Overview

In 2017, the Child Poverty (Scotland) Act instituted statutory targets for child poverty to be met by 2030-31. The targets focus on four key measures of poverty: relative poverty, absolute poverty, low income and material deprivation, and persistent poverty. Among these other measures of poverty, the Act set a relative child poverty target of 18% after housing costs by 2023/24 and 10% by 2030/31.

Relative poverty is defined against median UK income and is often the focus for poverty analysis because of the quantity of data available for modelling purposes. Absolute poverty is defined based on the 2010/11 distribution of income in the UK.

There has been clear progress over the last thirty years. However, relative poverty rates have remained at a relatively steady level, around 23-25%, since the child poverty targets were set in 2017.1 For context, rates of child poverty in the UK are generally higher – around 30% in the last few years.

The next set of statistics, due in March 2025, will measure whether the interim child poverty targets  have been met. The interim targets state that fewer than 18% of children should be living in relative poverty in financial year 2023/24.

Significant changes to social security have already come into effect in Scotland, such as the introduction of the Scottish Child Payment, and more are in the pipeline. However, at the time of writing, expectations are that the interim targets are unlikely to be met, and significant additional investments beyond what is currently proposed will be required to meet the 2030 targets.

The Scottish Government’s last four-year child poverty delivery plan will be published in early 2026. The modelling in this report is intended to lay out possible combinations of policy levers that, if maximized, could achieve the child poverty targets by the 2030/31 deadline, along with an estimate of their costs. 

It explores the cumulative effect of:

• More parents working,

• Increasing hours worked and pay rates for working parents,

• Increasing private rent support received by low-income households, and

• Increasing the rate of the Scottish Child Payment.

It also include analysis of the recent announcement to mitigate the UK Government’s two-child limit on certain benefits, primarily Universal Credit.

We use microsimulation modelling to understand the potential impact of each of these policies and how they may interact with each other. The baseline for comparison is the tax and benefit system as it currently is, including recent forecasts and announcements.

Scenario 1: Maximising employment potential among parents

Several scenarios where the Scottish Government effectively uses its policy levers to support more parents into work and improve job hours and pay is modelled.

Scenario 2: Increasing hours

Adds on an increase in hours of work for parents who are already working.

Scenario 3: Ensuring good pay

Ensures that all working parents receive a fair rate of pay.

Scenario 4: Rent support

Adds additional support for households in the private rented sector to cover their rent costs through benefits.

Scenario 5: Topping up with Scottish Child Payment

Models the potential impact of higher rates for the Scottish Child Payment. 

The child poverty targets require that the relative child poverty rate in Scotland be 10% or less by 2030-31; in 2022-23, it was 26%. This report's baseline estimates suggest that, with the current set of tax and benefit policies (including mitigation of the two-child limit), relative poverty in 2030-31 would be around 20%, short of the target of 10%. This baseline includes the effects of the two-child mitigation from 2026/27 announced in December 2024, which we estimate will reduce poverty by around one percentage point.

While the modelling shows that the newly announced mitigation of the two-child limit takes a significant step, it is apparent that substantial additional measures are needed to meet the targets. 

The results highlight the relative contributions of different policy levers as well as their costs. Greater parental employment and pay combined are cost-effective, but cumulatively reduce child poverty by only around 3 percentage points.

These employment policies increase tax revenues and reduce the social security bill, but will also be costly in terms of employability support and childcare provision.

Given the levers available to the Scottish Government, the likelihood is that the social security system will need to provide a further large boost to efforts to reduce poverty. The effect of greater support for housing costs is limited, leaving much of the work to be done through other avenues. 

Authors estimate that the flat rate of Scottish Child Payment would need to be raised to £150 in 2030-31 to reach the child poverty targets in combination with these other policies. Alternatively, a rate of £115 per week, per child plus a per-household premium of £50 for households with a disabled member and or a child under 1 would also achieve the targets at a reduced cost. The per-household premium for specific priority households alone reduces child poverty by 1.3 percentage points at a cost of about £294 million in 2030/31, potentially making this policy a good starting point. 

This analysis illustrates a set of potential options within existing policy levers for reducing child poverty. These options include greater targeting of benefits like the Scottish Child Payment, which has been universal to date to those on certain benefits.

The options we have modelled are of course not the only path to meeting the targets, nor are they necessarily the optimal path. There are potentially many other options that could cumulatively make a big difference – for instance, a Minimum Income Guarantee, rent and housing policies, or further policies to increase benefit take-up. However, the timeframe for interventions to take effect is relatively short, which limits the range of options now available to the Scottish Government if they are to meet the targets. Given fiscal limitations, an investment of this size in child poverty would likely mean cuts in other areas of spending. Additionally, we have largely omitted reserved policy options, which could also make a large difference in combination with devolved policies.

The final Scottish Government child poverty delivery plan is due before the end of March 2026. Within this, the Scottish Government will have to set out the measures that they will take in the period up to 2030/31 and the contribution they will make to meeting the targets. We look forward to the delivery plan, and would urge the Scottish Government to do their own modelling of proposed measures to demonstrate how the targets will be reached.

This final delivery plan will come a few months before the Scottish election. Given the cross-party support for the Child Poverty (Scotland) Act, it will be critical that all parties are able to say how they will meet the targets. Microsimulation modelling like this will be crucial for the credibility of any manifesto policies.