Bringing Hope, Building Futures: Tackling child poverty delivery plan 2026-2031 – annex 5: Cumulative Impact Assessment

7. Methodology

7.1 Cumulative impact assessment

The policy package modelled in the CIA includes the following policies: Free School Meals; School Clothing Grant; Council Tax Reduction (including water and sewerage discount); Discretionary Housing Payments (bedroom tax and benefit cap mitigation); Scottish Carer Supplement; Best Start Grant; Best Start Foods; Scottish Child Payment; and employability services. The mitigation of the two-child limit has been removed as this policy has been implemented at a UK level. The methodology underpinning the CIA, which is based on the microsimulation model UKMOD, has been detailed in the original publication and subsequent updates.

The analysis of the impact of employability support has been updated in the CIA. The numbers of parents modelled to experience outcomes are based on the policy supporting up to an estimated 69,000 parents between 2022/23 and 2029/30, with up to 52,500 reached whilst out-of-work and around 17,000 reached in-work at point of access to No One Left Behind support over the period. This update is based on anticipated financial profiles over the period, analysis of financial information related to No One Left Behind, and No One Left Behind statistics on the employment status of parents when starting to receive support through No One Left Behind.^[15] A scenario-based approach is used to estimate potential sustained outcomes, in light of the ex-ante nature of the analysis. Conversion rates from reach to sustained outcomes for out-of-work participants have been updated from those used in the second Tackling Child Poverty Delivery Plan, Best Start Bright Futures, in light of further data for parental participants in Fair Start Scotland becoming available, covering people who started receiving support before March 2023.^[16] Scenarios have been developed based on conversion rates within the 10%-30% range observed for Fair Start Scotland within this period, with a conversion rate of 22% used to estimate the central inputs into the CIA.

Assumptions on time lags between support and outcomes, and on an attrition rate for out of work outcomes, remain unchanged. These are assumptions, and the rate at which the outcomes are achieved, or the period over which they are realised, may differ from this analysis and be influenced by external economic and labour market conditions.

The analysis presented in the second Tackling Child Poverty Delivery Plan, Best Start Bright Futures, applied increases to conversion rates to reflect possible improvements over observed and implied conversion rates for out-of-work and in-work support. This approach is not used within the central inputs to the CIA, but is instead reflected in the assumptions used in the indicative modelling in Section 5.

7.2 Unrepresented policies scenarios

The assumptions outlined in Section 5 are presented below. As noted these are assumptions that aim to indicate a possible range in impacts from policies which are not currently included in the model due to the lack of robust evidence.

7.2.1 Employability Impacts

Table 10 below shows the increased employment assumptions used in each scenario. Two different employability impacts are assumed in the scenarios: an increase in employment and pay for parents in poverty due to targeted support, and an increase in employment rates for mothers due to the increase in funded early learning and childcare hours.

The number of parents in poverty moved into work or seeing their pay increase is anchored against the estimates used in the CIA model for employability services. The wrap around support provided by the unrepresented policies is assumed to have a complimentary effect on the success rate of achieving positive work outcomes for parents supported by employability services. As such a 4 percentage point increase in the success rate for participants achieving a sustained outcome has been assumed for Scenario B, which has been halved to 2 percentage points for Scenario A.

The number of mothers moving into work is anchored using the forthcoming publication Expansion of Funded Early Learning and Childcare to 1140 hours: 2018-2025 National Outcomes Evaluation Report (ELC evaluation report). The findings from the ELC evaluation report have not been used in the main CIA report due to the lack of confidence in the direct contribution from the programme against wider economic shifts post-Covid-19, with the results instead presented in these indicative scenarios to show a possible range of impact.

As the Early Learning and Childcare (ELC) increase was implemented from August 2021 onwards, with employment impacts only being observed for mothers leaving after at least a year of childcare, the 2021-22 year used in the input data may be under-representing the labour market impacts seen in the evaluation. To note, this addition is not intended to capture the full employment effect of ELC, only that which may be unrepresented in one of the sample years used. To estimate the potential impact from the expansion of ELC, a 4 percentage point increase in full-time work for mothers of children leaving ELC was assumed for Scenario A, rising to 8 percentage points for Scenario B. However, this increase is assumed to come from both a shift into part-time work by those in lower income households, and a shift into full-time work for those in higher earning households. This is to reflect the uneven take-up of childcare seen across the Scottish Index of Multiple Deprivation (SIMD) areas in the latest Scottish Household Survey.

In 2021 the FRS data estimates there were 107,000 mothers of children aged 4-5 in Scotland, with 8% being around 8,500 mothers. As the sample uses a 3 year pooled set, all 2021 weights are divided by 3 which would give us 2,800 mothers in our sample. To achieve the 8 percentage point shift into full-time work, while part-time work remained unchanged, the movement was split into two parts. First, 2,800 mothers of children aged 4-5 who were in households above the median income were moved from part-time work to full time work. For this calculation part-time was assumed to be anyone below 30 hours, full-time was assumed to be 35 hours, and the wage increase was either based on their previous hourly wage, or the minimum wage in 2021 if they were completely self-employed. Following this, 2,800 mothers of children aged 4-5 who were in households below the median income were moved from out of work into part-time work. For this calculation 20 hours of part-time work was assumed with the wage provided being the minimum wage in 2021. Mothers are chosen to move into part-time or full-time work using the same logit regression to predict employment status as used for the employability impacts, which is described in the 2022 CIA methodology.

