Scottish Child Payment was developed as a new Scottish benefit with the aim of making a substantial contribution towards reducing child poverty. It is designed as a top-up to benefits such as Universal Credit and Tax Credits. The Scottish Government is implementing it in two phases. Phase One introduced payments of £10 a week for children under age 6 from February 2021. Phase Two is introduced by these draft Regulations and will make payments of £25 a week for children aged 6 up to age 16 by the end of 2022.

This report has been developed with regard to the Scottish social security principles and any relevant provisions of human rights law. In our report on the Scottish Child Payment Draft Regulations 20204 we noted the potential of Scottish Child Payment to align with several of the principles, most notably principle e to “contribute to reducing poverty in Scotland”, in particular for families with children.

The Child Poverty (Scotland) Act 20175 has four targets to reduce child poverty in Scotland, one of which relates to ‘relative poverty’ (low income relative to the rest of society). Table 1 below from the Family Resources Survey demonstrates relative poverty in the years 1994 to 2020 with projections against interim targets set for 2023/24 and 2030/33.

Relative poverty is described as the proportion of children in households with income below 60% of the median UK income.

In 1994/95 relative poverty was noted at 30% according to this measure with the trajectory of the graph dropping to a low in the years surrounding 2010 before rising again for a projected increase to 26% in 2019/20.

The interim target 2023/24 depicted in the graph is a reduction of poverty to 18% mid-way through the 2020s with a final target of poverty reduction to 10% by 2030/33.

Children have rights to benefit from social security (as set out in Article 26 of the UNCRC) and to an adequate standard of living (as set out in Article 27 of the UNCRC). SCoSS has previously noted that what constitutes an adequate standard of living is not defined in law. We suggested that in setting targets for the near elimination of child poverty, the Scottish Parliament has in effect established its own benchmark for an adequate standard of living for households including children. Delivering on the policy objective of a reduction in relative poverty through social security will contribute to the realisation of children’s rights to benefit from social security and to an adequate standard of living.

Two measures in these draft Regulations mark important milestones towards achieving these goals – the roll out to children under 16, and the further increase to £25 a week per child. The Scottish Government estimates that together with a range of other measures, this will lift 60,000 children out of poverty by 2023/24 compared to 2017 and reduce relative child poverty by 9 percentage points, meeting the interim target.  Estimates could be significantly affected by hard to predict consequences of the cost of living crisis.

Scottish Child Payment has already doubled in value this year, from £10 to £20 a week. In the future, setting and increasing the rate of Scottish Child Payment to deliver a reduction in relative poverty does not necessarily reflect an improvement in overall living standards. For example, with the cost of living going up rapidly (9% in the 12 months to April 2022 when most UK benefits were uprated by just 3.1%), families can buy less with the same amount of benefit income. Setting an in-year increase in the rate of Scottish Child Payment from £20 in April 2022 to £25 by the end of 2022 helps to address this decline in buying power. Obviously it is open to the Scottish Government to continue to use Scottish Child Payment as a primary vehicle to reduce child poverty by further stepped increases. As a minimum, Scottish Child Payment must by law be uprated each year at least by inflation according to the Consumer Price Index.

Clearly Scottish Child Payment can only help lift children out of poverty if their families claim the support they are entitled to. Take up of Scottish Child Payment is estimated to be 77% for under 6s.9 The Scottish Fiscal Commission estimate this will go up to 82% by 2022/23, and for take up for children age 6 to 15 to start at 75%, rising to 77% over the first two years. While this could be seen as a reasonable start for a new benefit, it leaves a lot of families missing out on money. SCoSS has previously recommended moving towards making automatic awards of Scottish Child Payment, something that could become feasible once legacy benefits are replaced by Universal Credit. In response, the Scottish Government said it planned to review feasibility as part of its wider review of SCP when it is fully rolled out. Automatic entitlement would be most likely to increase take up. For now, take up work with stakeholders and most importantly, directly with eligible families should be as comprehensive as possible.

Observation 1: SCoSS and stakeholders warmly welcome the support for children and families through Scottish Child Payment, making good on Our Charter’s promise to deliver a better future by using social security powers to contribute to tackling poverty.

Recommendation 1: To promote take up of Scottish Child Payment as it rolls out to under 16s, Social Security Scotland should continue to be proactive in writing directly to families on Universal Credit and Tax Credits inviting them to apply.

During Phase One of the introduction of Scottish Child Payment, Social Security Scotland opened the application process for households with children under the age of six in November 2020. This gave people three months to submit applications before benefit payments were due to start in February 2021. This extended initial application window was designed to allow Social Security Scotland to better plan for and manage the anticipated peak in applications at the start of the benefit launch.

