Memorandum submitted by the Joseph Rowntree
Foundation
SUMMARY
This submission draws heavily on statistics
about Poverty and Social Exclusion in Scotland which can be found
at www.poverty.org.uk. The Committee's attention is drawn to the
potential usefulness of this site.
1. DEFINING AND
MEASURING POVERTY
1.1 A relative definition of poverty is
proposed which takes into account the resources needed for individuals
to participate full in society.
1.2 Much of our submission uses the government's
favoured measure of low income as those below 60% of the contemporary
median. However, we prefer to use the After Housing Cost variant
because of the distortions that can result from using a Before
Housing Cost variant.
1.3 There is a need for government to provide
low income statistics based on samples large enough to allow patterns
of income poverty across Scotland to be identified and fed into
policy-making.
1.4 In order to provide a measure of what
constitutes an adequate income in Scotland, the Committee is urged
to consider how further progress towards a Minimum Income Standard
for Scotland might be made.
2. THE EXTENT
OF POVERTY
2.1 Trends in poverty in Scotland are broadly
similar to those for Great Britain as a whole. Poverty has fallen
significantly from 23% in 2001-02 to 18% by 2004-05.
2.2 Although poverty is particularly prevalent
in some areas of Scotland, notably Glasgow, most poor people in
Scotland do not live in areas with high concentration of low income.
2.3 Children and pensioners have seen significant
falls in the proportions in poverty. But the trend for adults
of working age is upwards particularly for those who are without
dependant children, a third of whom are now income poor compared
with only one quarter 10 years ago.
3. CONTRIBUTING
FACTORS
3.1 Whilst worklessness continues to be
a problem for childhood poverty, worklessness is particularly
prevalent among single adult households with no dependant.
3.2 There are more people, particularly
women and in Glasgow, who are economically inactive but wish to
work than there are officially unemployed.
3.3 In-work poverty is also problematic:
a third of people in income poor working age households have at
least one person who is in work. Low pay is a major problem throughout
Scotland, but particularly in rural areas and among women. It
is also prevalent in the public sector, which employs the second
largest number of low paid workers of all sectors.
4. THE IMPACT
OF GOVERNMENT
POLICY
4.1 The final section considers the impact
of government policies and reaches the following conclusions and
recommendations:
— If the targets for reducing and eventually
"abolishing" child poverty in Scotland are to be met
government needs to target additional resources through the Tax
Credit system.
— But policies in education, skills
and childcare are also needed and these will require all levels
of government to work together to address the issue of poverty.
— Policies to assist people into work
need to be more flexible, allowing programmes to be tailored to
the specific need of local areas.
— The adult components of Income Support
and Job Seekers Allowance need to be increased significantly as
a matter of urgency.
— The amount that people can earn while
in receipt of out-of-work benefits needs to be increased, in order
to allow people to develop their work readiness and encourage
them towards the labour market.
— Attention is urgently needed as to
how people in Scotland can be assisted into sustainable jobs that
provide adequate levels of income.
— The public sector should pay its
workforce at levels sufficient to ensure that poverty is avoided
and the need to claim tax credits is reduced.
5. INTRODUCTION
5.1 The Joseph Rowntree Foundation is pleased
to respond to the request of the Scottish Affairs Committee for
written evidence to assist its enquiry into Poverty in Scotland.
Since 1998 the Foundation has supported the production of annual
reports on Poverty and Social Exclusion in Great Britain with,
since 2002, separate reports for Scotland (and Wales) (see, for
example, Palmer et al 2004). These reports contain a wealth
of statistics on many aspects of poverty and social exclusion
in Scotland and are regularly updated on the project website at
www.poverty.org.uk. Our submission draws heavily on these statistics,
but it is not possible in six pages to do justice to the full
range of information available. The Committee might find this
source useful in its future deliberations[1].
