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

Executive Summary

Introduction

In December 2024, the Scottish Government set out plans to mitigate the current two-child limit cap on the ‘child element’ of Universal Credit payments for families in Scotland. The proposal is for a ‘mitigation payment’ to be made, equal to the Universal Credit child element for each third and subsequent child in Scotland impacted by the two-child cap (currently £292.81 each month).

In order to develop a strong evidence base to help inform the Scottish Government’s approach to drafting the necessary legislation needed to provide such a payment, a public consultation was conducted to seek feedback on proposals for how the mitigation payments may be implemented. The consultation was open for eight weeks between February and April 2025. Responses were accepted via Citizen Space and via email or post, and one workshop event was conducted with individuals with lived experience of the two-child limit cap. The same consultation questions were asked of those who submitted written responses and workshop attendees, with similar feedback being provided across these two participation methods.

In total, 267 written responses were received. Most came from individuals (84%, n=225), compared to organisations (16%, n=42). A range of different organisational sectors were represented in the responses, including third sector organisations, local authorities, membership bodies, health/mental health bodies, and national representative bodies. In addition, 10 individuals attended the workshop event, along with one participant supporter from a third sector organisation.

As individuals responded in greater numbers than organisations, their views tend to dominate the closed question feedback. However, their qualitative responses were typically much shorter and focused on opposition to the introduction of mitigation payments generally rather than on the specific proposals at each question. Meanwhile organisations provided much longer and more detailed qualitative responses, meaning greater balance and understanding was provided between the opposing arguments.

Q1. Social Security Scotland should Deliver Mitigation Payments

Most respondents (73%, n=190) disagreed that Social Security Scotland (SSS) should deliver the mitigation payments, compared to 24% (n=62) who agreed. However, opinions were split between individuals and organisations, with 84% (n=189) of individuals disagreeing, and 86% (n=30) of organisations agreeing.

Those who disagreed (mostly individuals) did so because they generally supported the current two-child limit on benefits payments and were against the introduction of mitigation payments. They argued that parents should be responsible for their children and held accountable for decisions around family size, and that they should not be subsidised by the taxpayer. There was also a concern that mitigation payments could encourage greater reliance and dependency on benefits and engender worklessness. Similarly, it was suggested that the payment might encourage more people to have large families. Further, these respondents argued that there were a range of other priority areas that should be targeted for public spending, such as tackling low wages and unemployment, education, healthcare, housing, and other public services. A few disagreed because they felt the Department for Work and Pensions (DWP) should make the payments, either because they already held all the required information, or because the issues caused by the two-child limit was the responsibility of the UK Government, and that Scottish Government mitigation payments would absolve them of this.

Those who agreed (most of the organisations, some individuals, and most of the workshop attendees) mainly indicated either support for the mitigation payments in general, or support for SSS to make the payments rather than any other body. These respondents argued at length about the negative impacts of the two-child limit, and they acknowledged that mitigation payments could help boost the effectiveness of other payments, that the approach aligned with government responsibilities as well as other priorities, and that the payments would support vulnerable children and families. These respondents were also supportive of the payments being made by SSS, indicating that this would be the fastest, most straightforward, and most effective way to set up the system. Many noted that SSS already have the required infrastructure in place due to administering the Scottish Child Payment. Conversely, it was noted that the alternative option of local authorities making payments in an equivalent way to Discretionary Housing Payments (DHPs) would involve greater limitations on eligibility, and respondents were concerned that local authorities would not have the resources to take on this responsibility.

Some concerns and caveats to support were raised, however. Respondents were keen to ensure that funding the mitigation payments was not done at the expense of other public services or initiatives to tackle poverty. Fast and effective data sharing would also be needed between DWP and SSS, and the application process for mitigation payments should be as easy as possible. Clarity was sought over how the mitigation payments would interact with current DWP exceptions, and in particular, the ‘rape clause’ which several respondents were keen to see removed.

Q2. Use of s79 Powers to Top-Up Universal Credit

The Scottish Government proposed using the powers at section 79 (s79) of the Social Security (Scotland) Act 2018, which allows top-up of a UK qualifying benefit, to introduce the mitigation payments.

