Welfare cuts report shows why we must do things differently
This week's Scottish Government report, highlighted by Patrick Harvie at First Minister's Questions, on the impact of UK welfare reforms makes for very sobering reading. It shows that a very large number of reforms – including, but not limited to the freeze on the value of benefits; the two-child limit on Child Tax Credits; the Benefit Cap; the scrapping of Disability Living Allowance for most claimants, and the Bedroom Tax – are removing thousands of pounds from Scottish households, many of them containing our very poorest and most vulnerable people. In some cases, multiple cuts impact people at the same time.
The report projects that £3.9bn will be removed from the pockets of Scots families in the 10 years from 2010. This overall figure is bad enough, but it becomes even more bleak when we consider that the cuts are almost entirely to the incomes of some of our poorest households.
Even worse still, many of the households that will be impoverished are those with children, as many of the reforms such as the restrictions on Child Tax Credits and the Benefit Cap either wholly or mostly target households with children. Additional research shortly to be released by the Scottish Greens shows that that 90% of households impacted by the Benefit Cap have at least one child.
As a result of welfare reform, the poorest 10% of families with children are projected to lose 15% of their income over the period to 2020/21, compared to no change for the richest households.
No wonder the Institute for Fiscal Studies has now updated its projections to show that absolute child poverty will increase from 27.1% in 2015/16 to 31.6% in 2020/21, which is a return to levels not seen since the early 2000s.
This is simply storing up problems for the future. We know that the long-term costs of responding to the damage child poverty causes vastly outweighs these short-term savings. Research by Loughborough University suggests the costs of Child Poverty to the UK economy are in the region of £29bn a year.
This is why Greens have been seeking to strengthen the Child Poverty Bill currently making its way through the Scottish Parliament. Whilst the Scottish Government should be congratulated for its ambition in setting such stretching targets for Child Poverty reduction, the Bill could go further in making the links with the new social security powers and the possibilities they have for arresting the alarming increase in child poverty.
Using the new benefit top-up power to increase Child Benefit should be something that Scottish Government regularly consider as a way of meeting the new child poverty targets. When sanctions; errors and delays have taken huge chunks out of family incomes, Child Benefit is often one of the few sources of income left. University of York research suggests that a £5 top-up would remove 30,000 children from relative child poverty at a stroke.
But even this would only roll-back some of the real terms cuts made to Child Benefit through freezes on annual increases, which will reduce the value of the benefit by 28% up to 2020. Whilst cuts like those to Tax Credits have garnered the lion’s share of political and media intention, it is the much less-heralded freezing of the value of benefits that accounts for the largest single share of the cuts being made.
Of the £3.9bn to be removed from the Scottish economy by welfare reforms, £1.9bn, just under 50%, will be through freezes to the value of benefits, which makes them fall in value over time, reducing the incomes of 750,000 Scots families.
This underlines the need for the new Social Security Bill, lodged with the Parliament last week, to ensure that Scottish social security benefits are automatically uprated to keep pace with inflation. Scottish benefits need to be protected from a future government raiding benefit budgets as a soft target for spending cuts, just as the current UK government has. This is one of several major changes Scottish Greens will be seeking to make to the bill as it makes its way through Parliament.
Another major change we can make is to ensure everyone who approaches the Scottish system gets the help and advice they need to navigate what can be a bewildering and complex process. With access to good quality income maximisation advice, people can get thousands in benefits that they are entitled to but otherwise might not claim. Across the UK, 48% of low income families do not claim everything they are due, and £15bn of benefits go unclaimed every year.
With 22% of claimants losing entitlement entirely and 22% getting a reduced award, the report's coverage of Disability Living Allowance recipients being re-assessed for the replacement Personal Independence Payment benefit is backing for multiple Green calls over the past year for the re-assessment process to be paused. DLA and PIP account for around half of the total value of benefits being devolved, and getting this complex area of the new Scottish benefits system right and winning back the trust of the tens of thousands of disabled people treated so badly by UK government reforms will be a major test.
Welfare reform is perhaps one of the biggest challenges for devolution since the convening of the 1999 Parliament. The purpose of devolution is to allow Scotland to make different choices that reflect the will of the Scottish people and which are best suited to the situation in Scotland, and this week's report shows that there is a hugely urgent imperative to make different choices in terms of how we assist Scots most in need of financial support.
This article first appeared in The National.