5.2 The submission focuses on matters that
remain the responsibility of the UK government. However, the Scottish
Executive has used its devolved powers to put in place a raft
of initiatives that seek to remedy the outcomes of poverty and
which the Committee will also no doubt wish to consider during
its deliberations (see, for example, Scottish Executive, 2004).
6. WHAT IS
POVERTY?
6.1 It is most useful to consider this question
in two parts: how poverty is defined and how it is measured.
6.2 Defining Poverty
6.3 Although some would continue to argue
for an "absolute" definition of poverty, it is widely
accepted that avoiding poverty in modern industrialised societies
requires more than food, clothing and shelter. Numerous definitions
exist, but all have in common an emphasis on the need for individuals
and families to have adequate resources to participate fully in
the society in which they live. This means that people should
have enough money to have the opportunity to access a wide range
of resources, including education, health, employment, transport
and a social life—in addition to having sufficient food,
clothing and heating and adequate housing. In other words, poverty
is a "relative" concept—requiring reference to
some yardstick of what is an acceptable standard of living in
Scotland today.
6.4 Measuring Poverty
6.5 A relative measure of low income is
most often used to assess the extent of poverty in the UK and,
indeed, in Europe as a whole. Individuals are said to be experiencing
poverty at a point in time if their household income is below
60% of the median income for all households at that time.
6.6 The Government has recently adopted
three measures of poverty by which it intends to assess the extent
to which it is meeting its targets:
— "absolute" low income—incomes
before housing costs below the 1998-99 relative low income threshold,
adjusted for inflation;
— "relative" low income—below
60% of the contemporary median equivalised income, before housing
costs; and
— "material deprivation and low
income"—going without certain items and/or activities
and having income below 70% of the contemporary median equivalised
income, before housing costs (DWP, 2003).
6.7 No doubt other submissions to the Committee
will debate the adequacy of these measures but we would make the
point here that Before Housing Cost (BHC) measures of low income
do not take into account variation in housing costs across the
UK and, indeed, within Scotland. At its simplest, if housing costs
are high an individual or family will have less money left to
meet their other needs; if housing costs are low they will have
more disposable income. The BHC measure can therefore present
a distorted picture of the day-to-day living standards of the
Scottish population. In what follows, therefore, we have chosen
to present After Housing Cost (AHC) measures of relative low income.
6.8 The Family Resources Survey, upon which
Government relies for its statistics on low incomes, published
annually in the Households Below Average Income series (DWP, 2005),
allows separate low income figures for Scotland (and Wales) as
a whole to be calculated. However, whereas disaggregated figures
for nine regions of England are published, sample sizes are insufficient
to allow such disaggregation within Scotland (or Wales). Yet as
the Monitoring Poverty and Social Exclusion Scotland reports clearly
show, using other measures, the extent of poverty and deprivation
varies extensively within Scotland (see further below).
— There is an urgent need for low income
statistics based on samples large enough to allow patterns of
income poverty across Scotland to be identified and fed into policy-making.
6.9 The Government's measures of poverty
do not tell us what level of income is adequate to command an
acceptable standard of living in Scotland. Previous reports of
the Scottish Affairs Committee, the Social Security Committee,
and its successor the Work and Pensions Committee have all recommended
the Government to commission work to develop a Minimum Income
Standard. It is worth quoting from the Scottish Committee's previous
report:
"We consider it time for the UK to have
a proper measurement of income adequacy and accordingly recommend
that the Government commissions and immediate study... designed
to develop a minimum incomes yardstick which is sensitive to local
conditions. The introduction of such a measure would demonstrate
both a sense of fairness and the Government's commitment to overcoming
poverty". (House of Commons, 2000)
6.10 To date the Government has been reluctant
to commission such a study. The Joseph Rowntree Foundation has
commissioned the Centre for Research in Social Policy, Loughborough
University and the Family Budget Unit, University of York to develop
such a Minimum Income Standard for Great Britain as a whole (www.minimumincomestandard.org),
which will be available by late 2007. Although a limited exercise
will be undertaken toward the end of the research, that will attempt
to check the Standard for its relevance to Scotland, resources
do not allow for the development of a specific Standard for Scotland.
