Tackling the causes of poverty

The shocking news that a homeless person dies every three weeks in Edinburgh highlights the extreme consequences of poverty and neglect in our society. Millions more are struggling in poverty every day, not least because of rocketing housing costs that can lead to homelessness.

It has long been claimed by the current UK government that the solution to poverty is work. However, a record three-fifths of people living in poverty now come from a household with at least one person in work.

A Cardiff University study found that Britain’s in-work poverty figure has risen to its highest documented level. The risk of poverty for adults living in homes where at least one person is employed rose by more than a quarter over a 10-year period from 2004-5 to 2014-15. The researchers reported that rocketing housing costs were also hitting hard, with those in private-rented accommodation more at risk than owner-occupied households. Dr Rod Hick said: 

“If policy does not do more to tackle rising housing costs directly, then it seems likely that these will eat up gains made elsewhere — for example, in terms of the planned increases in the minimum wage.”

One in six working Scots (around 440,000) are paid below the Scottish Living Wage, with wages and employment still lower than before the financial crash. A quarter of all children in Scotland are living in relative poverty (up four per cent in one year) and this will have long-term impacts on their health, well being and life chances. 

As well as poverty, income inequality has also risen sharply. The top 10 per cent of the population had 38 per cent more income in 2015/16 than the bottom 40 per cent combined. This compares to 15 per cent more income in 2014/15.

The latest pay data shows that average pay across the UK is more than £800 below its 2008 peak. This means we are on course for the weakest decade of pay growth since the Napoleonic era. As the Resolution Foundation has highlighted, we cant put all the blame at the door of inflation. Nominal pay growth has also been slowing recently, falling in each of the last five months’ of data. Pay packets would be shrinking even if inflation was bang on the Bank of England's target of 2 per cent.

No where is that clearer than in the public sector where after years of pay restraint workers are struggling to make ends meet. Others are leaving our public services and we are not recruiting young staff. As a consequence the workforce is growing older as our recent research shows. That is why UNISON will be redoubling its campaigns to scrap the pay cap, here in Scotland and across the UK.

The Joseph Rowntree Foundation is today making the case that tackling poverty and inequality should be a priority in Scotland’s city deals. Chief executive Campbell Robb said: 

“Scotland has enjoyed a strong economic record but too many people have not shared in its success – over a million people live in poverty, which is a cost and waste our economy and society cannot afford. Scotland needs inclusive growth now to create a stronger and fairer economy. We need growth but everyone needs to the benefit from it.”

While real wage growth is crucial, we also need to ensure that quality jobs are back on the policy agenda. Today’s Great Jobs Agenda initiative from the TUC it sets out what they want the government to do to ensure that every worker has a great job with fair pay, regular hours and the opportunity to progress.

We also need to remember that high quality public services play a key role in tackling poverty. The dodgy deal with the DUP may bring some relief from austerity in Northern Ireland, but we need to campaign to ensure that the Autumn Budget does the same for the rest of the UK.

The Scottish Government has announced the creation of a ‘Poverty and Inequality Commission’. There is a legitimate concern that this a way of pushing difficult issues into the long grass – largely more process like the Social Security and Child Poverty Bills.  So it is up to civil society to ensure that the commission provides an opportunity to build momentum behind the policies needed to reduce poverty and inequality in Scotland.

On Friday this week, the UWS-Oxfam Partnership Policy Forum will provide an opportunity to consider how this might be done. 

Inequality: moving from analysis to action

The causes of poverty and inequality are well understood, we now need to have the difficult conversations about taking action.


All this week, BBC Scotland have been running a series of features under the heading Unequal Scotland. They have looked at education, health, life expectancy and income. This fairly describes inequality and the impact it has, not just on those most impacted, but also the economy and everyone in Scotland.


As Douglas Fraser explains, this issue is being given a lot of attention by those in power, including heads of government, central bankers, the International Monetary Fund, even the Davos gathering of the economic elite. Nicola Sturgeon has put the tackling of inequality alongside economic growth as her twin priorities. Even a Tory Prime Minister has targeted her political message at those "struggling to get by".


Describing inequality is something we are very good at doing. Taking real action is more tricky, primarily because it involves some difficult conversations with those of us who are not in poverty.


A good example of this is highlighted by Gideon Calder from Swansea University. His research asks, is it okay for parents to pass wealth down to their children? So the kids gain a house when mum dies, for example. And before that, get everyday benefits just because their parents are relatively well-off? He concludes that we are not willing to have this conversation because the 'family' is sacrosanct.


The First Minister's poverty tsar touched on a similar point with her call for increased taxes, not least by addressing inheritance tax. She also picked on tax increases for the richest and the need for a progressive council tax - something the Scottish Government has ducked yet again. She said: "When people say they want a really wonderful NHS they don't say I want to pay more taxes for it. Well, I'm afraid you cannot have a really wonderful NHS unless you are willing to pay more taxes for it."


