Scotland spent almost a sixth – £1 billion – more on welfare than the funding provided by the UK government in 2024/25
Scotland has the highest proportion of children in long-term workless households in Great Britain with child poverty targets missed
Jobless couple with three children can receive combined benefits worth £45,500 a year in Glasgow, equivalent to a salary of £69,000
New plan ahead of Holyrood elections sets out reforms to save almost £1 billion a year and refocus support on work and mental health treatment
The case for reforming Scottish welfare
The Scottish Government has poured billions of pounds of taxpayer cash into the country’s welfare state “with abandon”, according to a new report.
The research, entitled Benefitting Scotland?, finds that nearly a decade after major welfare powers were devolved, Scotland is spending significantly more than the rest of the UK on a “smorgasbord” of conflicting benefits and entitlements.
There is “minimal” evidence that the system is succeeding even on its own terms, warns the Centre for Social Justice. Persistent child poverty is running at 23 per cent, more than double the Scottish government’s eight per cent target.
At the same time, Scotland has the highest proportion of children living in long-term workless households in Great Britain at 11.3 per cent, and its rate of economic inactivity has gone from below England’s before 2016 to persistently above it.
The £28 billion annual welfare budget – almost a quarter of which is administered by the Scottish government – has ballooned out of control.
Last year Scottish ministers spent above and beyond the “block grant adjustment” – a grant allocated by the UK government to match non-devolved benefit spending – by almost £1 billion.
The cross-party think tank argues that Scotland could save hundreds of millions of pounds while achieving better outcomes.
Restricting eligibility to disability benefits for those with less severe mental health conditions and frontloading the Scottish Child Payment would save at least £800 million for the Scottish government to re-invest in treating the root causes of mental illness and supporting families directly through Whole Family Wellbeing Funding.
The report also highlights the scale of work disincentives in the system.
A couple with three children living in Glasgow can receive almost £45,500 per year by combining benefits. To match that income from work alone would require a salary of roughly £69,000 before tax from a single earner.
Even when parents move into employment, they can lose up to 79p of every additional pound earned once benefit tapers, income tax, national insurance and pension contributions are combined.
They also risk losing access to the myriad supplements layered on by the Scottish government, including the Scottish Child Payment, several Best Start Grants, a Carer’s Allowance Supplement, new Winter Heating Payments, and a plethora of one-off grants.
Ben Gregg, Head of Welfare at the Centre for Social Justice, said: The Scottish government has missed its own child poverty targets, while pushing economic inactivity in Scotland from below to above England.
“The welfare system is over budget, overly complex, and failing on its own terms. With Holyrood elections this year, there is a real opportunity to create a much leaner, far more effective system, focused on changing lives and tackling the root causes of poverty.”
Challenging the myth that higher social spending is incompatible with economic success, new IPPR Scotland analysis confirms that many European countries with high spending on social protection measures such as benefits, childcare and training, also sustain highly productive, innovative and dynamic economies.
Researchers found that countries like Germany, the Netherlands, Sweden, Finland, France, Denmark, Norway, Belgium, Austria and Switzerland spend much more on social protection per person than the UK and Scotland and have also had far superior economic and social outcomes sustained over the long run.
The UK has had lower GDP per capita throughout this past decade. Scotland’s GDP per capita, meanwhile, has been very close to the UK’s, and well below that of the 10 countries that the researchers focussed on.
This research demonstrates that high spending on social protection does more than just place a safety net for the economically disadvantaged; it helps economies to become more productive. For example:
Higher unemployment benefits give people the security and support to retrain, upskill and re-enter the workforce in a job that matches their skills, interests and expertise.
Measures like generous childcare investment enable high employment rates for women.
High spending on social protection can also encourage entrepreneurial risk-taking and help facilitate economic change.
The research shows that high-spending countries also perform well across a range of international indices of competitiveness and innovation. For instance, all the high social spending countries achieve a ranking in the top 25 nations in the 2024 Global Innovation Index, with six appearing in the top 10. Switzerland and Sweden fill the top two places.
Ahead of this year’s election, IPPR Scotland is urging the Scottish government to take learn from these countries and lead a renewed drive to build a national consensus on economic development. The next government should also examine ways in which spending can shift towards areas such as employability, childcare, and labour market support, that directly address both social and economic objectives.
IPPR Scotland director Stephen Boyd said:“The experience of other countries shows – unambiguously – that it is possible to create a virtuous cycle between high social protection spending and economic dynamism.
“Scotland’s political parties should bear this in mind when developing manifestos and engaging in debate around this year’s election. The next Scottish government can and must build a new policy agenda. By focusing on areas like employability and childcare, we can tackle social challenges and boost the economy at the same time.”