Following an internal review of the launch, the Scottish Government has indicated to Audit Scotland that this approach will not be repeated for the extension of Scottish Child Payment for children under 16. Instead, from day one, all households will be able to apply.

To manage the spike in applications, automated ‘straight-through processing’ will be used. The system will process new applications from submission to payment without manual intervention from staff provided all eligibility checks are passed. However, the Scottish Government has noted that this will not be possible where further evidence is required from clients or where clients are applying to add a child to an existing award. These applications will go into a work queue to be processed by Social Security Scotland staff. People will receive notifications to update them on the progress of their application. SCoSS is reassured that straight-through processing will not result in a claim being refused without being reviewed by a claims handler.

This new approach is a welcome example of the system learning and improving. Social security principles and Our Charter place a high priority on continuous improvement in ways which put the needs of people first.14 Delivering improvement through technology is likely to make the system more efficient and better value for money – social security principle (h).

It is likely that the spike in applications will be high as an estimated 200,000 more children are expected to qualify.15 Alongside the roll out of Adult Disability Payment, this will lead to a significant delivery challenge placed on Social Security Scotland. Success will be heavily dependent on the new IT processes working well from the start and on accurate estimates of how many claims will need manual processing. The overall message from Audit Scotland is that the Scottish Government is preparing well for the roll out.16 However, estimating how much manual processing is needed is difficult making it challenging for Social Security Scotland to plan how many staff it needs with certainty.

To improve delivery systems in a way that puts the needs of people first, processes and modelling assumptions of how many staff are needed should give the highest priority to what is best for claimants – for example that communications are clear, the application process is simple and that there are enough staff to process manual payments accurately and on time.

Recommendation 2: The Scottish Government is invited to explain how it will make sure that the processes and staffing levels will be in place when Scottish Child Payment opens to children under 16 to manage the anticipated spike in claims in a way that puts the needs of people first – such as clear communications, simple application process and enough staff to process manual payments accurately and on time.

Stakeholders told SCoSS that, despite initial teething problems, families have mostly found the application process simple. However, some thought that families with children turning six before the roll out (who would lose their Scottish Child Payment award) were not clear about whether they would have to reapply. Regulations do require an application for a child over six if there is no existing award no matter how short the gap in entitlement. For example, a family could have their Scottish Child Payment award stopped for a child whose sixth birthday is in October 2022 and have to reapply In November despite Social Security Scotland already holding all the necessary information. This could prove confusing for families.

“There is worry about what currently happens when a child turns 6. Families are not aware of the planned roll out, current bridging payments are not understood, and some parents think that the two-child limit applies to Scottish Child Payment so aren’t clear/don’t claim full entitlement.” – Save the Children

There is a case to include a temporary provision in regulations to help bridge this gap. Regulations could be introduced to allow Social Security Scotland to make a ‘determination without application’ for a family with a short gap in entitlement since their child turned six. Alternatively, Social Security Scotland could identify through its own records families in this situation, and offer a simplified tick box application, to ensure nobody misses out on entitlement.

Recommendation 3: Guided by Our Charter expectations on improving take up and making processes simple, the Scottish Government should develop a simple, effective way to re-start Scottish Child Payment so that families with a short gap in entitlement between their child turning 6 and the roll out for under 16s do not miss out on entitlement.

Universal Credit, a qualifying benefit for Scottish Child Payment, is designed to taper away as family income goes up. Each additional Pound earned reduces Universal Credit by 55 pence. In contrast, Scottish Child Payment which is a top-up to Universal Credit, is an all or nothing benefit. Scottish Child Payment is paid in full until the universal Credit award reaches zero, at which point there is an immediate loss of £25 a week per child.

A small increase in income e.g. through a pay increase or working more hours may not be enough to compensate for the loss of Universal Credit and Scottish Child Payment. Benefit entitlement stopping can also destabilise rent and utilities payment arrangements, which are often paid directly from benefit, and exacerbate debt problems.

The ’cliff edge’ created when a small rise in earnings leads to a drop in overall income is more significant as Scottish Child Payment rates go up and form a larger part of family income. The loss is greater for larger families, and as the Poverty and Inequality Commission pointed out, could have a particular impact on women.

“If this cliff edge is not addressed it could make it difficult for parents to take advantage of opportunities to increase their hours and progress in work. This may have a particular impact on women who are more likely to be the lower earner in a couple household and are already more likely to take time out of the labour market to look after children. More time out of the labour market is likely to result in lower wages and pensions and increase women’s risk of poverty.” – Poverty and Inequality Commission

One stakeholder told SCoSS that many parents they asked spoke of the cliff edge experienced when returning to work. A stable income is important to families on low incomes managing on tight budgets. If families believe they could be worse off, they may not risk working more hours or seeking better paid work.

