Scottish Government Commits to Ending Two-Child Benefit Cap

Scotland’s government intends to eliminate the “pernicious” two-child limit on welfare payments within its borders, as declared by Finance Secretary Shona Robison. This policy, which applies across the UK, was first implemented in 2017 by the Conservative administration and has been maintained by the Labour party. It restricts parents from receiving universal credit or child tax credit for a third child, with certain exceptions. During her presentation of the draft Budget at Holyrood, Robison stated her objective to allocate funds to families with the 15,000 children impacted in Scotland by April 2026, which is one month prior to the upcoming Scottish election. Members of the Scottish Parliament (MSPs) from opposition parties have criticized the Scottish government for alleged financial mismanagement. The precise method for removing the cap, its operational details, and its total expense remain undefined. Robison indicated that data from the UK government regarding the cap would be necessary to completely counteract its effects in Scotland. This initiative is anticipated to pose a significant challenge to Labour, a party that has expressed openness to new proposals but highlights the absence of any allocated funds in the forthcoming year’s budget to support such a measure. Robison conveyed to MSPs: “My challenge to Labour is to work with us – join us in ending the cap in Scotland, give us the information that we need.” She further emphasized: “But, either way, let me be crystal clear, this government is to end the two-child cap and in doing so will lift over 15,000 Scottish children out of poverty.” She concluded by stating: “Be in no doubt that the cap will be scrapped”. An anonymous source within the Scottish government estimated the cost of this measure to be between £110m and £150m. The Scottish Fiscal Commission has declared the policy uncosted, citing that they were informed about it only last week, and characterized it as a “fiscal risk”. Robison additionally revealed adjustments to Scotland’s income tax brackets, which will result in a larger portion of individuals’ incomes being taxed at reduced rates. She indicated that this change would lead to most Scottish residents paying less income tax compared to if they resided elsewhere in the UK, albeit by a minimal margin. Scotland features six income tax bands, differing from England, Wales, and Northern Ireland, which have only three. Robison informed Holyrood that the thresholds for the basic band—taxing 20% of earnings between £14,876 and £26,561—and the intermediate band—taxing 21% on earnings between £26,562 and £43,662—are set to rise by 3.5%. Notwithstanding the fact that most other bands will stay unchanged, a greater number of individuals are expected to incur a higher tax rate due to a phenomenon termed fiscal drag. This occurs when tax bands are not adjusted for inflation or aligned with wage increases, consequently pulling some individuals into elevated tax brackets. Yvonne Evans, a tax specialist and Senior Lecturer at Dundee University, conveyed to BBC Radio Scotland’s Drivetime program that individuals with lower and middle incomes would experience only minor advantages from the elevated tax thresholds. She remarked: “At best that helps people by about £20, so it’s not worth getting over-excited about really,”. Presently, Scottish residents earning over approximately £28,850, representing around half of the nation’s taxpayers, incur higher income tax liabilities than they would in other parts of the UK. The Scottish government indicated that the proposed alteration to income tax would raise this threshold to £30,300. Individuals with incomes below this new figure would save up to £28.27 annually compared to living elsewhere in the UK, as per the Chartered Institute of Taxation. The Institute reported that Scots earning £40,000 would pay an additional £97 in income tax compared to other UK regions, while those earning £50,000 would pay £1,528 more. Individuals with an income of £100,000 in Scotland would face an extra £3,331 in tax. The draft Budget, which details £63bn in expenditure proposals, additionally encompassed: When announcing the health sector funding, Robison stated: “That is money that will make it easier for people to access GP appointments, that will improve A&E and ensure more Scots get the care they need in good time.” She informed MSPs that this funding would ensure that by March 2026, no individual would face a waiting period exceeding 12 months for a new outpatient appointment, inpatient treatment, or day case treatment. The finance secretary declared that the allocation for local councils would reach an unprecedented sum, earmarked to finance salary increments for various professions including teachers, social care workers, and refuse collectors. While a council tax freeze is currently in effect, the finance secretary indicated no intention to reintroduce this policy in 2025-26. Nevertheless, she advised local authorities against perceiving this as a chance to significantly raise rates. Robison further commented: “While it will be for councils to make their own decisions with record funding, there is no reason for big increases in council tax next year.” Liz Smith, the Scottish Conservative social security spokesperson, affirmed her party’s ongoing endorsement of the two-child cap. She asserted: “Social security payments must be fair to people who are struggling and to taxpayers who pick up the bill,” adding: “The rapidly rising benefits bill is currently unsustainable as a direct consequence of the SNP’s high tax rates and mismanagement of our economy and public finances.” Conversely, Robison’s declaration received approval from the Child Poverty Action Group in Scotland and Save the Children Scotland. These organizations advocated for additional measures to provide swifter assistance to families, including an increase in the Scottish Child Payment. In the previous year’s budget, the government reduced funding for affordable housing by £196m. Despite subsequent in-year adjustments bringing this figure down to £163m, the funding still represented a real-terms decrease of over 22% from 2023-24. Aditi Jehangir, chairwoman of Living Rent, characterized the £768m in funding announced by Robison as “only a reverse of previous cuts made to the budget” and a “drop in the ocean compared to what is needed”. Cosla, the representative body for councils, which had previously cautioned that financially strained local authorities were at a “tipping point” before the Budget, indicated that it would require time to evaluate the finance secretary’s proposals. Initially, MSPs are scheduled to debate these proposals and possess the ability to introduce amendments. A vote on the bill is not anticipated until February, at which point ministers aim for its enactment. The government holds a minority of parliamentary seats, necessitating support from non-SNP MSPs to advance its agenda. Should the budget fail to gain approval, a snap election could ensue, although the government expresses optimism about securing an agreement where opposition MSPs either endorse the budget or abstain. The Scottish Greens, who were removed from a power-sharing arrangement with the SNP earlier this year, have declared their unwillingness to support the Budget without significant modifications. Green MSP Ross Greer stated: “This budget fails to deliver on Green proposals like expanding free school meals for P6 and P7 or a price cap on bus fares.” He added: “It slashes funding for core local services like schools and for key climate projects like the Nature Restoration Fund.” Michael Marra, Scottish Labour’s finance spokesperson, commented that the Budget presented an occasion for the SNP to guide Scotland in a fresh direction, particularly after the UK government supplied an extra £3.4bn in funding. He conveyed to MSPs: “If only they had the imagination to take that new direction,” further asserting: “Scotland is going in the wrong direction under the SNP.”