Challenging Scotland’s record on poverty

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by Stephen Maxwell

A new report by the OECD has warned that the UK Government’s public spending cuts could undo the progress made in reducing child poverty over the last fifteen years.

Using the number of children living in households with incomes of less than half the national median as its measure, the OECD’s Doing Better for Families report identifies the UK as having achieved a 7% reduction in the rate of child poverty between the mid 1990s and 2008, the largest  reduction among the OECD’s thirty members.  However it warns that this progress shows signs of being reversed by the severity of the public expenditure cuts now facing the UK.

Even this improvement – attributed to a combination of relatively high economic growth and the poverty reduction policies of the first two Labour governments led by Tony Blair and Gordon Brown – still leaves the UK in the middle of the poverty league at  fourteenth with 10% of its children growing up in poverty.  The majority of the top ten performers are some of the OECD’s smaller members: Denmark with only 3.7% of its children in poverty, Finland with 4.2%, Norway 5.5%,  Sweden 6%, Austria 6.2% , Slovenia 7% and Iceland 8.3%.  The bottom places were taken by Ireland, the US, Turkey and Israel.  

As part of the UK Scotland was not separately identified.  However other sources show that in the  devolution years until the start of the recession in 2007-8 Scotland performed slightly better than the rest of the UK in reducing poverty.  Between 1998- 2008 there was a 3% cut in the total number of Scots living in poverty, a 6% cut in the number of children in poverty and a  2% cut in the  number of  working age people in  poverty.  A 15% cut in the number of pensioners was matched by other areas of the UK.   

In the same period Scotland’s traditionally higher rate of unemployment moved below the UK rate.  Although these improvements coincided with the establishment of devolved Scottish Parliament most experts attribute them to wider developments in the UK economy and UK policy rather than to devolved initiatives.

More recently however there are signs that Scotland may be particularly exposed to the danger identified by the OECD.  Overall Scottish unemployment which had fallen below the UK level in 2007-8 has now increased to just above the UK level.  Under 25 age unemployment is now higher than in 1999.  The poverty rate among workless unemployed adults without children  has risen sharply from 45% in 1996/7 to 58% in 2008/9, 4% higher than in England, reflecting a 20% cut in the real value of their benefits.  While the child poverty rate in Scotland is still lower than the overall UK rate, from 2007/8 it has been increasing more rapidly than the UK rate reaching 26% (by the more stringent UK poverty measure  of 60% of  the UK median), or 260,000 children, by 2010.

The main driver of this small but significant deterioration in Scotland’s relative performance seems to be Scotland’s slightly lower rate of recovery from the recession and the higher level of low paid jobs in Scotland.  According to the Institute for Fiscal Studies the tax and benefit changes introduced in April this year will reduce the incomes of all groups with the biggest proportionate impact falling on the richest and poorest tenths of the population.  Collectively Scotland stands to lose 2.8% of its national income by 2012-13 from the changes, approximately the same proportion as the south-east of England but less than London, Wales or Northern Ireland.  For low income groups the main losses will come from changing the measure of inflation up-rating for benefits, the traditional Retail Price Index to the Consumer Price Index and from cuts in child support payments.

But estimates of these fiscal swings and roundabouts cannot capture the full impact of the UK’s budgetary and economic crisis on poverty in Scotland.  That depends on the availability and quality of jobs, the rate of price inflation at a time when many workers in the private as well as the public sector are facing wage freezes and how far public services are cut in quantity and quality by the cumulative £3.8bn due to be cut from the Scottish budget by 2014-2015.

Most importantly the impact of all the changes generated by the UK’s budgetary and economic crisis on employment, wages, prices, services, taxes and benefits is not directly proportionate to the income lost across the income groups.  A 10% drop in income is much more damaging to someone living on £150 a week than to someone on £1000 a week.  According to the Joseph Rowntree Trust ‘deep poverty’ as measured by those living on less than 40% of the median income has increased by 19% and is now higher than at any time in the last fourteen years.  In Scotland ‘deep poverty’ is a symptom of a conjunction in particular families and communities of multiple economic and social problems among which persistent poor health is a prominent feature.