Our governments must use their powers to choose to end poverty

Both the Scottish and UK Governments must take responsibility and use their powers to loosen the grip of poverty in Scotland, argues Chris Birt. This long-read highlights the real poverty-reducing powers both governments can, and must, choose to use to improve the lives of people on the lowest incomes in Scotland.

At a glance

With looming child poverty targets and shocking levels of destitution and hardship it is time for both governments to take responsibility and ramp up their efforts. Our targets are achievable and the prize for hitting them is worth pushing for: a better Scotland.

Both the UK and Scottish Governments have significant powers to reduce poverty in Scotland and with child poverty targets looming they must both choose to act:

  • The UK Government must stop the cut to Universal Credit and Working Tax Credit and take further action to improve the adequacy of social security in Scotland and the UK.
  • The UK Government also has significant scope to use its fiscal powers, and powers in areas like employment law, to reduce poverty.
  • The Scottish Government has sole responsibility for meeting its child poverty targets, and the powers to do so.

Both governments must commit to reducing poverty

For some time, both the UK and Scottish Governments’ lines in response to criticisms of efforts to reduce poverty have become predictable. Any attack on the social security system at a UK level is met by a UK Government line usually including the pay-off:

… the Scottish Parliament has significant welfare powers and can top-up existing benefits, pay discretionary payments and create entirely new benefits in areas of devolved responsibility.
The Courier, 29 July 2021

Similarly, some version of the following line will emerge from the Scottish Government when charged with doing too little to tackle poverty:

The Scottish Government is doing everything it can to tackle child poverty with the limited powers and resources at our disposal.
The Daily Record, 14 July 2021

These are both powerful and attractive lines politically, fitting with the broader political positioning of both governments. There are simple messages behind them: from the UK Government “if you don’t like what we’re doing, you can do it yourself” and from the Scottish Government “we’ve taken action but would go further if only we could”.

Both contain an element of truth. Of course, the Scottish Government does now have more powers than ever before to tackle poverty but, equally true, many of the powers to tackle poverty still rest with Westminster.

On the other hand, if you take both lines as true, then the outrageous rates of poverty in Scotland will not be addressed. The Scottish Government and opposition parties are right to argue that actions taken by the UK Government, particularly in cuts to social security, have led to a rise in poverty (a view increasingly shared across the Conservative Party). But to deny the agency of the Scottish Government, and Parliament, to take further action to address poverty is to lock people in poverty in the hope that the UK Government will change its approach.

Hopefully it will, and it should, particularly on the looming cut to Universal Credit, but even if it does, the Scottish Government and Parliament will need to go further to meet the child poverty targets they have all agreed to.

Whose responsibility is it to meet the child poverty targets?

With the interim Scottish child poverty targets looming in 2024 and a global pandemic still doing its damage, it is a good time to reflect on both of Scotland’s Governments’ roles in reducing poverty.

In some respects, for the child poverty targets the argument is simple. Section 1 of the Act that introduced them says: “The Scottish Ministers must ensure that the 2030 targets are met…”

The Scottish Ministers are the Scottish Government, not the UK Government. Delivery of the targets is a binding statutory obligation on them, not a discretionary choice for the Scottish Government. The UK Government used to be under a similar obligation but removed the targets as they would not commit to the actions needed to meet them.

As a result, meeting or missing those targets will be the responsibility of the Scottish Government. It has already issued one Tackling Child Poverty Delivery Plan designed to make progress towards those targets, with an update coming early next year. Clearly, too, the Scottish Parliament has a vital role to play – it is the Parliament that set these targets for the Government, unanimously agreed, and it is vital that it holds the Scottish Government to account for doing so.

The possible impact of decisions made by the UK Government, however, cannot be ignored. The Scottish Government could take actions today that would set us on track to meet the interim and 2030 targets but changes made by the UK Government could mean missing those targets without further action.

In fact, if the UK Government reverses its decision to cut Universal Credit in October it will make meeting the targets easier compared to when the targets were set.

The key point here though, is that the Scottish Parliament did not set targets for the Scottish Government 'subject to the UK Government helping us and/or this Parliament having more powers'. On top of that, the Scottish Government has not yet put us on track to meet either the interim or 2030 targets; by its own admission (despite some media lines) it will need to do more.