While these figures are anchored against other evidence this is only to create plausible scenarios, but they are still based on assumptions.

Table 9: Employment assumptions used in each scenario.

Scenario A - Employability Support - Parents in poverty moved into full-time work

A 2 percentage point increase in sustained outcomes among participants in employability support.

Scenario A - Early Learning and Childcare - Number of mothers moved into full-time work

1,400 mothers in households above the median income moved into full-time work. 1,400 mothers in households below the median income moved into part-time work.

Scenario B - Employability Support - Parents in poverty moved into full-time work

A 4 percentage point increase in sustained outcomes among participants in employability support.

Scenario B - Early Learning and Childcare - Number of mothers moved into full-time work

2,800 mothers in households above the median income moved into full-time work. 2,800 mothers in households below the median income moved into part-time work.

Note: Scenario A & B represent the assumptions used in Section 4, indicating the impact of unrepresented policies.

7.2.2 Increased benefit take-up impacts

Table 10 below shows the take-up estimates provided in UKMOD, along with their updated rate for each scenario.

Scenarios A & B adjust take-up estimates for most modelled benefits, due to the policies person centred focused which are not specific to any one benefit. Take-up estimations for those of pension age were not adjusted as these are less often the target demographic for child poverty policies. Additionally, Free School Meal take-up estimates were not changed for Scenarios A & B, as the figures reflect the number of free school meals taken by free school meal registered pupils.^[17] This suggests that changes in these rates are due to meal choices and student preferences rather than awareness of the benefit. To note, the take-up rate used assumes a random distribution of persons who do not take-up benefits.

As no evidence on the change on take-up rates from wider policies is available, arbitrary step changes are presented. For example, if a benefit take-up rate was 80%, then increasing benefit take-up by 25% of the difference between the current take-up rate and the maximum take-up rate (5 percentage points) would result in a new take-up rate of 85%.

Note: Universal Credit does not have its own estimated take-up rate within UKMOD. Instead UKMOD utilises the take-up rates of legacy benefits for respective elements of Universal Credit.

7.2.3 Child poverty policies not currently modelled

Table 11: Examples of Scottish government policies with likely child poverty impacts not currently included in the model.

Policy

Whole Family Support policies, including Fairer Futures Partnerships

Potential Impact

Both employability and increased benefit take-up

Policy

Third Sector Delivery Fund

Potential Impact

Both employability and increased benefit take-up

Policy

Parental Employability and Financial Support campaign

Potential Impact

Both employability and increased benefit take-up

Policy

Childcare support such as ELC, breakfast clubs and school age childcare

Potential Impact

Employability

Policy

Transport to Employment offer

Potential Impact

Employability

Policy

Skills offers, including Colleges RISE, Flexible Workforce Development Fund and Training Access Fund

Potential Impact

Employability

Policy

Affordable Housing Supply Programme

Potential Impact

Housing costs

Policy

Data sharing programmes

Potential Impact

Increased benefit take-up

Policy

Various benefit take-up activities

Potential Impact

Increased benefit take-up

Policy

Invest in welfare, income maximisation and debt advice

Potential Impact

Increased benefit take-up

Note: This is not an exhaustive list nor does this cover all the expected policy impact, but rather presents a selection of policies with potential near term impacts that could be seen in the model. Additionally, housing costs have not been modelled in Section 5 due to the interactions with Local Housing Allowance and the complexity of assigning outcomes to families.

7.3 Welfare reform

7.3.1 The benefit cap

Our analysis of the benefit cap is based on official DWP data, available from the Stat-Xplore platform. Note that negligible figures are suppressed in the data and therefore assumed to be zero in this analysis.

Our estimate for the increase in the number of households affected by the cap as a result of the removal of the two-child limit is also based on DWP data. We inspected the distribution of capped amounts for households with three or more children, and projected this distribution to estimate how many households were close to the cap threshold, and by what amount. We then made an assumption about what proportion of these households were affected by the two-child limit based on current capped households to form a projection of the number who would be newly capped.

We also examined the extent to which DHPs are constrained in their use to mitigate the benefit cap. This would mean that the capped amount is higher than a household’s housing costs. We do not have robust evidence indicating to what extent this is the case, but given the small number of households that have no housing entitlement from benefits and are nevertheless capped (from DWP data extracted from stat-xplore), and by a small number of households in our FRS sample where this could be the case, we consider it highly likely that for at least some households DHPs cannot be used to fully mitigate the benefit cap.

7.3.2 The two-child limit

The estimate for at-source removal of the two-child limit takes into account interactions within the benefit system, notably by excluding additional support from removing the two-child limit that would be withheld by the benefit cap, and the Scottish Government’s subsequent mitigation of the benefit cap. It also takes into account the impact on eligibility – that is, it includes additional support that would be received by households that become eligible for UC or CTC as a result of the two-child limit being removed – including the increase in support that households may consequently receive through passported benefits.

Note that UKMOD does not model other exceptions to the two-child limit, which can be applied in the event of multiple births, non-parental care, adoption, or non-consensual conception. Nor does it distinguish between new and existing claims. Only the former are technically subject to the limit, but will comprise an increasingly large proportion of the caseload over time. A final caveat is that the model does not incorporate demographic change, meaning that a static population is assumed for years that are projected forwards from the input data.