By stewartb – a long read

As the British Labour Party government in Westminster targets the Department for Work and Pensions for budget cuts, a London-based think-tank with a high media profile has acknowledged the positive impact on levels of child poverty of actions and financial commitments of the Scottish Government, by necessity through use of its devolved powers.

The Resolution Foundation describes its mission as ‘improving the living standards of those on low-to-middle incomes.’ It claims to be ‘the leading UK authority on securing widely-shared economic growth.’ Its previous CEO, Torsten Bell  (2015-24) is now the Labour MP for Swansea West: he holds jointly the posts of Parliamentary Secretary in HM Treasury and Parliamentary Under Secretary of State in the Department for Work and Pensions (DWP).

Given all this and in advance of a Child Poverty Strategy promised by the Westminster government, it is worthwhile considering the RF’s latest report on child poverty. This is especially so given the substantive references it makes to Scotland

Source: Clegg and Corlett (February 2025) Turning the tide – What it will take to reduce child poverty in the UK. Resolution Foundation. (https://www.resolutionfoundation.org/app/uploads/2025/02/Turning.the_.tide_.pdf )

UK baseline and forecasts

The RF report starts by describing a shocking state of affairs for which only successive Westminster governments are culpable:

• in 2022-23, 4.3 million children in the UK (30 per cent) were growing up in relative poverty after housing costs – the Government’s preferred headline measure

• the RF judges that based on present policies and economic forecasts, UK child poverty will rise over this Parliament and the next: it will reach 33 per cent (4.6 million children) in 2029-30, the highest rate since 1998-99, and the highest number of children on record
  • it attributes this is partto ‘£3 billion of scheduled welfare cuts through the ongoing roll out of the two-child limit and family element abolition, and real-terms cuts each year in the value of Local Housing Allowance and the benefit cap’ – how much of this will continue under a British Labour Party government in Westminster in order to keep to arbitrary fiscal rules whilst protecting the income and wealth of the richest in the UK? With LINO in power (Labour In Name Only), who can say with confidence?

• the RF argues that whilst economic growth alone would provide additional fiscal resources and ‘allow’ for other reforms, it ‘would not directly help to reduce poverty’. It reasons: ‘the lesson from past decades is that growth in isolation will increase the gap between the middle and the bottom of the income distribution. But targeted measures within a growth strategy could help lower poverty directly.’

International comparions

To place the state of child poverty in the UK in perspective, the RF finds that:

• child poverty measured before housing costs are taken into account was higher in the UK than in 25 European countries in 2018, and twice as high as it was in Denmark
• using an after housing costs metric (one that also deducts energy costs from income but uses the ‘before housing costs’ income threshold), the UK child poverty rate was worse than all European nations except Greece (see chart below from the RF report).

In addition to these revealing historic statistics, the RF research notes that child poverty in the UK is currently on an upward trend, and without action, will continue to rise over the course of this Parliament and the next.

It is therefore hardly surprising that BBC Scotland’s Business and Economy Editor could pen a grudging article on the BBC News website on January 16 headlined ‘Ending child poverty remains complex issue for Swinney’. How could ending child poverty in one part of a nation-state, through the actions of a Westminster-dependent Scottish Government working against the prevailing UK policy environment, be anything other than ‘complex’ – perhaps impossible – given the above characterisation of the UK?

The Resolution Foundation on Scotland

Unusually in my experience of perusing RF output, this report on child poverty makes substantial references to Scotland. The reason becomes obvious.

The RF report notes that since 2017, the Scottish Government has placed ambitious child poverty reduction targets into law. These require Scottish ministers to reduce relative child poverty in Scotland to below 10 per cent and absolute child poverty to below 5 per cent by 2030 (both measured after housing costs). As a consequence – and even if such ‘very ambitious targets’ may not be met in full – the RF explains that the Scottish Government has been enacting a raft of measures that directly boost the incomes of parents claiming means-tested benefits, including:

• the Scottish Child Payment, currently worth £1,400 per child per year

• Best Start Grants, currently worth a total of £2,450 for the first child and £1,000 for subsequent children in three grants from pregnancy up to the start of school

• Best Start Foods, currently £5.30 per week during pregnancy and when a child is aged 1-3 and £10.60 per week when a child is under one, which help with the costs of pregnancy and looking after young children

• Free School Meals (FSMs), extended to all children in primary 4 and 5 in April 2022. (The plan to extend FSMs to all children in primary 6 and 7 was abandoned for now last year. However, eligibility for a FSM will now be widened to include primary 6 and 7 pupils whose parents receive the Scottish Child Payment, which is itself ‘passported’  via UC.)

On wider social policy, the RF report explains that the Scottish Government has used devolved powers to ‘pursue a different social security agenda’ to the UK as a whole: it explains that the Scottish Government has introduced mitigations for those UK-wide policies that have broken the ‘link between a family’s circumstances and their benefit entitlement’. It refers specifically to mitigations to address the Westminster-imposed benefit cap and the spare room subsidy (aka the ‘bedroom tax’).

It reports that in December 2024, the Scottish Government announced its intention to “effectively scrap” the two-child limit in 2026 by introducing automatic mitigation payments to affected families. Interestingly, the RF notes that this commitment ‘will require cooperation from the Department for Work and Pensions on data sharing, as well as new UK legislation to ensure that mitigation payments are not treated as income by the benefit system nor subject to the benefit cap.’ This explanation shows that instant implementation would not have been feasible, even if desirable and affordable. 

