More action needed: Cost-of-living crisis is squeezing households like never before
The first warning sign of the cost-of-living crisis was the energy price cap rise last October. At the time, the UK Government accepted the winter of 2021-22 would be “very difficult” for many families as the default tariff rose to an average £1,277 per year.
Since then bills have increased astronomically, with the price cap now at a record £1,971 a year and estimated to rise again to a whopping £ 3,582 in October, according to research firm Cornwall Insight. Sky-high energy bills are the biggest contributor to record inflation levels, but food and fuel prices are also higher. The Bank of England is now warning inflation could hit 11 per cent within months – and, importantly, salaries are not keeping pace.
Half of all households in the UK say their overall financial situation is worse than at the start of the pandemic, according to the Abrdn Financial Fairness Trust’s tracker. It also found 4.4 million households (one in six) are in “serious financial difficulty” as of June. “This is the first substantial deterioration we have seen since tracking people’s finances when the pandemic started. Times are tough for everyone, but it’s those on the lowest incomes who are particularly feeling the effects of rising prices,” Mubin Haq, the Trust’s CEO, said.
Indeed, for many the cost-of-living crisis will be far tougher than the pandemic. Interventions like the furlough scheme and the Universal Credit uplift had a positive effect on poverty rates across the UK, with the latest data from Loughborough University research indicating the number of people in relative poverty fell by two percentage points to 20 per cent in 2020-21, while child poverty fell by four percentage points to 27 per cent. But the End Child Poverty coalition, which commissioned the research, warned that the reversal of the Universal Credit uplift “will have, in turn, reversed this beneficial effect”.
The Scottish Government has moved to alleviate some of the pressures facing families, and the results of that are clear in the report. Scotland has the lowest rate of child poverty in the UK at 21 per cent.
As well as passing on the one-off payment from the UK Government, the Scottish Government doubled the Scottish Child Payment, brought in “bridging payments” and introduced Covid hardship payments.
In March, it also published Best Start, Bright Futures – its child poverty plan for the next four years. In addition to social security, it talked up efforts to improve employment services for parents, including a new Parental Transition Fund to cover the costs of re-entering the labour market, and plans for more benefits in kind, like childcare, digital connectivity and transport.
However, modelling by the Fraser of Allander Institute for the Joseph Rowntree Foundation (JRF) found that even with these new measures, the government is still set to miss its interim target. Chris Birt of the JRF said the government had “got the diagnosis right, but the prescription needs to be much stronger”.
This view was reflected by the Poverty and Inequality Commission as it responded to the Scottish Government’s fourth annual progress report on child poverty. It said: “Commitments made in the 2022-2026 Child Poverty Delivery Plan should help the Scottish Government make progress towards meeting the 2023 relative poverty interim target. Increasing the Scottish Child Payment to £25 per week is likely to have the biggest impact. But the cost-of-living crisis will make it much harder to meet the absolute poverty and low income and material deprivation interim targets, and further action is needed now if the 2030 targets are to be met.”
Ministers should not, the commission added, wait to outline further action in the next plan in 2026 because that will be too late to implement the “transformative policies” required. Meeting those 2030 targets – to have fewer than 10 per cent of children in relatively poverty and fewer than five per cent in absolute poverty – means an “unprecedented reduction” in child poverty levels. That will be impossible without changes to the drivers of poverty, it concluded.
The other major benefit change in the last year is the Adult Disability Payment. Replacing Personal Independence Payments for those who are disabled, have long-term health conditions or have a terminal illness, it is set to be available nationwide from the end of August. It is the twelfth benefit to be introduced by Social Security Scotland.
But Scotland’s new social security system took a blow in June after the chair of the Scottish Commission on Social Security resigned. Dr Sally Witcher ended her appointment early after being “unable to make more headway with work on the Social Security Charter, stakeholder engagement and communications, including, importantly, with people with lived experience.” For a system which would, according to ministers, be designed together with disabled people, it was hardly a ringing endorsement.
The government is also currently being challenged over housing support. The government provided £10m to councils to allow them to provide one-off payments for those struggling with arrears dating from the pandemic.
But tenants’ union Living Rent is calling for rent controls and better regulation to protect private and social tenants in the long term. It seems set to have got its way, with the government’s draft rented sector strategy published in December.
However, plenty of organisations are opposed to some of those measures, warning it may exacerbate the housing shortage by dissuading potential landlords from renting out their properties.
On the positive side, the government did manage to reach its housebuilding target to help address said shortage. Statistics published at the start of the summer confirmed that 51,119 affordable homes were completed between April 2016 (when the target was set) and March.
“We have now started progress towards our next target of delivering 110,000 affordable homes by 2032, of which 70 per cent will be for social rent and 10 per cent in remote, rural and island communities, as part of our ambition to ensure everyone has a warm, safe, affordable place to call home,” said housing secretary Shona Robison.
Another challenge in her wide portfolio is pressure on local government. With the local elections held in May putting a spotlight on local services, it is clear councils have a major role to play in reducing inequalities.
William Moyes, chair of the Accounts Commission, said in June: “Financial pressures and unexpected increases in demand mean that local authorities need to reduce costs without reducing the quality or availability of services regarded as essential by the populations they serve.
