The welfare reforms that broke the connection between need and support

Published on: 
03 October 2023
Written by: 

Kirsty McKechnie

Welfare rights adviser, Early Warning System

CPAG in Scotland’s Early Warning System has been operating for ten years! Over Challenge Poverty Week we are looking back at some of the social security events in this period, key findings from the Early Warning System and how they have influenced policy and practise. 

Today we are focusing on the welfare reforms that broke the connection between need and support in the social security system. The amount of benefits people are paid is usually calculated according to need in relation to their personal circumstances, but the bedroom tax, benefit cap and two-child limit all introduced arbitrary amounts into benefit calculations that had no relationship to need.  

Bedroom tax 

The bedroom tax was introduced in 2013 reducing the maximum amount of benefit that can be paid in relation to council or housing association tenants who are deemed to have one or more surplus bedrooms. We were delighted when Scottish government committed to mitigating the bedroom tax through discretionary housing payments (DHPs) in 2015, but noted that some people would not be eligible for this help:  

A client started work in December 2013 and her claim for housing benefit stopped accordingly. When her hours reduced in November 2014 she submitted a new claim. This was refused, as once the bedroom tax was applied there was no entitlement to housing benefit (and therefore no entitlement to DHPs). (January 2015)  

The Scottish Government are committed to mitigating the bedroom tax at source in universal credit by stipulating that the reduction for surplus bedrooms will be calculated at 0%. However, no date for implementing the change to universal credit has been agreed with the UK Government yet and until then there will still be a small number of people affected by the bedroom tax who do not get help through DHPs. 

Benefit cap 

The benefit cap is a limit that was placed by the UK government on the amount of benefit that can be paid to people who are receiving housing benefit or universal credit. When it was introduced in 2013, the cap for families was £26,000 per annum, but was then further reduced to £20,000 per annum in November 2016.  

One of the stated aims of the cap is to incentivise people to move into work, however Early Warning System case evidence highlighted that many of the families impacted by the cap would not otherwise be expected to look for work because of disability or ill-health or because they have very young children. For example: 

A lone parent has four children between the age of one and ten, the youngest of whom has recently been diagnosed with a severe disability but is not likely to be entitled to disability living allowance (and therefore exempt them from the cap), until the child is older. The benefit cap limit means her benefits are reduced by over £700 a month. To be able to work the client would require childcare for her four children, including someone who is specially trained to look after the child who is disabled. 

Informed by case evidence gathered through our Early Warning System we called on the Scottish government to use DHPs to mitigate the benefit cap as fully as possible. We shared evidence about:  

  • families whose universal credit is reduced who don’t meet the exemption criteria for the cap because their earnings fluctuate, sometimes just because of the way they are paid, or because someone in the household is waiting for an assessment for a disability benefit, in some cases for over a year,  
  • families who you might expect to be exempt but who are not, such as kinship carers, families who have recently escaped domestic abuse or who have recently been granted refugee status, and the devastating financial hardship of the cap on families who unable to pay their rent have been evicted from their home or have had to turn to foodbanks in order to feed their families, and  
  • different approaches by local authorities to mitigating the cap through DHPs resulting in a ‘postcode lottery’ of support depending on where families live.    

Our case evidence, combined with our social security expertise allowed us to support Scottish government officials to turn our policy call into a deliverable reality, with Scottish government now committed to mitigating the benefit cap as fully as possible since February of this year. 

Two-child limit 

The two-child limit was not introduced until April 2017. It restricts amounts paid to support children in universal credit, tax credits and housing benefit to the first two children in a family (with limited exceptions). The limit can represent a loss of up to £3235, per child, a year.   

Early Warning System evidence highlights that often the circumstances leading to families claiming benefits could not have been foreseen when the younger children were conceived. For example 

A woman who is pregnant with her fourth child had to leave her work recently due to ill health. She gets child tax credit for her existing three children but will not get a child element (worth up to £2935 a year) for the new baby due to the two-child limit. (April 2021) 

A dad became a lone parent to four children when his wife died. He only gets child elements in his UC for the older two children due to the two-child limit. (January 2022) 

The evidence also demonstrates that the policy does not take into account that family dynamics may change over time. 

A couple with two children recently took in a third child from a previous relationship. As one of the children was born after 2017, the two-child limit applies and the couple will not receive any additional universal credit in respect of the third child. (July 2021) 

As more children are born after 6 April 2017, more households will become subject to the two-child limit and fewer households will be subject to the benefit cap as they will not be awarded enough benefit to be capped in the first place. 

We welcomed Scottish government’s commitment to better mitigate the UK government’s benefit cap but it is vital that we look ahead and consider how we can mitigate the increasing number of households that will be subject to the two-child limit as well. The most practical and effective way to mitigate the two-child limit in Scotland is through an additional payment of Scottish child payment to all households who have a third, or subsequent, child born after the 6th April 2017.  Better still the UK government should scrap both the two-child limit, the benefit cap, and the bedroom tax to restore the relationship between need and support. 

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For more information about the Early Warning System please contact [email protected] 

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