Ultimately, all tiers of governments have the power to loosen the grip of poverty in Scotland. As a result they all have a responsibility to do so...
Chris Birt

The Scottish Government may feel aggrieved that the UK Government could make meeting the targets more difficult – as indeed will the global health crisis and its aftermath - but if it simply blames the UK Government – or the global crisis - for that, it is denying its own agency, and self-imposed responsibility, to bring about change.

When the Child Poverty Act was passed in 2017 the Scottish Parliament and Government were well aware of the policy landscape they made that decision in. It did not take great foresight to imagine that UK social security was going to remain inadequate.

Frankly, to a struggling individual or family it is neither here nor there whether a target is met, or whether it’s the action, or inaction, of the Scottish or UK Governments (or both) that is locking them in poverty. For many families, council or third-sector services play an equal or greater role in their quality of life, services that have faced long years of austerity.

Ultimately, all tiers of governments have the power to loosen the grip of poverty in Scotland. As a result they all have a responsibility to do so, regardless of statutory responsibility for meeting targets. Poverty rates are at best static in Scotland (and rising for children), and that will not change without concerted efforts from the Scottish, UK and local governments.

The moral case for taking greater action to reduce poverty is obvious but there is also a significant political prize of doing more for low-income households across the UK. One million people live in poverty in Scotland, and over 14 million in the UK as a whole. Low-income voters are consistently rejecting the status quo, whether by voting for Scottish independence, Brexit or breaking down the so-called Red Wall in English constituencies.

Who has the power to make changes?

The Scotland Act sets out the powers that are reserved to the UK Parliament and Government, and devolves the rest to the Scottish Government and Parliament. As a result there are few areas where you can say cleanly that everything is devolved or reserved, but key public services like the NHS, schools and policing are largely devolved whereas defence, security and foreign affairs are largely reserved.

The table below summarises some of the main powers of the UK and Scottish Governments that could have significant impacts on both the causes and symptoms of poverty, and captures some of the grey areas, where both governments have significant influence.

The powers in each of the columns attributed to both governments can have a massive impact on levels of poverty. What this unlocks for both governments is choice: the power to choose to do more, and significant power to make a difference.

Where power lies with potential for reducing poverty
Policy Area Scottish Government UK Government Grey Areas
Housing Ownership, rental tenure, social housing, planning, building standards, local taxation, homelessness and rough sleeping Energy markets, capital gains tax, inheritance tax, taxation of wealth Overall levels of capital investment, fuel poverty
Jobs Economic development, non-domestic rates, Scottish National Investment Bank, public procurement, transport, education and skills Employment law, trade union law, equalities law, company law, competition law, international trade, national insurance contributions and almost all business taxation (except for non-domestic rates) Employability, Apprenticeships, childcare
Social security Control of about 15% of all spend, most notably on disability assistance payments. Also includes Carers’ Allowance, Best Start Grants and Winter Fuel Allowance 85% of all social security spending via Universal Credit, Housing Benefit, Child Benefit, tax credits, the legacy benefits and state pensions Power to 'top-up' reserved benefits and to make 'new’ benefits
Local government Structure and powers of local government, local taxation and associated benefits, social work, children’s services, schools

Overall fiscal settlement still has significant impact (although exact impact on local government decided by Scottish Government). Councils still help UK Government administer Housing Benefit and are involved in issues like refugee resettlement.

None
Health and social care Almost entirely devolved – including the NHS, social care for adults and children, mental health services, public health and health inequalities Regulation of health professionals, overall funding decision still significant as NHS budget makes up near 50% of Scottish Government spending Cross-border cooperation and COVID-19 response

Where could the UK Government do more?

The most obvious immediate step the UK Government could make would be to reverse the fundamental inadequacy of the social security system. Universal Credit was a bold idea to merge in-work and out-of-work benefits to simplify the system and remove unintended disincentives for people to increase their incomes via work. But its implementation has led to a system that provides meagre support to families, accompanied with an incredibly stressful conditionality and sanctions system and features such as the five-week wait and two-child cap that cause immediate, and deep, hardship. Fixing these immediate flaws with the system would have a significant impact on families’ economic security in Scotland and across the UK.

The UK Government’s significant taxation powers could also be used to redress the deep inequalities in wealth and income that exist in the UK. Through ownership of property and other non-tangible assets, already-wealthy individuals and families often get wealthier merely by inflation of property values. This furthers inequality and skews the housing market. A more equitable distribution of income and assets is needed to meet the 2030 targets.

