Weekly update: the impact of the Scottish Budget on Homelessness, Child Poverty, Social Care and more…

The Scottish Government published a number of documents alongside the budget yesterday, including a distributional analysis which considers the impact of announcements on different types of households.  

 The document is quite focussed on the tax and social security system, and concludes that “households in the lower half of the income distribution are around £450 better off a year than they would be under UK Government tax and social security policies.”  

In this blog, we consider a few areas of social policy and the potential impact the announcements will have on different types of households.  

Child poverty 

The main headline from the budget is the Scottish Government’s commitment to mitigate the two-child limit from 2026-27. The two-child limit applies to reserved benefits including Universal Credit and some tax credits, and means that households do not receive additional benefit amounts for the third or later children.  

 Many third-sector organisations have called for the UK Government to abolish the two-child limit, so mitigation has been welcomed as a means of directly reducing child poverty. This will be welcome progress given that official statistics show the relative child poverty rate stagnating, despite targeted policies like the Scottish Child Payment.  

 Our initial modelling shows that mitigation of the two-child limit in Scotland could keep approximately 15 thousand children out of relative poverty (after accounting for housing costs) in 2026-27, at an initial cost of around £130 million. These figures are broadly consistent with initial estimates by the Scottish Fiscal Commission but the figures could change depending on how the policy is operationalised. For example, these figures assume that the UK wide Benefit Cap would still apply so that some families with three or more children may get no, or limited, increases in payment if the two-child limit is removed. We have not seen any confirmation either way from the Scottish Government about the overall benefit cap. 

The two-child limit only applies to children born after 2017. As time goes on and the policy applies to more children, the costs of mitigation will rise.  

The decision to mitigate the two-child limit was made too late for the Scottish Fiscal Commision to include in its forecasts for future years. Although they have provided some preliminary indication, the full commitment is not included in their estimates of future pressures on the Scottish Budget.  

Other announcements in areas like housing and health are also likely to impact on child poverty and wellbeing, although the size of the effect is difficult to estimate. Investment in affordable housing in particular is likely to decrease the poverty rate when measured after housing costs. However, it will likely be several years until the properties are available and have an effect on housing costs.  

Homelessness 

The Scottish Government’s efforts to tackle homelessness and expand affordable housing face serious challenges. The £768 million in funding announced by Shona Robison, intended to support the delivery of over 8,000 new properties for social rent, mid-market rent, and low-cost homeownership in the coming year, largely offsets previous budget cuts rather than signalling substantial new investment.  

Last year, 242 people experiencing homelessness in Scotland died, and the ongoing issue of inadequate temporary accommodation continues to affect many families, thus emphasising the urgent need for more decisive action. The budget document states that amendments to the Housing Bill will be brought forward to “clearly set out how rent controls apply and place duties on local authorities and other relevant bodies to prevent homelessness earlier”.  

While these steps show intent, it remains to be seen whether the measures will be sufficiently robust to address the growing crisis. Furthermore, the £4 million allocated for homelessness prevention pilots is likely to be regarded as insufficient, especially given that homelessness applications and assessments in Scotland are at their highest levels since 2011-12, and the 16,330 households in temporary accommodation in 2023-24 marked a record high. 

Social Care 

The record £21bn investment in Health and Social Care was the headline figure from the Scottish Budget. Whilst most of this was investment in health services, the record funding is likely to mean that the government will meet their target of increasing spending by 25% over this parliament, two years early.  

The government certainly are claiming that this has been reached, although there is the complication that social care is delivered by local councils so it is not necessarily in the Scottish Government’s control how much exactly is spent on social care. Also, as an aside, this target for a cash increase was set before the large increases in inflation – which highlights that commitments should generally be made in real terms if they are to be meaningful – the increase will not deliver as much social care as would have been envisaged when the target was set.  

Much of the discussion surrounding the employer National Insurance Contribution rises highlighted that the social care sector was likely to be significantly impacted, particularly given that much of the delivery is done outside of the public sector. As we highlighted on Wednesday, given the budget did not account for this, how this affects social care providers both public and independent remains to be seen.  

There was also some discussion on reform, and the need to improve the NHS. Despite this, reform of the health sector is where it ended, with little in the way of discussion on social care reform, or any mention at all of the National Care Service.  

What we know is that the implementation of the service has been delayed, until 2025, however with no funds allocated for implementation of the service for 2025/26, and 2026 an election year, it is unlikely we’ll see any significant shifts in the service now. 

Employability 

The 2025-26 Scottish Budget provides a 4.3% increase in employability services compared to 2024-25, from £101.19 million to £104.45 million.  

This change follows on from a reshuffling of funding from 2023-24, which initially budgeted £135.15million for employability and training. Some of the difference comes from redirected money: around £20million was redirected into Local Government budgets and Lifelong Learning and Skills budgets during the 2023/24 Autumn Budget Review, for instance. That said, employability services in 2023/24 also saw an additional  £10 million cut.   

There are now three funded areas within this budget: No One Left Behind (NOLB), Fair Start Scotland, and general fair work and labour market strategies. The majority of the total funding, and the majority of the change in funding, was applied to NOLB, which provides funding to local authority employability services. Fair Start Scotland, the previous employability support package, closed to new applicants in 2024, with ongoing funding in place to support people that are currently using the service.  

Between April 2023 and March 2024, 21,500 people received support from NOLB-funded employability programmes. Since the start of the programme in 2019, around 31% of all users entered into employment. People using these services can achieve other positive outcomes, such as gaining a qualification, entering training, volunteering, or re-engaging with school. 

Watch this space… 

There is so much detail in the Scottish Budget and the associated documents published on Wednesday afternoon… not least all the helpful analysis published by the Scottish Fiscal Commission.  

We’ll keep digging through the documents so you don’t have to – look out for more analysis next week!