— We would urge the Committee to consider
how further progress towards a Minimum Income Standard for Scotland
might be made.
7. THE EXTENT
OF POVERTY
7.1 In many ways the extent of and trend
in poverty in Scotland, as measured by the 60% of median threshold,
is similar to Great Britain as a whole. In 2004-05 18% of people
in Scotland were experiencing poverty (900,000 people) compared
to around 20% for Great Britain as a whole. This represents a
significant fall since 2000-01 when 23% of people in Scotland
were poor (1.2 million).
7.2 Concentration of Poverty
7.3 Poverty is heavily concentrated in,
but by no means exclusive to, certain areas of Scotland. For example,
whilst the proportion of working-age people in receipt of out-of-work
benefits has fallen in all local authority areas, this proportion
ranges from one in three in Glasgow to one in 10 in Orkney. A
raft of poverty indicators for the population as a whole and for
sub-groups, seem to tell the same story—Glasgow has the
highest concentrations of poverty. Nevertheless, poverty exists
in every authority in Scotland. The Scottish Index of Deprivation
divides Scotland into 6,500 data zones and provides estimates
for the number of income deprived people in each. Analysis of
these show that whilst Glasgow, not surprisingly, has by far the
largest number of data zones with a high proportion of people
on low income, almost all authorities in Scotland have at least
one such area. Furthermore, whilst two-fifths of income poor people
live in areas with high concentrations of people on low incomes,
the remaining three-fifths live outside these areas.
7.4 Who is poor?
7.5 Children and pensioners in particular
have benefited particularly from falls in income poverty: the
proportion of children in low income households in Scotland has
fallen from 30% in 2000-01 to 25% in 2004-05, compared to a fall
from 30% to 28% in England and from 33% to 28% in Wales. Whilst
poverty among children has fallen significantly there can be no
room for complacency, since Scottish children are still far more
likely to be poor than Scottish adults.
7.6 Among Scottish pensioners the risk of
poverty has fallen from 23% in 2000-01 to 18% in 2004-05. Nevertheless,
around 130,000 pensioners (a fifth of single pensioners and a
tenth of pensioner couples) rely exclusively on state pensions
and benefits for their incomes and single pensioners are two-thirds
of those who rely exclusively on the State for their incomes.
The prospects for future generations of pensioners are not good:
around a third of employees aged 30 to 60 years are not contributing
to a non-state pension.
7.7 For those of working age the picture
is somewhat more complex and not so encouraging. The risk of poverty
for an adult of working age in Scotland increased from 22% in
2000-01 to 24% in 2004-05. Although this increase was not as large
as in England (from 19% to 24%), or in Wales (from 21% to 27%),
this upward trend in poverty among working age adults must be
a cause for concern. The problem seems to be particularly severe
among working age adults without dependant children. A third of
this group is now income poor compared with only one quarter 10
years ago.
8. CONTRIBUTING
FACTORS
8.1 A wide range of factors can cause income
poverty and it is not possible to consider the full range here.
We have chosen to focus on the association between poverty and
work status, but ill-health and disability and educational qualifications
are also important issues which the Committee might wish to consider.
8.2 Worklessness
8.3 Government policy has emphasised the
importance of work as a route out of poverty and there can be
no doubt that the risk of poverty is particularly high among those
who are workless or, in the case of children, live in households
where no adult works. Although the proportion of children in workless
families has fallen by a third over the last decade, there are
still more than 140,000 children living in workless households
in Scotland and these children are far more likely to be poor.
8.4 Whilst the numbers of workless households
with two or more adults has fallen in recent years, the number
of single adult workless households has not. In fact, two-thirds
of working age workless people are in single adult households.