In employment law, the UK Government has significant levers that could reverse the worrying growth in in-work poverty over recent years. Burgeoning insecurity of contracts, unpredictable hours and flexibility skewed toward employers is systematically locking people in poverty. The much-delayed Employment Bill could look to reverse some of these most pernicious elements of the labour market.

It must also end the policy of No Recourse to Public Funds within the immigration system, leaving people destitute and entirely reliant on the heroic work of third-sector organisations.

Burgeoning insecurity of contracts, unpredictable hours and flexibility skewed toward employers is systematically locking people in poverty.
Chris Birt

Where could the Scottish Government do more?

For the Scottish Government it is a question of scale and focus. It has identified the key drivers of poverty in its Tackling Child Poverty Delivery Plan, but while there are numerous actions within that plan, there is limited evidence of its efficacy or impact so far. Arguably the scale of smaller projects is not delivering the scale of change that is required.

  • Employability: current programmes are small scale compared to the extent of unemployment and underemployment amongst groups most at risk of poverty, challenges that will not have been made any easier by the pandemic. As we have shown previously, even to get families with children up to the level of work expected of them by Universal Credit requires 140,000 families to increase their hours and 60,000 to move into work.
  • Childcare: the Scottish Government is delivering a huge universal expansion of free childcare to 1,140 hours a year for all 3 and 4-year-olds and some 2-year-olds from low-income families. But for low-income families, and for single parents in particularly, that childcare is often inflexible and therefore inaccessible, locking people, predominantly women, out of work.
  • Housing: while the level of social house-building has been much higher than elsewhere in the UK it has not necessarily targeted the places under most pressure. Similarly with transport, it is often either high cost and/or not serving the communities who are least likely to be able to access good work locally.
  • Health, social care and education: the best of these services is often most accessible to people with greater resources to access them (both through financial and social resources). And key local services such as social work, social care and housing support have been impacted by austerity.

These issues are not unique to Scotland (although the shocking concentration of drug-related deaths and other health inequalities are) but many of the powers to do something about them are fully within the control of the Scottish Government and Parliament.

The grey areas where powers overlap

Social security has become the most heated debate (particularly with the looming cut to Universal Credit). In some ways this should be simple, as the UK Government still controls 85% of the social security powers and spending. But the power to top-up 'reserved' benefits and create new benefits blurs this line.

The Scottish Government can choose to increase its share of overall spending, as it has done with the child payment. But the UK Government still has responsibilities, as it does across the UK, to Scottish taxpayers for providing social security support, and the system’s general inadequacy is their responsibility to reverse, not the Scottish Government’s. The UK Government also inherently has the power to 'top-up' reserved benefits and create new payments itself.

It is an example too, though, of how the grey area makes it difficult, most importantly, for people trying to access services, working in those services and for policy-makers. Trying to navigate the array of support available from different sources is mind-boggling for someone on a low income, never mind the challenges it puts on council or Job Centre Plus staff.

Trying to navigate the array of support available from different sources is mind-boggling for someone on a low income, never mind the challenges it puts on council or Job Centre Plus staff.
Chris Birt

Fuel poverty is a particularly interesting issue. With the transition to a net-zero economy becoming increasingly urgent, it is incumbent on both the UK and Scottish Governments to manage a 'just' transition. Low-income households already pay significant premiums for energy through standard rates and fixed meters. Without coordinated efforts by both governments there is a risk that low-income households will be further punished by any price increases as a result of the transition, or efforts to disincentivise carbon-intensive activity through pricing.

Work is perhaps the most significant grey area. Both the UK and Scottish Governments have significant ways of supporting jobs – with the UK Government’s focused on regulatory and fiscal means and the Scottish Government’s on less direct ones such as skills, economy development and transport.

It is important not to underestimate the role of business leaders, however. While government could be smarter about where its workforces are located to help create growth in different areas, most people work in the private sector and decisions on individuals’ wages and terms of employment are made in boardrooms not Parliaments. Businesses have massive influence in communities and families both inside and outside a workplace and the best companies recognise that as a fundamental part of sustainable success. For any mission to reduce poverty, businesses, as many already do, must recognise their role and play their part. Both Scottish and UK Governments must do more to support and encourage such businesses working alongside workers and trades unions.

Fiscal powers – as grey as it gets?

As set out above, the Scottish Government’s spending powers that have potential to reduce poverty are considerable. In areas like housing, it is clear the different decisions taken in Scotland have led to lower poverty than elsewhere in the UK. Why, therefore, has more not been done to reduce poverty?

