Poverty in Scotland: Time to share

Scotland is in the grip of a poverty crisis.

In the period from 2017 to 2020 just over a million people – a fifth of the population – were living in relative poverty, according to Scottish Government statistics, with close to half of those (40 per cent) living in households that had no certainty over being able to put food on the table. Though levels of pensioner poverty had levelled out in the years since the recession, child poverty rates had continued to rise, going from just over a fifth (21 per cent) in 2010-13 to just under a quarter (24 per cent) last year.

The figures may appear stark, but Neil Cowan, policy and campaigns manager at the Poverty Alliance, warns the true picture is likely to be a whole lot worse.

“That one million figure doesn’t include the impact of the pandemic – it doesn’t cover from March 2020,” he says. “Next year’s figures will reflect that and I’d expect those to be higher. Before the pandemic we had a million people living in the grip of poverty. For people already living in poverty the grip has really tightened but a lot of folk have also been tipped in for the first time.”

There are a number of reasons why so many people were living such financially precarious lives in the lead-up to the pandemic, but Cowan says that by far the biggest driver was the UK Government’s austerity programme, which began in the aftermath of the financial crash. When the global economy was brought to its knees by the collapse of large financial institutions, then chancellor George Osborne’s solution was to make large-scale cuts to public spending that resulted in libraries being closed, public sector pay being frozen and benefits being slashed.

His mantra was that “we’re all in this together”, but Cowan says in reality the highest price has been paid by those at the bottom of the socio-economic scale, many of whom have seen their incomes plummet after being moved from a multi-layered system of benefits that helped poverty fall sharply in the pre-crash years onto the single – and controversial – Universal Credit payment.

The social security system is supposed to protect people from poverty but actually it drags them into it

“Over the last decade the key thing really has been the social security system at the UK level,” Cowan says. “From 2010 we have seen a profusion of policies from the UK Government that have driven people into poverty. There’s the benefit cap, the two-child limit, the benefit freeze – which lasted for several years – and things like the five week wait for Universal Credit, which drives people to foodbanks.

"More recently there has been the £20 a week cut to Universal Credit – the government increased it by £20 in response to the pandemic, which was recognition that it wasn’t adequate – and that’s having a big impact. The social security system is supposed to protect people from poverty but actually it drags them into it.”

For Morag Treanor, deputy chair of the Poverty and Inequality Commission, an independent body that provides advice and scrutiny to Scottish ministers, the problem goes further than that. She says that “subtle changes” to the benefits system – such as using the consumer price index rather than the higher retail price index when linking increases to inflation – mean payments have reduced in real terms over and above any nominal cuts, while problems in the labour market and high levels of debt are pushing more and more people further into poverty.

“Employment and earnings also impact hugely on poverty,” she says. “Since the recession of 2008 the UK has managed to keep a relatively high level of employment so it looks good on paper, but the nature of those jobs has changed with zero-hours contracts and other insecure contracts. In the decade up to 2008 wages increased by around 17 per cent in the UK; in the decade since they have increased by about 0.4 per cent. People in work are earning relatively less while costs are rising hugely.”

When it comes to debt, Treanor says the Department for Work and Pensions (DWP) is now the largest creditor of individuals, with everything from rent arrears, council tax arrears and school meal arrears meaning “public debt is huge, way bigger than any commercial debt”. These so-called zombie debts never get taken off the DWP's books and, because they get taken off people's benefits at source, collecting them pushes already vulnerable people further into poverty.

The fact the UK Government is not doing anything to alleviate the situation is, says Elaine Downie, co-ordinator of Faith in Community Scotland’s Poverty Truth Community, making extremes of poverty even worse. While the statistics show that, proportionally, there are more people living in poverty than a decade ago, she notes that the numbers do not reveal how that poverty is impacting on an individual level.

“In the last 10 years I’ve seen it get harder for people and I’ve found that really distressing,” she says. “I’ve seen people really, really desperate. We’re not a support agency and we don’t give out food or clothes, but we have people coming to us who are really desperate. We are signposting and we do what we can, but that’s something that wasn’t happening 10 years ago.”

The UK Government has reserved powers and reserved responsibility so it’s perfectly legitimate to point out their failings, but the Scottish Government and local government have massive powers as well

In its annual report on poverty in Scotland, social change organisation the Joseph Rowntree Foundation (JRF) said that “families all over Scotland need [the Scottish Government] to do more and do better” to help them out of the poverty trap. Yet Chris Birt, associate director for Scotland at the JRF, says that because the benefits system is largely reserved, too often the response from Holyrood is to point the finger at Westminster while Westminster’s response is to say that if the Scottish Government was that bothered it could use the welfare powers it has had at its disposal since 2016.