“Families whose income rises above the income thresholds feel that they are still struggling when they are no longer eligible for Universal Credit and the Scottish Child Payment. Many families are managing a very precarious income and cycling in and out of eligibility/poverty.” – Save the Children

In our January 2020 report SCoSS recommended that the Scottish Government should consider the desirability and feasibility of a tapered withdrawal of the Scottish Child Payment in order to avoid the risk of a small increase in earnings resulting in a larger loss of benefit income.

The Scottish Government’s subsequent response partially accepted our recommendation, noting that:

“There is a case for tapering the Scottish Child Payment as it would allow the payment to be withdrawn gradually and avoid situations when a household does not gain from increasing hours or earnings. However, the advantages of tapering should be viewed in context of the size of payment and the ease of designing and implementing a taper. There are advantages in having simple and easily understandable rules to give households certainty about their entitlement, which may be more difficult to achieve with some of the more complex means-testing approaches.”

SCoSS agrees that certainty about entitlement is very important and acknowledges that redesigning Scottish Child Payment as a completely means-tested, standalone benefit is likely to be too complex and would probably reduce take up. Stakeholders all expressed concern to SCoSS about the impact of the cliff edge on families, however, views differ about how to address it. Options from stakeholders include: tapering Scottish Child Payment, adding a run on of Scottish Child Payment and making payments universal like those of child benefit.

The Scottish Government has indicated that a review of Scottish Child Payment will be undertaken once the benefit is fully rolled out. This allows for the design of Scottish Child Payment to reflect the lived experiences of clients in the coming years. We would encourage the Scottish Government to ensure that the causes and consequences of the cliff edge are investigated and better understood to inform this review.

Some options for change would require new primary legislation to provide for Scottish Child Payment as a type of assistance in its own right rather than a top of benefit as it is now. This is not a short-term solution. In the meantime, Social Security Scotland could offer practical help by proactively referring families to advice when benefit ends.

Recommendation 4: The Scottish Government’s review of Scottish Child Payment must take into account the lived experience of people, and any disproportionate impact there may be on particular groups such as lone parents or disabled people, in relation to how they understand and manage the loss of income from Scottish Child Payment when entitlement ends as they move into work or increase hours or earnings and thus lose entitlement to Universal Credit.

Recommendation 5: Following the promise in Our Charter to help improve people’s wellbeing and financial circumstances, Social Security Scotland should proactively refer people to money, debt and welfare rights advice when Scottish Child Payment stops due to changes in household income.

Scottish Child Payment ends at a child’s 16th birthday. At this age, young people are usually still at school or college and financially dependent on their family. Families on low incomes will likely find it hard to budget for the £25 a week drop in income when Scottish Child Payment stops.

As an incentive and support to stay on at school or college, from school leaving age, young people from low-income households can apply for a £30 a week Education Maintenance Allowance (EMA). EMA could become a follow-on payment to Scottish Child Payment and an important addition to household income.

We encourage the Scottish Government in its plan to ensure relevant signposting to the EMA, and in their work with schools to ensure that EMA is promoted alongside Scottish Child Payment. Additionally, end of award letters should include information and encouragement to claim EMA.

The number of young people receiving an EMA has been declining and take up, at least amongst college students, has been low.18 Pressure on families to meet basic needs could divert use of the EMA away from its purpose as a support for young people to overcome financial barriers to participating and succeeding in education. SCoSS notes that the £30 value of the EMA has not increased since its introduction in 2004. A review of the EMA, its value, its use and its alignment as a potential follow-on payment to Scottish Child Payment may be timely.

Recommendation 6: The Scottish Government should consider what else it can do to actively help families transition from Scottish Child Payment to an Education Maintenance Allowance at age 16.

The draft regulations remove the existing four week deadline for making the first payment of Scottish Child Payment after receiving an application. Scottish Child Payment will be brought into line with the approach taken for other Scottish social security benefits which have no time limit in regulations and instead allow Social Security Scotland to notify the date of first payment in the decision letter.

The Scottish Government has noted that while the original policy intent was to “signal the intention that we wanted to ensure new claims were processed quickly” in practice this has resulted in some individuals being paid “out with the scope of the regulations.”

Stakeholders noted the additional pressures for families and children while waiting for benefit payment.