Reacting to the report,Professor Patricia Findlay, Scottish Centre for Employment Research, Strathclyde University, said: “This report is a timely reminder that there are no necessary trade-offs between economic growth and high social protection spending – and the many wider social benefits from the latter.
“The report carefully avoids a suggestion of causation between social spending and economic growth, though a positive causal relationship has some intuitive plausibility. The challenge, of course, is in the transition – what should Scotland do now to move from a vicious circle of low relative social spending and stagnant growth to a more virtuous circle present in other successful economies?
“There is no silver bullet, but the recommendations of investing in collective design of economic strategy, more active labour market policies and, crucially, stronger structures of social partnership and dialogue, would represent important steps towards better longer-term outcomes.”
WITH welfare and benefits in danger of becoming a political football in the Holyrood election campaign (see today’s FMQs for starters – Ed.), Scotland’s Poverty Alliance has spoken out:
Poverty Alliance Policy & Campaigns Manager Gary Christie said: “When it comes to ending the injustice of poverty and investing in a better future, the Poverty Alliance works constructively with leaders from all political parties.
“One of the things we ask of all is that they avoid creating false division between people. Very few politicians would criticise someone for using our NHS or claiming Pension Credit. So, it’s morally wrong to point at others who use our shared social security system.
“Nearly 40% of the people on Universal Credit are in work. Nearly 1 in 3 people referred to Trussell Trust foodbanks are in working households.
“We all pay into our shared public services, and we all benefit. People who don’t pay income tax contribute every time they buy something that has VAT on it. And many people on the lowest incomes in Scotland have higher tax rates than the wealthiest in society. We are all in it together.
“Instead of risking stigmatising and hurting our friends, neighbours and fellow citizens, it would be good for politicians to look at their own responsibilities first. They have the power to move towards a Minimum Income Guarantee based on fair work, strong services, and a just social security system for all of us. These must be pursued together, not traded off against one another to score political points.
“The Scottish Child Payment is a vital building block of that future. It helps give a decent start in life to more than 300,000 of Scotland’s children.
“Rather than talking about unjustly cutting some children off from that vital help, politicians can boost the value of the payment as one important stepping stone towards the Minimum Income Guarantee.”
Social security support can make a difference to lives
From Shetland to the Borders, people across Scotland are being urged to check if they are eligible for financial support.
Social Security Scotland helped over 960,000 people receive the money they were entitled to in financial year 2024/25.
The organisation now delivers 17 benefit payments, including support for families on low incomes, disabled people, pensioners, young people looking for work and unpaid carers. There is also financial help for heating homes and contributing towards the cost of a funeral.
Amongst the payments is Scottish Child Payment, which is only available in Scotland. Families who receive Universal Credit, or other qualifying benefits, may be entitled to a weekly payment of £27.15 for every eligible child under 16 years of age. There is also no limit on the number of children who can benefit.
Financial support is also available for disabled people, those who have long-term health conditions or are terminally ill.
Child Disability Payment and Adult Disability Payment can help cover the extra costs disabled people face. Pension Age Disability Payment replaces Attendance Allowance in Scotland and can support disabled people aged 66 and over who need help looking after themselves or supervision to stay safe with a weekly payment of up to £110.40 a week.
Scotland’s unpaid carers receive more support than anywhere else in the UK. Carer Support Payment, a payment of £83.30 per week, has replaced Carer’s Allowance with more carers in full time education able to access it. Further improvements for carers, including new extra support for those caring for more than one person, will come into effect in March 2026.
Young people aged 16-24 who have been out of work for at least six months and receiving a low-income benefit may be able to get Job Start Payment. It is a one-off payment of £319.80 to help cover the cost of starting a new job.
People are urged to check if they can get social security support and can access an online benefit calculator to help them to do this. Many are available online, are free, and can provide more detail on the benefits available to an individual and how to apply.
Social Justice Secretary, Shirley-Anne Somerville, said: “We know that many people are feeling the strain right now – especially after Christmas – and we don’t want anyone to miss out on the support they’re entitled to.
“That’s why we are investing in the people of Scotland with social security when they need it most. These payments can make a real difference to everyday lives, whether it’s helping with heating costs, caring responsibilities, enabling someone to be more independent or with raising a family.
“Many of our payments are available for people in and out of work, for example Adult Disability Payment is available no matter whether someone is in work or has savings. Social security is a public service that anyone may need at any point in their life. I urge people to check if they are eligible and get the help they are entitled to.”
