Poor outlook: the political debate on poverty in Scotland

Written by Liam Kirkaldy on 6 January 2016 in Inside Politics

In the age of austerity, poverty has come to frame Scottish politics and this looks set to continue

“There is only one guaranteed way to reverse the growing number of children living in poverty.” So promised a Yes campaign ad. Featuring a child with a ragged skirt and dirty legs, it urged voters “let’s become independent before 100,000 more children are living in poverty”.

Given how child poverty has persisted throughout Scotland’s history, it seemed a pretty big thing to ‘guarantee’.

But for many of those deciding where to put their cross in the referendum – at least for those unmoved by the flag-waving on both sides – the effect of a new constitutional model on poverty levels would have weighed heavily on their decision.

For the Yes campaign, independence would hold the key to tackling inequality, even if it was never exactly clear how, beyond talk of Scots ‘doing things differently’ and claims a new state would mean the end of the centre-right.

Better Together, meanwhile, talked of ‘pooling and sharing resources’ and of the UK as a redistributive body, along with dark warnings over the supposed dangers of independence.

The claims of the Yes campaign, of course, remain hypothetical. Unless another referendum is staged, and the campaign does better than it did last year, then no one will know if a Yes vote would have reversed growing numbers of children living in poverty.

But we know what a No vote has meant, and for the poorest in Britain, the reality is pretty bleak.

In 2012-13, the UK’s biggest foodbank charity, the Trussell Trust, provided three days’ worth of food to more than 347,000 people.

In 2013-14, that number rose to 900,000 people.

In 2014-15, it exceeded a million.

In Scotland, the latest figures showed a 17 per cent increase in just six months, with numbers exceeding 60,000. The trust said that, on average, people needed 1.7 referrals, which would mean around 35,000 individuals received help.

Almost a third of the recipients were children, and the numbers are expected to rise over the winter as fuel costs stretch those on low incomes even further.

The most common reason for needing to use a foodbank was a delay in receiving benefits payments.

As Ewan Gurr, Trussell Trust Scotland network manager, put it: “Difficulties related to welfare benefits are still driving the majority of people to our Scottish foodbanks, but now one in five of those referred is on a low income.

“Among that number is a growing body of people in low paid employment who are simply unable to make the pay cheque stretch far enough when crisis hits.

“The increasing instability of the oil, gas and steel industries has already led to significant numbers of people being made redundant and figures also show that unemployment has risen in Scotland while decreasing in the rest of the UK.”

Scottish Government stats show that in 2013-14 940,000 people, or 18 per cent of the population, were living in relative poverty once housing costs were taken into account.

That is actually 60,000 fewer than the previous year, but still higher than it had been in 2010-11.

The same is true for absolute poverty figures. The number has fallen by 70,000 on the previous year, but it is still higher than it was in 2011-12.

Inequality too is high, with the least wealthy 30 per cent of Scottish households owning just two per cent of all personal wealth and the richest two per cent of households owning 17 per cent.

Alex Neil, Cabinet Secretary for Social Justice, said: “It’s not right that the wealthiest 10 per cent of households have 20 times more wealth than the least wealthy 30 per cent.

“We need concerted action to tackle inequality, yet even the UK Government’s own analysis shows that households with the lowest incomes are bearing a greater burden from public spending cuts – an astonishing admission that austerity is hitting the poorest the hardest.”

The evidence from the Joseph Rowntree Foundation (JRF), contained in its 2015 report ‘Monitoring Poverty and Social Exclusion in Scotland’, is also mixed.

On the one hand, 230,000 fewer people were living in poverty in 2012-13 than had been a decade before.

The number of children living in poverty fell from 33 per cent in 1996-97 to 22 per cent in 2012-13 and poverty among pensioners dropped even further, from 33 per cent to 11 per cent.

But adults under 30 have suffered. In fact, the demographic is now more at risk than any other of living in poverty in Scotland.

Aleks Collingwood, policy and research manager at JRF, says: “Scotland has a slightly lower overall poverty rate than the UK as a whole (19 per cent compared with 21 per cent in 2012-13). Lower housing costs in Scotland than England in both social rented and private rented accommodation certainly make a contribution to this. It is also possible that lower levels of low pay and in-work poverty in Scotland have an effect.”

The possible solutions aired by JRF include increasing opportunities for in-work training, building more affordable homes near places of work, more effort to reduce the educational attainment gap, and better communication with jobseekers, so that sanctions are only used as a last resort.

It also recommended the introduction of the living wage.

And so it might have been expected that George Osborne’s promise to introduce a national living wage, made in his July budget, would have been welcomed.

Speaking at the dispatch box in front of a packed House of Commons, Osborne said: “In the past five years, we have taken the tough choices to drive down our borrowing, to make our business taxes competitive and to reform welfare. It is because we have taken these difficult decisions, and overcome the opposition to them, that Britain is able to afford a pay rise.

“Let me be clear: Britain deserves a pay rise and Britain is getting a pay rise. I am today introducing a new national living wage. We will set it to reach £9 an hour by 2020. The new national living wage will be compulsory. Working people aged 25 and over will receive it. It will start next April at the rate of £7.20.”

The Tory benches were jubilant. Iain Duncan Smith, the Secretary of State for Work and Pensions, celebrated like a football fan.

The problem though, is that the living wage – which around 2,000 firms pay their staff voluntarily – is currently set at £8.25 per hour, well above the Chancellor’s £7.20.

Rhys Moore, director of the Living Wage Foundation, seemed sceptical of the statement.

He said: “We are delighted that the announcement made in the Budget will see over 2.5 million workers receive a much needed pay rise. This is a massive victory for Citizens UK and those communities, workers and business leaders who have campaigned for a living wage since 2001.