Again, most respondents (71%, n=185) disagreed with this proposal, compared to 22% (n=56) who agreed with it. Consistent with the results above, however, feedback was polarised, with 82% (n=184) of individuals disagreeing and 88% (n=30) of organisations agreeing.

Disagreement at this question (coming mostly from individuals) was almost entirely driven by a general opposition to the introduction of mitigation payments themselves rather than any specific views about how the payments should be made. Again, many felt that the two-child limit was appropriate and should be retained, with the arguments made against the introduction of mitigation payments provided at Q1 being reiterated. Only a few new issues were raised, including uncertainty about whether the scheme was affordable and doubts that it would be effective in tackling child poverty. Anti-SNP or anti-Scottish Government sentiments were also expressed.

Those who agreed (including most of the organisations and some individuals) did so because they felt this would be the fastest and most straightforward way to set up and administer the payments, ensuring money reached families as quickly as possible. Respondents also welcomed the possibility that the mitigation payments could encourage greater uptake of benefit entitlements. A series of factors which respondents felt were important in supporting the success of the scheme were also outlined in response to this question. These included ensuring that the application process was as easy as possible for families (with a preference for automatic eligibility if possible), the provision of clear and effective communication and awareness raising about the payments, and effective data sharing with DWP.

Again, respondents who were generally supportive of the proposal also outlined a range of concerns and caveats. The most significant issue, discussed, both here and throughout the consultation feedback, was the gaps inherent in the system if using s79 powers. It was stressed that many families experiencing poverty would not be eligible for the mitigation payments because they cannot claim Universal Credit, which in some cases was as a direct result of the two-child limit on the income threshold (i.e. if this policy was dropped families would be eligible). Several respondents (including organisations and workshop attendees) urged the Scottish Government to consider alternative or additional mechanisms to capture these families and ensure they are not excluded, even if this requires a longer lead in time for such families. Again, respondents sought clarity over how the mitigation payments would interact with current exceptions, while a few urged consideration of ‘cliff-edges’ that families face in balancing work-based income against benefits payments.

Workshop attendees’ views were largely mixed regarding the use of s79 powers to establish the payments. Some supported this in order to get the system set up and payments introduced as quickly as possible. However, a few supported taking the time to establish a bespoke, but more inclusive scheme to ensure no families were missed. The gaps in eligibility were again a main concern for most of the workshop attendees.

Q3. Disregarding Mitigation Payments as Income

The Scottish Government proposed that the mitigation payments should be disregarded by the UK Government as income for benefit and tax calculations, and that the benefit cap should be adjusted to accommodate them.

Slightly less than two thirds (61.5%, n=160) disagreed with this proposal, compared to 31.5% (n=82) that agreed. Again, opposing views were largely provided between individuals and organisations, with 71% (n=159) of individuals disagreeing with this, and 92% (n=34) of organisations agreeing.

Again, those who disagreed (mainly individuals) tended to reiterate their objections outlined at earlier questions. Those who gave new substantive responses either argued that all pay/benefits should be treated as income and properly considered in means testing and other assessments, and/or that there were already too few people paying taxes and so disregarding this benefit as income would compound issues around tax generation and input into the system. These respondents highlighted that all income received from work was taxable, as were pensions, therefore it was fairer to ensure income from benefits was treated in the same way. Ultimately, they argued that all income should be taxable, regardless of the source.

Those who agreed that the payments should be disregarded as income (including most of the organisations, some individuals, and all workshop attendees) provided a range of reasons. Mostly, respondents argued that not disregarding the payments would result in deductions being made from other benefits (such as Universal Credit itself, as well as potentially other means tested support), thus making the payments less helpful for families in tackling poverty and ultimately defeating their purpose. It was also argued that not disregarding the payments would result in the transfer of funds from Scotland to England as DWP would reduce Universal Credit payments. It was also noted that disregarding the payment as income would be consistent with other existing benefits (such as the Scottish Child Payment and DHP), and therefore, the mitigation payments should be consistent with this. Disregarding the payments would provide the greatest support for families and be most impactful in tackling poverty, it was felt, and it would reduce complexity for frontline staff and advice services who support families.