Rebecca Fagan, Benefit and Welfare Policy Executive at Advice Direct Scotland, added: “Every year, millions of pounds worth of vital benefits go unclaimed because people are unaware of what they may be entitled to.
“Sometimes people just assume they won’t qualify.
“At a time when many households are under significant financial pressure, it is more important than ever that people check what support is available to them.
“At Advice Direct Scotland, we see first-hand the essential support provided to people across the country through every stage of life by Social Security Scotland benefits.
“Our trusted online benefits calculator – at www.benefits.advice.scot – is a simple, confidential way to get an accurate picture of what you are entitled to.
“This type of calculator can help people make informed decisions, boost household income and act as a vital first step in accessing advice and support before problems escalate.
“Our skilled advisers are also here to help people find out what they can do to claim all the benefits that they are entitled to.
“Our advice.scot team can be reached on 0808 800 9060 or via www.advice.scot.”
The number of people helped by Social Security Scotland in financial year 2024/25 is 962,525. A full report can be found at:
Anyone in Scotland who needs additional support to apply for benefits can receive free help to complete their applications.
There are several options available for people who need support:
Social Security Scotland’s Client Advisers can help people by talking to them by phone or through webchat.
We can support people to apply over the phone on 0800 182 2222 or via webchat.
People can also get help in their communities from our team of local advisers.
In addition, the Scottish Government funds an independent advocacy service to deliver free advice and support to disabled people applying for benefits.
Organisations including Citizens Advice Scotland, Macmillan Cancer Support, Age Scotland and local authority welfare rights teams can also help.
Cabinet Secretary for Social Justice Shirley-Anne Somerville said: “I urge everyone to avoid any company asking people for money to help them apply for benefits. Free support is readily available from Social Security Scotland and several organisations.
“People should get every penny of the vital support we are delivering to help them live with dignity. Companies charging fees to make benefit applications are exploiting people and taking money from those who need it most.”
Derek Mitchell, CEO of Citizens Advice Scotland said:“Our advisers in local Citizens Advice Bureaus across Scotland provide free and confidential advice expert advice that gets money back in people’s pockets.
“Whether you need that face to face, over the phone or online, advisers based in local communities will work with you and make sure you get all the support you need.
“No one should have to pay for advice to get the social security payments they’re entitled to. Every penny of the nearly £170 million we secured for people last year, stayed with them.”
Scotland benefits from the strongest package of winter heating support in the UK
Over 837,000 payments have been made to people across the country to help with heating costs this winter – thanks to a unique package of support that provides more for people in Scotland than anywhere else in the UK.
More than 268,500 payments for Child Winter Heating Payment and Winter Heating Payment – support only available in Scotland – have been paid and are likely to have already landed in people’s bank accounts.
Child Winter Heating Payment supports families caring for children with the highest disability support needs and the vast majority of payments have already been made.
Winter Heating Payment is a guaranteed, annual payment for people receiving certain benefits.
This is irrespective of how cold the temperature gets outside, unlike the Department for Work and Pensions (DWP) Cold Weather Payment which is only paid if the average temperature reaches, or is forecast to reach, freezing or below for a full week.
Over 568,000 Pension Age Winter Heating Payments have been paid to people aged 66 and over. This has replaced the DWP Winter Fuel Payment in Scotland and is at a higher rate than elsewhere in the UK. Payments will continue to be made throughout the winter.
All Social Security Scotland winter payments are automatic with no need to apply.
Social Justice Secretary, Shirley-Anne Somerville said: “Costs are rising and there will be many people struggling with household bills this winter.
“That’s why the Scottish Government is taking action and will deliver the strongest package of winter support than anywhere else in the UK.
“We’re providing winter help, no matter the weather and I’m pleased that over three quarters of a million payments have already been made to do just that.”
Joe Cluxton, energy coordinator at FEL, a service that provides free home energy advice to residents in the Forth Valley added: “We welcome the range of winter heating support delivered by Social Security Scotland as a means to address fuel poverty and the rising cost of heating our homes.
“The cost of living crisis may drive some to keep the heating off or too low in homes with vulnerable residents, and this is a valuable move to keep people safe through the coldest seasons.”
Keep warm in the cold weather
Heat rooms you regularly use to a comfortable temperature (at least 18°C if you can)
Financial boost for carers ahead of the festive season
Carer’s Allowance Supplement will be paid to more than 96,000 carers across Scotland from 4 December.
Carer’s Allowance Supplement is an extra payment, currently made twice a year, for people in Scotland who get Carer Support Payment or Carer’s Allowance on the qualifying dates.