“The Accounts Commission is clear in its Local Government Overview report that councils need to build back differently, not roll back services to pre-pandemic ways of working. Doing so would be both unsustainable and fail those most in need of help and support.”
While all the above are significant challenges for Robison, the issue that has perhaps grabbed the most headlines recently is the Gender Recognition Reform Bill. The cabinet secretary formally introduced that bill in March and the Equalities, Human Rights and Civil Justice Committee has been taking evidence on it in the months since.
It was a long time coming, having been delayed twice before after concerns were raised about unintended consequences. Robison went into her session adamant that those consequences had been inflated: “The bill will not change or remove women’s rights. It will not make changes to how toilets and changing rooms operate. It does not redefine what a man or a woman is, and it does not change or expand trans people’s rights.”
The bill is set to pass in the coming months with the support of SNP, Green, Labour and Lib Dem MSPs.
Q&A with Cabinet Secretary of Social Justice, Housing and Local Government, Shona Robison
Holyrood: The cost-of-living crisis is biting. How will the Scottish Government stop even more children growing up in poverty?
Shona Robison: We have allocated almost £3bn this financial year to help with the increased cost of living. This includes investment of £204m in the Scottish Child Payment, one of five family benefits. Best Start Bright Futures, our tackling child poverty plan, outlines both immediate support like this alongside longer-term policies in areas such as employment support for parents.
Concerns about the new Bill of Rights have been raised by several key stakeholders. How will the Scottish Government engage with the UK Government on this bill and how concerned are you about what it could mean for human rights across the UK?
SR: The UK Government’s Bill of Rights is an act of legislative vandalism. We will continue to make clear to UK ministers that the UK’s Human Rights Act needs neither reform nor repeal. I’m proud that we are treading a different path, with plans for future Scottish human rights legislation to increase rights – not remove them.
The debate around the reform of the Gender Recognition Act has been described as one of the most divisive issues faced by Holyrood. How confident are you that some of the toxicity that has surfaced over the last few years will be healed once the legislation passes?
SR: Trans people want to be able to live their lives without facing prejudice, harassment and exclusion, with legal documentation to reflect the way they are already living. Now the bill is going through parliament and we are hearing from people directly, I hope people now have a better understanding of trans people and that we are reforming the process of obtaining a Gender Recognition Certificate, not changing anything around the Equality Act.
On a personal level, how difficult have you found it to deal with the concerns raised by some women about the issue of self-identification in particular?
SR: I’ve heard directly the range of views on this bill and understand they are strongly held. We are not setting one set of people’s rights against those of another. We’re stronger when we promote and strengthen everyone’s rights.
Calls for rent controls have been rising in recent years, particularly as other household bills rise. When will the government legislate for this and how will you support tenants up until then?
SR: We are leading the way within the UK in committing action to introduce rent controls during this parliamentary session. We are working with key stakeholders to deliver a robust system that gives long-lasting benefits to tenants and will consult further on the detail, building on our New Deal for Tenants consultation.
We are also supporting tenants now, by committing £83m in discretionary housing payments this year. Parliament recently agreed our proposals to permanently strengthen protections for private tenants against eviction and we are launching a campaign to help more private tenants exercise their rights, including existing rights to challenge rent rises.
Heartbreaking stories from Ukraine and Afghanistan have highlighted the need to open Scotland and the UK to refugees and asylum seekers. How is the Scottish Government helping those who come here?
SR: We’ve all been shocked at Russia’s illegal and barbaric war in Ukraine. I am proud that Scotland is providing sanctuary to thousands of displaced Ukrainians. We’ve worked in partnership to stand up welcome hubs across Scotland. We’re ensuring that people are safely matched into longer-term accommodation and are supported to make Scotland their home, while they need it to be.
While asylum and immigration is reserved to Westminster, our New Scots refugee integration strategy sets out our commitment to support people from the day they arrive in Scotland.
With a new raft of councillors recently elected, how will you work with local government to ensure they are able to support their citizens?
SR: It is vital we continue to work in partnership with local government to improve outcomes for the people and communities of Scotland. The spending review promised a new deal for local government and discussions have started to progress this.
2022 was hailed at the “biggest year yet” for Social Security Scotland. How is the rollout of new benefits going and will the remainder be delivered on time?
SR: In the four years since we have had the legislative framework and ability to deliver benefits we have introduced 12 benefits, seven of which are completely new forms of financial support, available only in Scotland. This includes the Scottish Child Payment which doubled to £20 per child per week in April and will increase to £25 by the end of the year when it will also extend to under 16s – a 150 per cent increase within nine months. We have introduced both child and adult disability payment and our new Low Income Winter Heating Assistance will provide an annual £50 payment to around 400,000 low-income households from this winter. We are set to invest £4.2bn in benefit expenditure in 2022-23, providing support to over one million people.
The pandemic has been a time for reflection for many of us. Has it caused you to rethink priorities, and have you managed to find any silver linings from such a torrid time?
SR: The pandemic has been a period of reflection and it has made me appreciate more the importance of social contact with family and friends and to make more of an effort to stay in touch. Taking more exercise and spending more time on holiday in Scotland rather than going abroad have been a silver lining from what has been a very difficult time.
This article appears in Holyrood’s Annual Review 2021/22.