Three ways the Scottish Budget can tackle poverty

Budget proposals need to focus on in-work poverty, inclusive growth and higher costs to help solve poverty, says Jim McCormick.

The draft Scottish Budget has been presented to MSPs by Finance Secretary Derek McKay. It proposes substantial new funding to increase early learning and childcare, narrow the attainment gap and expand affordable housing supply against the shadow of budget cuts in subsequent years. These are promising moves in response to poverty, which sees just under one in five Scots (960,000 people of all ages) failing to make ends meet. But there’s a gap between these proposals and the final deal that a minority government will need to strike with other parties by February. We propose three ways to fill it to ensure the Budget get to grips with poverty.

In-work poverty

JRF’s annual report on the state of poverty in the UK shows employment rates are up, but in-work poverty is at record levels. Almost half of Scots in poverty are in working households and almost half of those receiving working tax credits are in three sectors: retail, hospitality and care, mostly women. Improved coverage of the voluntary Living Wage and a rising minimum wage make a dent in poverty but limited working hours, flexibility or childcare still hold low-paid workers back. Making deeper inroads needs government backing for industry to drive productivity and progression into better jobs. The proposed skills budget needs to be raised and targeted more effectively, with a sharper focus on high-quality careers advice and in-work training for those stuck in low-paid work. New evidence from the retail sector shows that employers need to respond to segments of the workforce who need more hours and want to progress to higher-skilled roles. 

Inclusive growth

With future budgets increasingly reliant on tax receipts generated in Scotland, inclusive growth becomes a policy imperative. Any road to inclusive growth must run directly through low-paid sectors of the economy. Many policy tools – on pay, skills and procurement – need to be used in tandem. City-region deals being struck across Scotland offer the prospect of significant jobs growth. Scottish Ministers and local civic leaders, in return for their stake, need to set sights higher and ensure plans make a clear contribution to reducing poverty. As Scotland edges toward an EU exit it didn’t vote for, putting the economy on a fairer footing is essential.

Higher costs

People in poverty face higher costs for everyday goods and services like energy, credit and financial services. The draft Budget says too little about tackling this poverty premium. The Scottish Government has limited powers here, but it can act on consumer advocacy as well as money/debt advice. It can set standards it expects companies to meet in serving vulnerable consumers and write these into a revised Business Pledge. A commitment to hold a summit with energy providers should be made as well for banking, credit and insurance. Housing remains central to solving poverty: a third of people in poverty in Scotland rent from a private landlord. The Scottish Government could incentivise faster improvement in the quality of private rented housing through additional loan finance for landlords to meet energy-efficiency standards. 

Addressing these challenges in new year Budget negotiations would signal a genuine commitment to solving poverty. More powers are available to the Finance Minister than ever before. Choosing the right tools and using them with skill has become even more important.