mean asking the Department for Work and Pensions to top up universal credit for those who qualify.

A briefing last month from the Resolution Foundation said the supplement could play an important role, with the potential to help reduce, or at least limit rises in, child poverty. However, its success would be conditional on the supplement being sufficiently ambitious and adequately resourced.

The foundation blamed the expected rise in child poverty on UK-wide policies, in particular the four-year freeze on benefit values. It said more radical options to support low-income families would have to be considered.

“While it is Westminster rather than Holyrood that explains the current direction of travel, the Scottish Government is not powerless,” said senior economic analyst Adam Corlett.

“The decisions it takes in the coming years have the potential to make a difference to outcomes for children.”

Communities secretary Aileen Campbell said the Scottish Government was committed to the introduction of the income supplement, which will be backed by a £50m fund to tackle child poverty. It is already investing £125m a year to mitigate the impact of welfare reforms on those on low incomes, she added.

“Tackling – and ultimately eradicating – child poverty in Scotland is one of our main priorities,” she said. “We are currently exploring options to reach the greatest number of children in poverty, ensuring we top up incomes sufficiently to lift those households out of poverty.”

The Scottish Government’s first annual child poverty progress report will be published in June.

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