Does the Scottish Child Payment mean a move to a new Scottish benefits system?

November 04, 2020 – Phil Agulnik
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With applications for the new Scottish Child Payment opening on Monday 9 November it­s arrival could not be better timed.

While bringing in a new benefit during a pandemic will no doubt be a challenge for the fledgling Scottish Social Security Agency, the need for extra money is greater now than ever. Moreover, as the row over Free School Meals illustrates, there appears to be growing public support for providing more help for children in low income families.

The details of the new payment have changed little from when it was first announced, despite the pandemic. As set out in my previous blog on the Scottish Child Payment, it will be available to Scottish households with a child aged 6 or under and payments worth £10 a week per child will start in February.

Administratively the key feature is that eligibility will be ‘passported’ from entitlement to other benefits – there will not be an independent test of means. Instead the rule will be that if you qualify for Universal Credit (or Child Tax Credit for households still claiming ‘legacy’ benefits) you qualify for the Scottish Child Payment.

As a passported benefit the new payment enjoys lower administration costs than would be the case if the Scottish Social Security Agency operated a means test. However, this simplicity necessarily comes at the expense of reducing incentives to work, at least for some families.

The issue is that families who just qualify for Universal Credit will face a ‘cliff-edge’ when their earnings rise, as entitlement for the Scottish Child Payment ends when Universal Credit falls to £0.

The amount a claimant can earn before Universal Credit, and therefore the Scottish Child Payment, is extinguished varies depending on the composition of their household and the amount of rent they pay, but let’s look at an example.

A home-owning couple who have a two year old child, with one of the couple working 35 hours a week and the other working 16 hours a week (both at the minimum wage for someone over the age of 25), would qualify for around £150 Universal Credit a year.

Although a small amount, the entitlement to Universal Credit means they are also entitled to the Scottish Child Payment, worth more than three times as much over the year.

Clearly one effect of passporting entitlement in this way is that it makes it more worthwhile to claim Universal Credit, even if there is only a small entitlement. As such it should act as a spur to take-up. But the flip-side is that, if our hypothetical couple increased their work by even an hour their Universal Credit would fall to £0 and they would also lose entitlement to the Scottish Child Payment altogether.

At the moment this sort of effect is inevitable. As the Scottish Social Security Agency does not have its own means test there is little option other than to passport the Scottish Child Payment from entitlement to Universal Credit.

While the level of the Scottish Child Payment remains low the cliff-edge created is relatively small and unlikely to have much effect. But if the level of the Scottish Child Payment were increased to match Holyrood’s ambitions to eradicate child poverty then the cliff-edge problem would grow.

The only way out is to move away from passporting, most likely through increasing the child element in Universal Credit for Scottish households only.

Whether through independence or greater devolution, we have to wonder if the introduction of the Scottish Child Payment sets the course for a completely independent benefits system for Scotland.

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