A few strategic and practical considerations were also outlined by respondents who supported this proposal. These included the need for clear communication related to the requirement to disregard the payment as income - this was necessary for the debt sector as well as local authorities in considering the impact on the Council Tax Reduction scheme. Clarity and accuracy would also be needed in the interaction between the mitigation payments and exceptions.

Q4. Potential Impacts

While this question sought to focus on the possible impacts for different groups of people, communities and businesses, and information that might be relevant for the range of Impact Assessments to be carried out on the policy, most respondents discussed the impacts in a much more general sense. Overall, individuals again focused on their reasons for opposing removal of the two-child limit and introduction of mitigation payments, while organisations reiterated their general support for the proposals and sought clarity or reassurance over how the policy would be implemented and would operate in practice.

Many discussed the impacts of the two-child limit. They argued that the policy perpetuated cycles of poverty and often disproportionately impacted certain groups, particularly, women, minority ethnic families, certain religions or faiths, refugees, and young parents. The ‘rape clause’ was also seen as particularly inappropriate and as having a significant negative impact on women and their children.

Others did consider the impacts of the mitigation payments, with both positive and potentially negative impacts outlined. Positive impacts (mostly identified by organisations), included that the payments would provide support for families in poverty, resulting in immediate as well as longer-term benefits for them and the wider community. It was noted that this would help families to afford food, heating, transport, clothing, and tackle a range of educational issues such as hunger at school, attendance, concentration, etc. Over the longer term, the payments would help to tackle the effects of poverty, including improved outcomes in education, employment, physical and mental health, etc. It was also felt that the payments would provide support for specific groups, such as women, but that a wide range of demographic characteristics and issues needed to be considered within the impact assessments. These included: women/gender issues; age (in relation to children and young parents); ethnicity, and particularly BME groups; families with certain religious beliefs/faiths; care experience (including care experienced parents, parents of care experienced children, and kinship households); refugees, asylum seekers and those with no recourse to public funds; carers; and people with disabilities.

Again, respondents took the opportunity to highlight concerns about the impact of the scheme. They flagged the potential for gaps in eligibility and urged the Scottish Government to find a mechanism to address this; questioned how the interactions with exceptions would be managed; and stressed the need to consider ‘cliff-edges’ which families might experience. Similarly, concerns around the impact that the mitigation payments may have on wider public finances, on other initiatives and public services, and on the taxpayer were reiterated. Other perceived negative impacts were also reiterated (mostly by individuals), including that the payments may encourage worklessness, promote reliance on benefits, and stop parents from tackling the root-cause of their financial problems. Several individuals were also concerned that the payments would result in an increase in the number of larger families, and could impact migration (with large families moving to Scotland to collect the benefit and working taxpayers leaving if the tax burden increases).

Several other general comments were also provided at this section, which largely repeated feedback outlined above. However, there were two key issues of note. The first included the desire from organisations to maintain pressure on the UK Government to scrap the two-child limit policy entirely, with calls for the Scottish Government to continue being pro-active in this area. The second issue, raised by individuals and workshop attendees, was caution that the Scottish Government should be prepared to tackle negative publicity which was likely to surround the scheme if it goes ahead.

Conclusion

Overall, responses to the consultation were highly polarised. Individuals responded in higher numbers and were generally more opposed to the introduction of mitigation payments, as well as each of the specific proposals in the consultation document. Although organisations and workshop attendees participated in lower numbers, they were generally much more supportive of the mitigation payments and the specific proposals around how they could be implemented.

A number of recurring concerns were highlighted throughout the feedback, however. These included the need to address potential eligibility gaps, providing clarity around how the mitigation payments and exceptions would work in practice, considering ‘cliff-edges’, ensuring there are no negative impacts on other initiatives or public services, and that continued pressure should be put on the UK Government to drop the two-child limit policy.

The consultation provided useful feedback on the proposals for the mitigation payments, which the Scottish Government should take into account when finalising their plans and any legislation required to take forward any final policy.