In summary, the RF states: ‘These income-boosting measures are projected to drive a (further) wedge between Scottish and English child poverty rates, … We project that child poverty in Scotland fell by 1.5 percentage points between 2022-23 and 2024-25, compared to a 1.3 percentage point rise in England. This divergence is set to grow across the current Parliament: under current policy assumptions, we project that Scottish child poverty in 2029-30 will be 2.2 percentage points below its 2022-23 level, compared to 3.4 percentage points higher in England.  …. child poverty in 2029-30 could reach 33 per cent in England, 9 percentage points higher than Scotland’s projected 24 per cent.’ (See the RF chart below.)

Recommendations for achieving ‘meaningful reductions in child poverty’ in the UK

The RF report sets out a number of recommendations for the reduction of child poverty, aimed at the British Labour Party government in Westminster.

• increase income support for poorer parents
• abolish the two-child limit
• end the benefit cap, ‘whose continued existence would dull the impact of repealing the two-child limit’.

It may be hard for certain voters in Scotland to realise this based on the nature of media coverage of politics in Scotland, but – as the RF is acknowledging – the SNP Scottish Government has already been taking such steps!

Also in alignment with SNP policy, the RF’s position is crystal clear: ’The two-child limit introduced in 2017 is incompatible with a credible Child Poverty Strategy: half of children in poverty now come from larger families (i.e. with three or more children), and the numbers impoverished by the limit will continue to grow over this decade, such that 50 per cent of children in larger families will be in poverty by the end of the Parliament’. Reference is made to work by the Institute for Fiscal Studies which has shown that ‘abolishing the two-child limit would be the most cost-efficient way to reduce child poverty (a finding that we share)’.

The RF argues that the two-child limit ‘breaks the link between need and entitlement that should be a part of any sensible welfare system’. In addition, it argues that it is both unfair and discriminatory as can be seen in the data on the risk of child poverty associated with different numbers of children in a family: ‘In 2014-15, children in larger families (those with three or more children) were only around a third more likely to be in poverty than two-child families, but by 2024-25 they are estimated to be around twice as likely, leading to a situation where half of children in poverty are now in families with three or more children.’

Other options for Westminster government action identified by the RF include:

• extend the coverage of Free School Meals – worth around £500 a year per recipient child – to all families on Universal Credit (UC)
• address ‘UC adequacy’ for parents by restoring the coverage and value of the family element in UC, phased out by George Osborne from 2017
• restore the linking of the Local Housing Allowance to local rents in order to avoid ongoing real cuts to housing support.

The RF forecasts that implementing all the above recommendations would drive down the relative child poverty rate in the UK to 27 per cent in 2029-30 – ‘its lowest level since the 1980s’. (It’s worth recalling that the Joseph Rowntree Foundation has already reported this: ‘Child poverty rates in Scotland (24%) remain much lower than those in England (30%) and Wales (29%) and are similar (if slightly higher) than in Northern Ireland (23%). This is likely to be due, at least in part, to the  Scottish Child Payment. This highlights the effect benefits can have in reducing poverty.’

Source: Joseph Rowntree Foundation (January 29, 2025) UK Poverty 2025 – The essential guide to understanding poverty in the UK. (https://www.jrf.org.uk/uk-poverty-2025-the-essential-guide-to-understanding-poverty-in-the-uk  )

Cost of recommended interventions

The RF acknowledges that implementing its recommendations would incur a significant cost e.g. £4.5 billion in 2029- 30 to scrap the two-child limit and the benefit cap. It explains: ‘our work confirms that this is the most cost-effective major option that the Government could choose, equivalent to a cost of £10,000 per child lifted out of poverty by the end of the Parliament.’

All the above options set out in the RF report taken together would ‘cost c. £8.5 billion in total, falling to £5.5 billion if the extension of Free School Meals were funded within existing departmental budgets and the Government can succeed in raising employment and building more homes.’

The RF observes that even an £8.5 billion policy would be ‘under half of what the previous Government spent on National Insurance rate cuts ahead of the general election; it is far less than the roughly £40 billion of new family support announced under New Labour (albeit in better fiscal circumstances; ..); smaller than the package of benefit cuts announced in 2015; and broadly equivalent to spending on the Scottish Child Payment (even excluding any new two-child limit mitigation), which would be around £7 billion if replicated UK-wide in 2029-30.’

End note

Th RF’s cost calculations for the Westminster government implementing the recommended child poverty reduction interventions give an insight into the scale of what it is costing the Scottish Government to mitigate Westminster policies towards children and the poorest in society. It gives an indication of the scale of funds foregone in Scotland due to Westminster decisions not to tackle child poverty in England adequately.

If the Westminster government accepts the recommendations of RF and their cost implications, Scotland will gain in two ways: (i) those in Scotland reliant on benefit payments from the DWP will receive more adequate financial support; (ii) the Scottish Government, freed from the necessity of budgeting for mitigations, will find new headroom in its fixed budget to go further in addressing poverty and/or invest more in other important areas of devolved responsibility like the NHS or education.

As details of the Child Poverty Strategy promised by the British Labour Party government in Westminster finally emerge, we will learn how much further ‘austerity’ will reach: we will learn how much a dependent Scotland will need its own government to continue with mitigation measures at the expense of other crucial areas of responsibility in need of public investment.