Scottish government to end two-child benefits cap from March

The Scottish government will effectively scrap the two-child benefits cap north of the border from March next year, ministers have announced.

The UK-wide policy prevents parents from claiming universal credit or child tax credit for more than two children, with a few exemptions.

The Scottish government will mitigate the cap by offering payments to affected families, with applications opening on 2 March 2026.

Social Justice Secretary Shirley-Anne Somerville said the move would help keep 20,000 children out of relative poverty.

The payments are due to start two months before next year's Scottish Parliament election.

The two-child cap prevents most families from claiming means-tested benefits for any third or additional children born after April 2017.

It was introduced by Conservative ministers as part of cost-cutting measures. It has been kept in place by Sir Keir Starmer's Labour administration.

However, Labour ministers have indicated in recent months that they could scrap the policy.

Somerville told BBC Scotland News: "Families can't wait any longer, they've waited for the UK government and there's been no action.

"That's exactly why the Scottish government is stepping in."

The mitigation payment will be offered as a separate benefit, administered by Social Security Scotland.

Somerville said it was expected to cost between £140m and £150m in the first year, but that would represent an "investment" in children and families struggling with the cost of living.

The Scottish government is already spending £1.5bn each year to ensure welfare north of the border is more generous than in the rest of the UK.

Asked whether the outlay on social security was sustainable, Somerville said: "We know that this is a challenging fiscal settlement but we know we need to invest in people and that is exactly what this policy will do."

The minister said applications for the benefit would open 15 months after the government announced it would mitigate the cap, making it the quickest delivery of a social security benefit in Scotland.

The UK government has been asked to comment.

In its Budget announcement last year, the Scottish government vowed to provide payments to families affected by the policy by April 2026, or earlier if possible.

It said it needed data and assistance from the UK government before it could introduce the payments.

The Scottish Fiscal Commission has estimated that 43,000 children in Scotland will benefit from mitigation of the cap in 2026-27. It predicts this will cost £155m in that year, rising to almost £200m by 2029-30.

The Institute for Fiscal Studies has estimated that mitigating the policy would reduce relative child poverty in Scotland by 2.3 percentage points, equivalent to 23,000 children.

The think tank described removing the cap as a "highly cost-effective policy", with an estimated annual cost of £4,500 per child lifted out of poverty.

However, it has also warned mitigation could weaken incentives to work because some of the lowest-paid workers could earn more on welfare than in employment.

The government's announcement was welcomed the Child Poverty Action Group in Scotland.

Director John Dickie said: "It is absolutely right that the Scottish government acts to effectively scrap the UK government's two-child benefit limit in Scotland.

"Families affected, most of whom are working, are facing real hardship and the sooner these payments can be made the better."

He also called on the UK government to scrap the policy "as a matter of utmost urgency".

Claire Telfer, head of Save the Children Scotland, said: "The social security system and the economy just aren't working for too many families, who have been overlooked by politicians and are struggling to get by.

"Positive policy choices like this which invest in childhood can help to rebuild trust in politics, and make a real difference to families' everyday lives.

Prime Minister Sir Keir Starmer has previously said he would consider "all options" to tackle child poverty.

His government is expected to announce its decision on the cap in autumn, when it publishes its child poverty strategy.