“Payment of arrears in a lump sum is no substitute for prompt payment of what is due. Families trying to manage on a low income tend to incur debts, the repayment of which can leave them with less than they need to live on for lengthy periods of time.” – Inclusion Scotland

Stakeholders recognise the challenges that Social Security Scotland is tackling as it deals with higher claim volumes but are clear that the focus must continue to be providing families with much needed money as quickly as possible. Under the Our Charter obligations, Social Security Scotland is obliged to “pay you on time in the right amount”.  With no deadline in law or guidance SCoSS is concerned that it will be difficult or impossible to determine whether this commitment is being fulfilled.

Applications are not currently processed or paid within the four week deadline. 68% of applications take longer than four weeks to process. The average processing time showed a steady improvement in the early months of Scottish Child Payment, reaching rates of 8 to 10 working days – well within the legal time limit. However, this has not been sustained, with claims taking on average 31 working days to process in March 2022.

More use of technology, as planned for the roll out to under 16s, to automate processing should lead to faster payments for the majority of applications. However, where there is manual intervention, the Scottish Government has indicated that this creates problems in practice in adhering to the 4 week payment deadline. Clearly everyone should be paid on time including people whose awards are processed manually.

The Scottish Government should investigate why some awards take longer to decide in order to inform improvement of manual processes. Social Security Scotland should make sure that they are communicating clearly to people what they can expect and how their application is progressing.

Recommendation 7: In line with the Social Security Charter expectation that assistance will be paid ‘on time in the right amount’, once Social Security Scotland is able to assess the time reasonably needed to make quality decisions, it should communicate this to people who are making Scottish Child Payment claims and, in individual cases where exceeded, explain the reasons why.

Scottish Child Payment regulations provide for a 12 week period after entitlement ends for it to re-start without the need for an application. Currently, the period begins on the date that the determination is made to end entitlement. Because it can take some time for a change in circumstances, such as the loss of a qualifying benefit, to be reported or acted upon, in fact the re-start period could be considerably longer than 12 weeks from the date on which entitlement to Scottish Child Payment ended. Draft Regulations ensure that the 12 week period begins on the earlier date on which the change of circumstances occurred.

The policy intention is “to ensure proper checks are carried out … after a long period of ineligibility”. The Scottish Government has explained that Social Security Scotland continues to have access to the data on eligibility for 12 weeks after a qualifying benefit ends, allowing an accurate up-to-date determination. Beyond this, they believe there to be a greater risk of fraud and error. In practice, the majority of cases involve fluctuations in Universal Credit over a month, so this change will not change automatic reinstatement of Scottish Child Payment for those families.

SCoSS is not convinced that changing this provision is necessary. The ‘determination without application’ process is a useful way of Social Security Scotland taking the initiative. Requiring an application may mean some families who might struggle to manage the application process missing out on entitlement. It would presumably be possible to make additional checks where there are gaps in up-to-date information. We are aware that this is likely to mean more manual processing at least in the short term.

Recommendation 8: The Scottish Government reconsiders the proposal to restrict the 12 week re-start period and instead finds an alternative way to make any necessary checks to fill gaps in up-to-date information while undertaking a determination without application, so that families who might struggle with the application process do not miss out on entitlement.

The draft Regulations introduce a lump-sum payment of Scottish Child Payment when a child dies. The intention is to provide a more compassionate and dignified system in the event of the death of a child. Both Child Benefit and Universal Credit have a run on of 8 weeks and two monthly assessment periods respectively when a child dies.

The Scottish Child Payment lump sum is equivalent to up to 12 weeks payment. The amount is arrived at by doubling the award given in the 12 weeks before the death. Deriving the lump sum amount this way means that families in the same traumatic circumstances will receive varying amounts, with the most being paid to those with a continuous award of Scottish Child Payment in the 12 weeks before the child died, and less to those whose award began during that period. For example, a family whose child is born and dies a week later could receive just one week’s extra payment.

This additional support for families is welcome. In the longer term, in line with Our Charter promise to “look for ways to make eligibility rules fairer”, the Scottish Government should consider giving the same amount to all families whose child dies. This should be considered as part of the review of Scottish Child Payment.

Recommendation 9: In its review of Scottish Child Payment, the Scottish Government should look for ways to make eligibility rules fairer by offering the same amount of support to all families whose child dies.

Scottish Child Payment regulations continue to give people more time to apply for Scottish Child Payment or ask for a re-determination, or appeal when the delay is related to coronavirus. Scottish Child Payment regulations currently define ‘coronavirus’ by reference to the definition in the Coronavirus (Scotland) Act 2020.

The Act is due to expire in September 2022. The draft Regulations insert the definition of ‘coronavirus’ directly in the Scottish Child Payment regulations.