The relative inequity of power between the revenue-raising side of Scottish Government finances vs UK Government powers is often used as the reason for a lack of further action. Prior to the further devolution of the Smith Commission there was very limited ability for the Scottish Government to vary the level of public funding beyond the block grant from the UK Government. It had tax powers that were arguably too blunt or not big enough in scale to make a big difference and no significant borrowing powers.

The further tax powers have changed this, though, and there is now significant power to vary income tax rates and thresholds on earnings. With the mix of council tax, business rates and Land and Business Transaction Tax the Scottish Government can make significant changes to taxes on individuals. It has already chosen to change the income tax system in Scotland, meaning that people on higher incomes do pay relatively more than those on the same income elsewhere in the UK. This has given the Scottish Government spending power that it would not have had otherwise.

The UK Government’s revenue-raising powers are much greater than the Scottish Government’s. With control over income tax on savings and dividends, national insurance contributions, VAT, corporation tax, capital gains tax, inheritance tax as well as income tax, council tax and stamp duty elsewhere in the UK, the tax base that it can potentially utilise is considerably broader.

On borrowing powers, the Scottish Government’s powers are heavily prescribed and much narrower than the UK Government’s, essentially only allowing borrowing for additional capital spending. They are also tied to a fixed budget and far less able to manage shocks like coronavirus.

As a result, the majority of fiscal powers do still lie with the UK Government. While the Scottish Government’s are limited in the sense that there are limits on them, it is difficult to conclude that they are limited in the sense that they are too small to achieve much or there isn’t more they could do.

Reducing poverty is a political choice

Every government faces limits on its spending ability. As a result, the ultimate lever of government is choice. Often the political debate in Scotland is about how you pay for a policy via taxation or through Barnett consequentials. The other option is, of course, changing how you are spending existing funds: tax vs cuts; universalism vs targeting; regional parity vs supporting areas that are struggling.

Clearly these are not binary, unrelated choices but they will have to be made. And they have to be more strategic than 'stop this small project that I don’t like, so you can do this big thing that I do’.

For example, meeting the 2030 Child Poverty targets will require fundamental changes to our economy and public services. For relative child poverty to be below 10% there will need to be a significant rebalancing of where income and wealth currently rest within Scotland. That can be done through a number of different means but, putting it bluntly, inevitably it means winners (people currently on the lowest incomes) and the political process will define who the losers will be. But there are significant winners and losers now. For example, during the pandemic people on higher incomes have been able to save due to limits on recreational spending while life has become more expensive for people on low incomes, increasing their debts.

Clearly decisions to shift these imbalances would have impacts on the economy, but they would be intended improvements in the quality of life for people in Scotland, rather than unintended consequences. If you want to do one thing, it inevitably means you cannot do something else. In any event, as the Scottish Government has recognised for years, an unequal economy is not a sustainable one.

The ultimate lever of government is choice.
Chris Birt

Our governments can and must take action

A brighter future tomorrow is something we can all sign up for, but it will always feel more likely if we take action today.
Chris Birt

Scotland’s child poverty targets loom and we are currently going to miss them. Those targets are the Scottish Government’s to meet and they must put us on a credible path to do so. More importantly, health inequalities that long pre-date COVID-19 have been cruelly exposed by the pandemic.

As shown here, the Scottish Government can take a number of actions to reduce poverty and it must commit to doing so. There is more it can do, and more that it must do. It is not just the Scottish Government, though: each of the parties in the Scottish Parliament are committed to these targets. Next year’s Tackling Child Poverty Delivery Plan needs to set out a credible, and measurable, policy platform that will deliver on meeting these targets. It will have to demand action from across Scottish society, but its ultimate prize will be better quality of life for everyone in Scotland.

From the UK Government’s perspective, the impact of its decisions (such as the two-child cap, or the plan to cut Universal Credit) has or will increase poverty in Scotland. The Scottish Government is neither funded nor responsible for mitigating the impacts of those decisions. Of course, it can make decisions itself to decrease poverty but the UK Government cannot wash its hands of its responsibility to voters and taxpayers in Scotland.

Child poverty was rising in Scotland before the pandemic, and the inequalities people experiencing poverty already faced have deepened. Both Scotland’s governments have a responsibility to take action to reverse that. A brighter future tomorrow is something we can all sign up for, but it will always feel more likely if we take action today.