Given that 55% of lone parents are now working—up from 40%
a decade ago—it seems that the problem of worklessness is
particularly severe for single adults with no children.
8.5 Although the numbers of people who are
officially unemployed has fallen by 2005-06 to around 150,000,
far more are economically inactive but want to work (200,000).
Most of those who want work but are not officially unemployed
are women, in all age groups except for the over 50s. The proportion
of people who want work is three times higher in Glasgow than
in the Highlands.
8.6 In-Work Poverty
8.7 But poverty is by no means confined
to those who have no work. A third of people in income poor working
age households have at least one person who is in work. In fact,
the risk of poverty is very low only in households where all the
adults are working and at least one is working full-time. The
main contributory factor to this situation is low pay, defined
here using a widely accepted indicator of less than £6.50
per hour, which is approximately two-thirds of median hourly earnings
in Great Britain. The problem is particularly severe among women
workers; almost half of women who work part-time earn less than
£6.50 per hour, one-fifth of women who work full-time and
only one-seventh of men who work full-time. Women are more likely
to be paid below the £6.50 threshold than men in all occupations.
8.8 The sector with the largest numbers
of low paid workers in Scotland is retail and wholesale, with
almost 30% of all low paid workers in Scotland. But the public
sector has the second largest number of low paid workers; 22%
of workers employed directly by the public sector are earning
less than £6.50 per hour[2].
Whilst low pay is an issue in all areas, it is particularly prevalent
in rural Scotland, where employment in the tourist industry and
agriculture are significant: rates of low pay are highest in the
Scottish Borders, Moray and Dumfries and Galloway, along with
West Dunbartonshire.
9. IMPACT OF
GOVERNMENT POLICY
ON POVERTY
9.1 This final section considers the impact
that government policy has had on poverty in Scotland, both positively
and negatively, and makes some suggestions for policy change.
We begin by considering children, before looking at what has and
might be done for workless people, including parents, and those
who are in work but income poor.
9.2 Policies for Children
9.3 There can be no doubt that government
policy has played a major part in the reductions in child poverty
in Scotland which, as noted above, have been greater in Scotland
than in England. Since 1999 it is estimated that state financial
support for children in the UK has grown by 52% in real terms
(Adam and Brewer, 2004). The Child Tax Credit, payable for children
irrespective of the work status of their parents, despite its
administrative difficulties, has provided a secure source of income
for children.
9.4 Nevertheless, the Government failed
to meet its target of reducing child poverty by one-quarter in
the UK as a whole between 1997 and 2004. Recent research suggests
that it will be difficult to meet the 2010 target of a 50% reduction
given current policies, much less the ambitious target of "abolishing"
child poverty by 2020 (Hirsch, 2006). Yet the 2010 target and,
indeed, the 2020 target could be achieved given the political
will. The same report estimates that the total cost of a policy
package that could achieve the 2010 target, by increasing the
Child Tax Credit for poorer families and those with more children,
would be around £4-5 billion, or only about 0.3% of GDP (Hirsch,
2006, p 13). Achieving the 2020 target will require longer-term
measures in addition to tax and benefits: in education, skills
and childcare. These matters are, of course, devolved responsibilities
of the Scottish Executive who have been proactive in policies
in this area (see above). However it is vital that the different
levels of government work together if the child poverty targets
are to be met and, indeed, other groups at risk of poverty are
to be protected.
— If the targets for reducing and eventually
"abolishing" child poverty in Scotland are to be met
government needs to target additional resources through the Tax
Credit system.
— All levels of government need to
work together to address the issue of poverty.
9.5 Policies to Reduce Poverty among those
who are Workless
9.6 The obvious solution to poverty for
people who are workless is for them to find (secure, adequately
paid) work. Again, there can be no doubt that government policies
including the New Deal programmes, have had a major impact on
reducing levels of unemployment. Yet, as was shown above, there
are large numbers of people in Scotland who wish to work but do
not have jobs and worklessness is still a cause of child poverty.
