Scotland losing out on £2.4bn per year over failure to eradicate poverty

Failure to eradicate poverty is causing Scotland to lose out on up to £2.4bn a year, according to a new report by anti-poverty charities.

Researchers at IPPR Scotland, Save the Children and the Joseph Rowntree Foundation found billions are being spent tackling the causes of poverty which could be better used in preventing it.

The report found between £1.6bn and £2.4bn per year – up to 1.5% of Scottish GDP – is lost due to historic child poverty in Scotland.

Some £2.3bn of health boards’ budgets is directed at responding to the impacts of poverty, while around a quarter of a billion pounds is spent each year on dealing with the consequences of poverty in schools, the report found, but warns that both of these are likely to be significant underestimates.

The organisations said struggling households in Scotland collectively face a £2.7bn gap between their current situation and achieving a basic level of financial security, equivalent to 350,000 households being short-changed by £7,000 a year.

They claim this shortfall is due to a lack of action from the UK and Scottish Governments on social security, creating fair work and tackling inequality.

Researchers said people aged over 30 who experienced poverty in childhood have around 25% lower income and eight times the unemployment rate of people who were better off.

They highlighted policies which could be scaled up to further help prevent poverty, such as the 600 hours of free childcare provision in Scotland.

The report said this has lifted more than 10,000 adults and children out of poverty and boosted parents’ earnings, with the recent expansion to 1,140 hours meaning even more children will benefit.

Scotland’s lower cost of social housing rent, relative to private rentals, keeps at least 50,000 people out of poverty, the researchers said, and has also generated £250m in savings, primarily for the UK Government from lower spend on social security housing payments.

The organisations behind the report said full Universal Credit take-up for those eligible would provide a £1.9bn boost.

Philip Whyte, IPPR Scotland director 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 for Save the Children, urged the UK and Scottish Governments to “recalibrate” what they spend to prevent poverty.

She 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.”

Chris Birt, associate director for Scotland, Joseph Rowntree Foundation, also called for action from both governments, adding: “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.”

A Scottish Government spokesperson said: “The First Minister has convened an anti-poverty summit earlier this month to inform Scotland’s drive to tackle poverty and inequality.

“Tackling poverty and protecting people from harm is the Scottish Government’s priority.

“That is why both last year and this, we have allocated almost £3bn to support policies which tackle poverty and protect people during the ongoing cost of living crisis.”

The spokesperson said Scotland requires independence to be able to fully tackle poverty, adding: “Most of the key policy levers needed to address the cost-of-living crisis still lie with the UK Government.

“We continue to urge them to use all the levers at their disposal to tackle this emergency on the scale required.”

A UK Government spokesperson said: “We have helped nearly two million people out of absolute poverty since 2010 and have launched a £94bn support package worth around £3,300 per household to help those most in need.

“This is on top of an unprecedented increase to the National Living Wage, raising benefits by 10.1%, and holding down energy bills.

“Our priority is working with the Scottish Government on the issues that matter to people across Scotland, including growing our economy and helping people with the cost of living. This is why we have given an extra £82m to help people in Scotland with essential costs.”