“We agree with the Chancellor that work should be the surest way out of poverty. However, this announcement raises several important questions.

“Is this really a living wage? The living wage is calculated according to the cost of living whereas the Low Pay Commission calculates a rate according to what the market can bear. Without a change of remit for the Low Pay Commission this is effectively a higher national minimum wage and not a living wage.”

Meanwhile, only those over 25 will be eligible anyway.

Still, better than nothing. But while the announcement represented a step forward in combating in-work poverty, with the budget including £12bn in cuts to welfare spending, it was never going to be all good news.

The biggest fallout surrounded tax credits, with cuts amounting to £4.3bn a year. For families, many of whom are already struggling, it would have meant losing £1,300 per year.

So while Osborne asserted that, because of his national living wage trick, the budget would leave most people better off, independent analysis suggested otherwise.

Pressure built up and the House of Lords rejected the move, voting by 289 to 272 to provide full financial redress to those affected, while also stalling the plans until an independent study of the impact was carried out.

Still, Osborne’s response came as something of a shock. The Chancellor announced his intentions to cut tax credits in July. In November, he stood in the exact same spot and performed a U-turn.

He said: “I have listened to the concerns. I hear and understand them. Because I have been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether. Tax credits are being phased out anyway as we introduce universal credit.”

Maybe it was a victory for Jeremy Corbyn – or indeed for his shadow chancellor, John McDonnell, who reacted to Osborne’s statement by waving a copy of Chairman Mao’s Little Red Book.

However, as the Institute for Fiscal Studies (IFS) pointed out, the tax credit U-turn may have little effect in the long term, given it is already being replaced by universal credit, and universal credit will not be affected by the November announcement.

In short, huge cuts are still coming, with analysis from the IFS demonstrating that the UK Government’s proposed package of tax and benefit changes will reduce household incomes by an average £455 per year.

But the figure is somewhat misleading, because the effects will not fall evenly across the population. The biggest losers, according to the IFS, will be low-income households with children.

The rich – those in better-off households and pensioners – will feel far more removed from these cuts.

The report says: “Overall, poorer households lose out from these changes, and lose out more than households around the middle of the income distribution. We would therefore expect the direct impact of these changes to be to increase the numbers of households below both absolute and relative poverty lines, relative to a scenario where these changes had not been introduced.”

And so in Scotland the national debate will continue to be dominated by what the Chancellor’s continued commitment to austerity economics will mean for the country’s poorest families, as it has been since the country voted to remain a part of the UK in September 2014.

Nicola Sturgeon has been clear: she wants her record in government to be judged on how she goes about tackling inequality.

As she put it in her 2014 conference speech, upon taking over as first minister: “A strong economy depends on a having a healthy, happy, well-educated and well-paid population, to provide the workforce and the customers that businesses need to succeed.

“Right now, one million of our citizens – 220,000 of our children – are living in poverty. In the 14th richest country in the world, that is, quite frankly, a scandal.

“So let me promise you this. Tackling poverty and inequality, and improving opportunity for all,  will be my personal mission as your first minister.”

It looked like a play for Labour voters – and a pretty successful one, it later transpired.

And so Kezia Dugdale did much of the same in her first conference as leader. Speaking in Perth, she reached deep into the party’s history to pull out its sense of purpose.

Dugdale said: “Keir Hardie, whose memory we honour, a century after his death, stood on Irvine Moor with hundreds of trade unionists.

“And proclaimed, for the first time, that working people demanded our own Labour Party in parliament.

“There was no need (the enemies of progress said then, as they say now) for a political party which exists solely in order to address inequality in society and to advance the interests of working people and their families.

“It was a lie then. And it is a lie now.”

Turning to educational inequality, she added: “If there is a silver bullet to slay the monsters of poverty, inequality and ignorance then it is education.

“If there is a magic key to a fuller and more fulfilling life then it is education.”

Interestingly, Sturgeon has said much the same thing, telling education leaders: “Let me be clear, I want to be judged on this. If you are not, as First Minister, prepared to put your neck on the line on the education of our young people then what are you prepared to do. It really matters.”

If Sturgeon and Dugdale really care about inequality, it makes sense they both focus on attainment.

As a JRF report said last year, “there is clear evidence of a persistent gap in attainment between pupils from the richest and poorest households in Scotland. This gap starts in pre-school years and continues throughout primary and secondary school. In most cases, it widens as pupils progress through the school years.

“Most importantly, the poverty attainment gap has a direct impact on school-leaver destinations and thus the potential to determine income levels in adulthood.”

Meanwhile the transfer of new powers to the Scottish Parliament will provide limited new levers with which to protect Scotland’s poorest people.

Moving forward, these powers will bring new debates over how devolved tax levers could be used to top up welfare payments, or fund programmes aimed at improving educational outcomes in deprived communities.

But while the technicalities of the debate may change, its substance will likely stay the same.

And so Scottish politics sits in an odd place. On the one hand, those 940,000 people living in poverty in Scotland, already in desperate trouble, seem to be facing a perfect storm in the shape of further spending cuts and low economic growth. On the other, if the rhetoric coming from both the SNP and Scottish Labour is to be believed, there has rarely been a time in Scottish politics when the commitment to combating inequality was so great.

The issue frames Scotland’s political debate. It did so in the referendum and it does so now. How a new constitutional model will impact on foodbank queues will have guided the decisions of many on 18 September 2014 and, judging by the rhetoric from Labour and the SNP, it is still the reference point for the ongoing back and forward over the future of devolution.

As long as acute poverty persists across Scotland, questions remain as to how meaningful both parties’ words are unless translated into purposeful policy that influences change.

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