“The UK Government has reserved powers and reserved responsibility so it’s perfectly legitimate to point out their failings, but the Scottish Government and local government have massive powers as well,” he says. 

Noting that Scottish social security powers should not be used simply to mitigate against cuts made at Westminster, Birt says the introduction of a minimum income guarantee, “which the Scottish Government is playing around with”, would be one key way to reduce poverty levels. “Setting a floor below which no one will drop is crucial because then you’re using social security as a public policy tool,” he says.

Targeted policy changes can make a considerable impact. Mubin Haq, chief executive of abrdn Financial Fairness Trust (formerly the Standard Life Foundation), a charitable organisation focused on promoting financial wellbeing, says that pensioner poverty, which was sitting at 31 per cent in the 1990s, has stabilised at a much lower level in recent years thanks to the introduction of the so-called triple lock by the coalition government in 2010. Though poverty levels among Scottish pensioners have risen slightly since then, Haq says the measure, which guarantees the state pension will increase annually in line with the higher of inflation, average wage rises or 2.5 per cent, has provided a welcome safety net.

“Pensioner poverty in Scotland is 14 per cent,” Haq says. “That’s five percentage points lower than everyone else and that’s a success story.”

The Scottish Government has already made some similar moves of its own, doubling this month’s instalment of the Carer’s Allowance Supplement – a twice-yearly Scottish top-up to a UK-wide benefit – to £462.80 and last month announcing that the Scottish Child Payment, which is currently paid to low-income families with children under the age of six, will double to £20 a week from April next year.

But while the increase to the child payment in particular has been welcomed, Birt notes that, as the Scottish Government has set itself a target of reducing child poverty levels to 18 per cent by 2024 and 10 per cent by 2030, it does not go nearly far enough. Increasing it to £40 would possibly enable the government to hit the interim target, but Birt stresses that no legislature should be relying on social security measures alone to reduce poverty rates.

The government needs to join the dots. Housing, transport, childcare, and other costs of living need to be made easier, cheaper and seamless

Action needs to be taken in other areas so that people on benefits can afford the laptop and broadband that will enable them to complete the college course that will improve their employment prospects; public transport needs to be cheap enough and connected enough for them to be able to attend job interviews; and childcare needs to be affordable and accessible enough to be of benefit to them when they secure a job. All these areas need to be tackled alongside the social security issue, Birt says, if Scotland is ever to stand a chance of reducing its poverty rates. 

Treanor agrees. “We need to sort housing,” she says. “We need more affordable housing. There needs to be more done to make things more affordable for tenants in the private rental sector too.

"Employment is key. It’s not good enough to say the UK Government controls employment law - which it does – when the Scottish Government has some levers at their disposal. There is currently discussion on how to use public contracts to put in conditions and requirements saying those bidding have to pay the living wage.

"Transport is key. Often where people live, especially in peripheral, poorer areas, is not well served by transport or it doesn’t take them to the centres where the jobs are.  The government needs to join the dots. Housing, transport, childcare, and other costs of living need to be made easier, cheaper and seamless.”

Haq adds that if the Scottish Government really wanted to be radical, it could introduce legislation aimed at better sharing the rewards generated within the companies that are based here.

“Are those rewards being fairly shared?,” he asks. “We did some work with the High Pay Centre on pay ratios and found really large differences between what was being given to those at the very bottom and those at the very top, but a very small change could make a really big difference to what those at the bottom get. If you take three per cent from the pay of those in the upper quartile of FTSE350 companies you could give a £2,500 pay increase to those in the bottom quartile. It’s quite substantial. It couldn’t be done overnight, but how we share rewards really needs to be addressed.”

In its poverty report the Joseph Rowntree Foundation likened the poverty crisis in Scotland to the climate emergency, in as much as it is something that needs to be dealt with at speed to avoid serious repercussions further down the line. Though the Scottish Government’s 2030 child poverty target looks just as ambitious – and just as likely to be missed – as its net-zero one, Birt says the fact it has pledged to meet them in tandem shows just how committed to positive change it is. The challenge now is to bring it all to fruition.

“It’s good that it’s aligned with the climate change targets,” he says. “If all the parties are signed up to that and they are all signed up to the child poverty targets that’s a vision for a radically different Scotland. We can get there but we need to make some difficult decisions along the way and we need to loosen the grip of people on the highest incomes, with the highest wealth and the most power. If we can share the income, wealth and power we will have that low-poverty society and it will be a better society than it is today.”