SCOTLAND’S ECONOMY is missing out on up to £2.4 billion a year due to the UK and Scottish government’s failure to eradicate poverty – with billions more being spent tackling the consequences of poverty which could be better used to prevent it. But change is possible if politicians act now, according to experts at IPPR Scotland, Save the Children, and the Joseph Rowntree Foundation. 

In a new report published on 31 May, the leading charities warn that the failure of successive governments to drive down poverty is causing significant harm to individuals, public services and the economy. The toll this takes on peoples’ financial security is severe, meaning that:

  • Struggling households across Scotland collectively face a £2.7 billion gap between where they are and where they need to be to achieve a basic level of financial security. This is equivalent to 350,000 households being short-changed by £7,000 each year due to the inadequacy of UK and Scottish government action on social security, creating fair work and tackling inequality.
  • The impacts of child poverty are far-reaching with children paying the price now and in the future. People over the age of 30 who experienced poverty during their childhood have around 25 per cent lower income, and eight times the unemployment rate, than those who did not.

The report adds to the overwhelming evidence of the scale of harm caused by and resulting from governments’ failure to act. This includes people in the most deprived areas dying prematurely at a rate four times higher than those in the richest areas, and a stubbornly persistent educational attainment gap between pupils from the most and least deprived communities. However, the charities say that helping struggling families and boosting the economy go hand in hand, showing that action is both a moral and economic imperative.

They found:

  • Underinvestment in tackling the root-causes of poverty has caused a backlog of harm – with £2.3 billion of health boards’ budgets directed at responding to the impacts of poverty, and hundreds of millions more channelled through primary care and tackling health inequalities resulting from poverty.
  • Around a quarter of a billion pounds is spent each year on addressing the consequences of poverty in our schools and tackling an attainment gap which can start far earlier in a child’s life. Like NHS spending, however, this is likely to be a significant underestimate of the total investment schools and councils make in attempts to close the attainment gap.
  • At a conservative estimate, between £1.6 and £2.4 billion per year (up to 1.5 per cent of Scottish GDP) is lost due to historic child poverty in Scotland.

But this new research shows that change is possible. It also finds that increased government investment in tackling poverty at its roots today, would lead to less reactive spending in the long run – leading to a more prosperous Scotland, where wealth is fairly distributed and poverty is prevented, not perpetuated.

Pointing to policies that have been shown to work for people and the economy, and which could be scaled up to deliver even greater impact, researchers say that:

  • 600 hours of free childcare provision in Scotland brought over 10,000 adults and children out of poverty a year while boosting parents’ earnings. The recent expansion to 1140 free hours means that even more children will be lifted from poverty.
  • Social housing’s low rent (relative to the private rented sector) keeps at least 50,000 people out of poverty. It also generated £250 million in savings for (primarily) the UK Government from lower spend on social security housing support payments.
  • Ensuring people eligible for Universal Credit take up their full entitlement would put an additional £1.9 billion into their collective pockets now.

With Scotland setting itself legally binding targets – backed by all political parties – to tackle child poverty, charities say this research demonstrates the prize on offer: with falling poverty rates leading to significant savings, which can be reinvested into our public services, people and communities to create a fairer and more equal Scotland for everyone.

Philip Whyte, director of IPPR Scotland and report co-author, said: “Every child should have a warm, happy home with food on the table and dreams they can pursue – but that’s not the reality for many. Instead, we face a growing backlog of harm, while billions of pounds are lost to the economy each year.

“Despite decades of rhetoric around preventative investment, we still see a vicious cycle of avoidable cost forcing reactive spending: but it doesn’t have to be that way. We can grasp the opportunity to invest seriously in the things we know work to secure lasting change, and that can be cost-effective and good for the economy.

“While we have political consensus to tackle poverty in Scotland, both governments need to go further, faster to the full extent of their powers. The prize is great, and the cost of inaction is too high – we quite literally can’t afford not to.”

Claire Telfer, Head of Scotland, Save the Children said: “Today’s report shows clearly that beyond the compelling moral case to tackle child poverty – there lies an economic case for doing more. Every one of the 250,000 children living in poverty right now in Scotland is a child who is losing out.

“The reality is, as a country, we can’t afford to tinker round the edges any longer, we need transformational changes to prevent poverty, create fairness and opportunity and bake in equality. If we get that right, we can sustainably drive down child poverty but also see the long-term benefits to our economy and our society.

“We urge the Scottish governments and UK to act on this report and to do all they can to recalibrate spend to prevent poverty and invest in fairer childhoods and brighter futures for all children.”

Chris Birt, Associate Director for Scotland, Joseph Rowntree Foundation said: “Today’s report highlights a crucial truth, poverty is an injustice that can, and should, be solved. The impact on individuals is writ large in the current cost of living crisis, with hundreds of thousands of people able to afford just the basics we need to get by. Our society, public services and economy are also showing this strain. We cannot flourish as a country while so many of us face the trauma of poverty. If we truly believe in a more equal and just society, it is time to prove it.

“Both the Scottish and UK Governments insist they are focused on the needs of the people they represent yet poverty thrives and deepens. The UK Government need to seize their responsibility for this and guarantee that Universal Credit can, at a minimum, mean people can afford the basics. For the Scottish government they need to fulfil the promise of the new First Minister’s rhetoric. Double down on the things this report shows work and use these difficult times to show that change is possible because it is desperately needed.”

* Read: Tipping the Scales: The Social and Economic Harm of Poverty in Scotland  here.

* Source: Institute for Public Policy Research