No evidence Scottish child payment really encourages worklessness, study finds

There is no evidence the Scottish child payment (SCP) meaningfully encourages parents to avoid work, a study has found.

The research from economists and policy academics at Glasgow University, York University and the London School of Economics (LSE) found deprivation and food insecurity would be up to 9% higher without the benefit.

The Child Poverty Action Group (CPAG) said the study backed the case for the Scottish Finance Secretary to increase the payment above inflation in her budget in January.

The charity said that investing the estimated £155 million in Holyrood savings from the UK Government’s decision to scrap the two-child benefit cap could fund a hike in the SCP from £27.15 to £37.50.

It said this would lift another 10,000 children out of poverty, with 40,000 already having been lifted by the creation of the policy.

The study found “statistically significant reductions in both child material deprivation and food insecurity relative to England after the introduction of the SCP”.

It also found that “concerns that the SCP creates work disincentives are overplayed”.

By comparing trends north and south of the border the researchers found that the effects of the payment were “considerable in size” and “that both material deprivation and food insecurity would have been between eight and nine percentage points higher in Scotland without the SCP”.

The findings are based on analysis of the Department for Work and Pensions’ UK-wide Family Resources Survey.

Alongside interviews with low-income families in Scotland and in England they offer the first comparative study across UK nations of the impact that the Scottish child payment is having.

John Dickie, director of the CPAG, said: “It is vital that the Finance Secretary takes note of these findings in considering her budget options.

“She has promised to spend the money freed up in her budget by the abolition of the two-child limit on the most effective measures to further reduce child poverty.

“The evidence is clear and mounting that increasing the Scottish child payment is the most straight-forward, cost-effective and impactful tool she has.”

During the study, researchers explored the impact of a potential “cliff-edge” facing claimants – the point where a small increase in earnings could take families above the eligibility threshold for SCP, leading to an overall loss of income.

First Minister John Swinney has previously raised concerns that such a cliff-edge could act as a disincentive to parents to increase their earnings, and that any boost to the value of the payment would increase the disincentive.

However, the researchers found no evidence to suggest that the Scottish child payment has reduced labour supply.

The analysis shows that only a small share of families have incomes that position them close to the cliff-edge.

A comparison of labour market participation and hours worked among families on both sides of the border found no labour supply impact in practice, including among second earners.

Professor Emma Tominey, from the University of York, led the research. She said: “Our study of families’ experiences in England and Scotland is clear in suggesting that the Scottish child payment is having a significant impact in reducing family hardship, child deprivation and food insecurity.

“Fears that the payment creates a work disincentive are also overplayed. There is no evidence that the SCP creates meaningful work disincentives – partly because for many families the cliff-edge exists at such a high level of hours worked as to make any potential constraint non-binding.”

LSE Professor Kitty Stewart said: “Our results show that things are easier for Scottish families relative to English families as a result of the SCP.

“But wider pressures mean material deprivation is still rising both north and south of the border – just less quickly in Scotland.

“To make a bigger difference, the Scottish Government should build on its investment so far and increase the value of the payment.”

The Scottish Government has been approached for comment.