The payment of £293.50, which is only available in Scotland, will be made automatically from 4 December to people who were paid Carer Support Payment or Carer’s Allowance on 13 October 2025. Carers due to get the payment will get a letter from Social Security Scotland before the payment is made.
Social Justice Secretary, Shirley-Anne Somerville, said: “As one of the first payments introduced by Social Security Scotland in 2018, I’m proud of the difference that Carer’s Allowance Supplement has made for carers across the country.
“The payment recognises the important role that carers play in our local communities and wider society. We have also recently widened eligibility for our Young Carer Grant, meaning even more unpaid carers in Scotland are benefitting from extra help.”
Paul Traynor, Head of External Affairs, Carers Trust Scotland, said: “Since its introduction, Carer’s Allowance Supplement has provided vital additional support to unpaid carers in Scotland, helping to recognise the invaluable contribution they make to their cared for people and communities.
“With over one million payments made and hundreds of millions of pounds delivered, this supplement has helped ease financial pressures for thousands of unpaid carers.”
If a carer is eligible for December’s Carer’s Allowance Supplement payment but has not received a letter or payment by 15 December, they should contact Social Security Scotland free on 0800 182 2222.
One of the key decisions that UK Ministers will be making ahead of Rachel Reeves announcing the Budget later this month is what to do about the two-child limit (write Fraser of Allander Institute’s SPENCER THOMPSON and HANNAH RANDOLPH).
This policy, which limits Universal Credit to the first two children in a family, has been widely criticised for driving up child poverty rates. And given that the UK Government has pledged to reduce child poverty, with the publication of its child poverty strategy expected sometime around the Budget, the pressure is on to abolish the policy.
The Scottish Government has committed to mitigate the two-child limit by introducing a new benefit, the Two-Child Limit Payment (TCLP). If the two-child limit is abolished, this payment would no longer be needed, freeing up resource for the Scottish Government. The First Minister has pledged that the savings would be spent on additional measures to tackle child poverty, which he has stated is the Scottish Government’s top priority.
How much would the Scottish Government save?
The Scottish Fiscal Commission has forecast the TCLP will cost £155m in 2026-27. This represents the amount that the Scottish Government will directly save if the two-child limit is abolished.
There would however be some offsetting costs to the Scottish Government, coming through two main channels. First, removing the two-child limit would push more families onto the Benefit Cap – unless this was also abolished – which the Scottish Government mitigates through Discretionary Housing Payments.
And second, it would bring more families onto Universal Credit, namely those whose incomes are just too high to be entitled with the two-child limit in place.
These families would in turn become eligible for devolved benefits that are linked to receipt of Universal Credit, including the Scottish Child Payment, raising spend on these benefits.
We estimate that these spillovers would amount to around £34m in 2026-27.
Whether this cost is met from within the £155m pot or counted separately is a political question. The fiscal context, which will become even more challenging if the UK Government chooses to raise income tax in the rest of the UK, may encourage the former choice. But this would likely be seen by campaigners as penny pinching at a time when urgent, ambitious action is needed to tackle child poverty.
Even with the two-child limit abolished, we would still be a long way off meeting the statutory child poverty targets in 2030 – and these are approaching quickly, with the final Delivery Plan due in March.
How could the savings be spent?
If the spillover costs from the abolition of the two-child limit (£34m) were funded from within the TCLP budget (£155m), that would leave £121m to be spent on other policies. We have modelled the child poverty impacts of five illustrative policy options, all of which we estimate will cost about this much in 2026-27 assuming no changes in behaviour or administrative costs. Clearly, a £155m policy could go further than a £121m one, so this represents a conservative scenario.
Impacts of policy options on relative child poverty after housing costs, 2026-27
Option
Raising the Scottish Child Payment to…
…and…
… would reduce child poverty by about…
1
£35
–
1ppt
2
£31
extending Scottish Child Payment from children under 16 to include dependents aged 16-19
1ppt
3
£34
increasing Best Start Grants and Best Start Foods by the same proportion
1ppt
4
£30
extending universal Free School Meals from P1-P5 to include P6-P7
–
5
£34
increasing the maximum discount on water and sewerage charges from 35% to 100% for families with children
1ppt
Source: FAI modelling using UKMOD. Notes: Dash indicates that impact is too small to report. Scottish Child Payment is currently projected to be about £28 per child per week in 2026/27. Free School Meals count as income for purposes of measuring poverty. Technical details of modelling available on request.
The impacts of these policies would be over and above the impacts of the two-child limit being abolished, which we estimate to be around 1 percentage point in 2026-27. All else equal, each of the options would reduce relative child poverty after housing costs by a further 1 percentage point in 2026-27, representing an additional 10,000 children who would be kept out of poverty.
