Ending two-child benefits cap in Scotland ‘will cost nearly £200m by 2029’

The scrapping of the two-child benefit cap in Scotland will cost the Scottish Government nearly £200 million a year by the end of the decade, the Scottish Fiscal Commission (SFC) has said.

The policy will cost £155 million in 2026-27 before rising to £198 million in 2029-30, according to the independent economic forecaster.

It said that, by 2030, payments will be made for about 50,000 children in Scotland. About 43,000 could benefit from the measure in 2026.

The Finance Secretary announced the decision to mitigate the UK Government policy during her budget on December 4.

But the mitigation will not kick in until 2026 – the year of the Holyrood election – with the Government saying it needs time to set up the system.

Some £3 million was allocated during the current budget to begin setting up that system.

The two-child benefit cap, introduced by the Tories in 2017, prevents parents from claiming any in and out-of-work benefits for more than two children, with some exemptions.

The SFC warned that the decision to mitigate the policy marked a further divergence between Holyrood’s block grant from the Treasury and the amount it spends on social security.

In December, it was reported that the gap between social security spending and the block grant adjustment (BGA) would be £1.5 billion in 2026-27. This will rise to £1.6 billion after the two-child cap mitigation is taken into account.

The SFC said spending on benefits in Scotland is taking up an increasing share of the Scottish Parliament’s budget – 14.9% of spending by 2029-30 – that will mean a “corresponding reduction in the amount available to fund other public services”.

It added: “This reflects the Scottish Government’s approach to disability payments and its priorities to use the devolved social security system to support those on low incomes and pensioners and tackle child poverty, but it does mean that spending in other areas is constrained.”

The SFC said it could not provide a full costing of the mitigation of the cap during the budget because the Scottish Government only told it about its plans a week ahead of time.

First Minister John Swinney has said the mitigation will help lift thousands of Scottish children out of poverty.

He has continued to urge Prime Minister Sir Keir Starmer to scrap the policy.

The Labour leader said that, while he was opposed to the measure, the UK Government could not afford to end it right now.

Scottish Labour leader Anas Sarwar has also voiced his opposition to the policy.

On Tuesday, he said his party would abstain from the Scottish budget vote – but added that he could vote it through if it committed to ending the two-child cap this year.

The Scottish Government has been approached for comment.