Given that worklessness is concentrated in particular areas of
Scotland, it may be that:
— policy needs to be more flexible,
allowing programmes that target worklessness to be tailored to
the specific need of local areas.
9.7 Yet it must also be recognised that
worklessness is so strongly associated with poverty largely because
the level of out-of-work benefits is so low. Although benefits
for children in families receiving Income Support or Job Seekers
Allowance have increased significantly in recent years, and the
government is committed to further increases at least in line
with earnings, the adult components of these benefits have been
increased by much lower amounts. The result is that the total
incomes of families with children and of working age households
without children receiving these benefits are falling further
and further behind year-on-year. Given that, whatever the success
of the economy in creating new jobs and of government policies
to assist people into work, there will always be those who cannot
work it seems wrong and, indeed, a contradiction of government
policy, to condemn such individuals and their families to a life
of poverty.
— The adult components of Income Support
and Job Seekers Allowance need to be increased significantly as
a matter of urgency.
9.8 There are also contradictions between
the policy aim of assisting people to find work and the rules
for receiving out-of-work benefits. It has long been accepted
that part-time work can provide a bridge to full-time work. Yet
the amount of money which people are allowed to earn whilst receiving
Income Support and Job Seekers Allowance has not been increased
since the 1980s. This means that most claimants could not work
for even one hour a week at the Minimum Wage before their benefits
were reduced.
— The amount that people can earn while
in receipt of out-of-work benefits needs to be increased, in order
to allow people to develop their work readiness and encourage
them towards the labour market.
9.9 Policy and In-Work Poverty
9.10 A combination of Tax Credits and the
Minimum Wage has boosted in-work incomes as part of the government's
commitment to Make Work Pay. But too many people in work in Scotland,
particularly women,—with knock on effects in terms of child
poverty—are still experiencing income poverty or hovering
on the edge as a result of low pay. Policy focus has been almost
exclusively on getting people into work, rather than into sustained
work with the possibility of progression to pay levels that would
protect people from poverty.
— Attention is urgently needed as to
how people in Scotland can be assisted into sustainable jobs that
provide adequate levels of income.
9.11 The fact that the second largest number
of people in low paid jobs in Scotland are employed by the public
sector is of concern. There seems little point in one arm of the
state underpaying its workers whilst another has to meet the shortfall
through tax credits.
— The public sector should pay its
workforce at levels sufficient to ensure that poverty is avoided
and the need to claim tax credits is reduced.
Sue Middleton
Adviser
Joseph Rowntree Foundation
October 2006
REFERENCES
Adam, S and Brewer, M (2004) The Financial Costs
and Benefits of Children since 1975. Bristol: Policy Press.
Department for Work and Pensions (2005) Households
Below Average Income 1994-95 to 2004-05. http://dwp.gov.uk/asd/hbai/hbai2005/contents.asp
Department for Work and Pensions (2003) Measuring
Child Poverty: Final Conclusions. http://dwp.gov.uk/ofa/related/final-conclusions.pdf
Hirsch, D (2006) What will it take to end child
poverty? Firing on all cylinders. York: Joseph Rowntree Foundation.
House of Commons (2000) Poverty in Scotland Select
Committee on Scottish Affairs: First Report Session 1999-2000.
http://www.publications.parliament.uk/pa/cm199900/cmselect/cmscotaf/59/5919.htm
Palmer, G, Carr, J and Kenway, P (2004) Monitoring
Poverty and Social Exclusion in Scotland. http://www.poverty.org.uk/reports/scotland%202004.pdf
Scottish Executive (2004) Closing the Opportunity
Gap http://www.scotland.gov.uk/Topics/People/Social-Inclusion/17415/opportunity
1 An update of the "Monitoring Poverty and Social
Exclusion in Scotland" report will be published on 6 December
2006. Back
2
This excludes those who are employed by contractors who work
for the public sector, such as hospital cleaners. Back
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