The exception is Option 4: extending universal Free School Meals to all primary school students would not have a measurable impact on aggregate child poverty levels, even when coupled with an increase to Scottish Child Payment of around £2 per child per week.
Although most of the policies are similar in terms of their aggregate impacts, under the surface there are some important differences:
Option 1 is the simplest, but does involve steepening the so-called ‘cliff edge’, whereby households lose their entire Scottish Child Payment award if their incomes increase beyond the point at which they are entitled to Universal Credit – which could incentivise them to forego opportunities to earn more. This option also increases Scottish Child Payment for recipients who are not in poverty, including those kept out of poverty by the payment at its current rate.
Option 2 is arguably preferrable in these respects, since it extends Scottish Child Payment to families who are not currently eligible while also benefitting many multi-child families who currently are, with the overall cliff edge not steepening as much. However, it does favour older children, when families with young children have been identified as a priority group.
Option 3 targets younger children specifically – Best Start Foods is available until the child turns three, while Best Start Grants are paid to children at various points until the child starts school. This option would also channel some of the TCLP savings into one-off grants as opposed to recurring payments, which may be less distortionary when it comes to work incentives even though they have similar eligibility criteria as the Scottish Child Payment. By the same token, their one-off, targeted nature limits their direct impacts on overall levels of child poverty.
Option 4 removes a cliff edge of sorts in the form of the means test for Free School Meals that applies to children in Primary 6 and 7, who are typically between 10 and 11 years old. Although this policy would benefit some households that lie just above current eligibility, it would primarily benefit those with higher incomes. On the other hand, the distributional impacts would depend on take-up, and there could be wider benefits such as a reduction in stigma.
Finally, Option 5 is unique in featuring a gradient across households – both because discounts on water and sewerage charges are proportionately linked to Council Tax Reduction, which tapers with income, and because these charges themselves vary by council tax band. Other changes to Council Tax Reduction would also be possible, but these will tend to extend entitlement to higher-income households rather than just benefitting current recipients, most of whom already receive a 100% reduction.
These are by no means the only options available, but they highlight some of the factors that the Scottish Government will need to weigh up when reallocating the TCLP budget, along with the potential impacts of doing so, in a scenario where the two-child limit is abolished.
Time will tell
Whether or not that that scenario will transpire remains unclear. It is possible that the UK Government will take an intermediate approach by relaxing the two-child limit in some way without abolishing it entirely – for example by exempting certain groups, moving to a three-child limit, or introducing a taper.
Mitigating the remainder of the limit would cost less than the planned TCLP – meaning there would still be some savings – but may require more time to be designed and implemented. It is also possible that the Budget will include a commitment to eventually abolish the two-child limit, but not in the coming year, meaning the TCLP would be needed temporarily.
For now, all eyes are on Rachel Reeves – but the focus will quickly turn to the Scottish Government. Keep an eye on our website and social media for more analysis of the UK and Scottish Budgets over the next few months!
Over 40 celebrities have joined anti-poverty charity Trussell in calling on Chancellor Rachel Reeves to scrap the two-child limit in the upcoming autumn budget.
The two-child limit, which restricts support from the social security system to just two children, is punishing children for their existence and forcing families to food banks. Removing the two-child limit in the autumn budget is the most effective way to protect children from hunger, give them a decent start in life, and help them reach their potential.
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Dear Prime Minister,
We are writing to implore that you fully remove the cruel two-child limit which is pushing 109 more children into hardship every single day. Ending it is the right thing to do – we need you to do it now.
The two-child limit, which restricts support from the social security system to two children, even when their parents can work, is punishing children for their existence and pushing families to food banks. We cannot stand by while this continues to happen.
Millions more people are facing hunger than a couple of years ago, and families with children are at particularly high risk. 4 in 10 families with 3 or more children face hunger, around twice as high as the rate for families with one or two children and almost 1 in 3 (29%) food bank parcels provided by the Trussell community go to families with three or more children, despite them making up just 11% of the UK population. This is not right.
Every week, food banks meet parents who’ve been doing everything they can to protect their children from hunger. Skipping meals for weeks so there’s enough for the kids to eat, making games out of wrapping up in blankets to avoid turning on the heating, trying to pretend everything’s okay – but it’s not okay.
Removing the two-child limit is the most effective way to protect children from hunger, give them a decent start in life, and help them reach their potential – there is no time to waste in a child’s life. It is your duty to act on your commitment to tackling child poverty – we need you to fully remove the two-child limit now.