However, her most telling comment was that she was not convinced governments would raise taxes to the levels needed. She said: "You [governments] can always go further but you'll always have your eye on the next election and what people can expect". This goes to what I call Scandamerica, the idea that we can have Nordic levels of public services without most of us, not just the very rich, having to pay more taxes. Remembering that we now have the powers to address this in Scotland.


The Scottish Government is currently consulting over what a Scottish social security system should look like. This is important because some 37% of benefits will be devolved to Scotland, when you exclude pensions. However, as Govan Law Centre and others have highlighted, the consultation is almost entirely about process, not about adequacy of benefits, a crucial element of any strategy for tackling income inequality.


This theme is also covered by the tax lawyer Jolyon Maugham QC who points out that this year we’ll collect around £170bn of income tax, but forego through reliefs about £30bn of income tax - almost £500 a year for every man, woman and child in the UK. He says these reliefs go  overwhelmingly to those who need it least, the inevitable consequence of two deliberate policy choices: to distribute that £30bn through the tax system and to fail to monitor what good it does.


Tackling these reliefs would include some difficult conversations on issues like ISA's and tax relief on pension contributions, which are valued by middle income groups. Perhaps his most striking statistic is that the highest earning 15,000 taxpayers, almost 0.05% of all taxpayers, netted 5.5% of total deductions and reliefs. Most will have seen six figure reductions to their income tax bills.


This isn't just a parochial issue for us in Scotland and the U.K. As Thomas Piketty argues in the Guardian this week, Trump’s victory is primarily due to the explosion in economic and geographic inequality in the United States over several decades and the inability of successive governments to deal with this. Fiona Buchanan from Christian Aid makes a similar point in relation to the developing world, also highlighting the issue of gender justice.


There are some serious attempts at developing a consensus around some solutions. The IPPR's Economic Justice Commission is one such initiative. Their background paper makes the point that for all the rhetoric about a strong economy, it isn't an economy that works for all. Half of all UK households have seen no meaningful improvement in their incomes for more than a decade. The JRF's 'Talking about Poverty' project also points the way to a better understanding of the solutions.


So, hats off to the BBC for doing what a good public service broadcaster should do - educating us on probably the most important issue of our time. However, we need to move on to some, often uncomfortable solutions. Tackling inequality is in all our interests, because more equal societies do better on every count. This means we all have to contribute to the solutions, and yes, it will cost us.

Challenge Poverty Week - Early Years

Important though actions to ameliorate poverty are in the short-term, it is through preventative spending and early interventions that we will begin to eradicate poverty in Scotland. One of the most important of these interventions is through early year’s provision.


This is Challenge Poverty Week in Scotland in which the Poverty Alliance and its member organisations seek to highlight the reality of life for over 900,000 people living in poverty. It is therefore a good time to look at the measures being taken to address poverty.


The Scottish government has chosen this week to publish its blueprint for the expansion of early years learning and childcare (ELC) in Scotland.  The centrepiece of this plan is to almost double entitlement to free ELC to 1140 hours per year by 2020 for all three and four year olds and eligible two year olds.


Five years ago, the Christie Commission used early year’s provision to illustrate the importance of early intervention. The blueprint confirms the Scottish government’s support for this concept when they say:


“It is widely acknowledged that the provision of universally accessible and high quality early learning and childcare enriches children with the skills and confidence to carry into and multiply throughout school, and is a cornerstone for closing attainment and inequality gaps”


With this statement you would assume that the plan would be to expand high quality early year’s provision that makes a real intervention in the lives of children at this crucial period in their lives.


The blueprint covers a number of key areas that might help achieve this. As ELC is delivered by people, the workforce is a key element. The blueprint states:


“It will be vital to ensure that, as part of the expansion, the skills and qualifications profile of the ELC workforce is raised, diversity is increased, and there is greater gender balance in the workforce.”


The blueprint also reminds us that we are a considerable way from achieving this in the private sector, with 80% of practitioners and 50% of supervisors in partner provider settings paid less than the Scottish Living Wage. Levels of qualifications are also poor in this sector.


To deliver the laudable aims in the blueprint we need a delivery mechanism to match. This is sadly where the plan starts to unravel. Three of the four options in the blueprint are demand led approaches, very similar to the Tory voucher scheme approach to public service delivery. The obvious risk in this approach is that it leads to a race to the bottom in quality provision and the wholesale privatisation of the sector.


This is not entirely unexpected. The SNP manifesto commitment to employ an additional 20,000 childcare workers and build 200 early years centres, always looked optimistic on a suspiciously round budget of £500m. Sadly, government budgets don’t stretch on the loaves and fishes principle!


We have some experience of a race to the bottom in the social care sector. Because of budgetary pressures, social care has suffered from a race to the bottom in poor quality care. The consequences are half a million patient days in hospitals lost to delayed discharges. Only now are we beginning the climb up from the bottom with the requirement to pay the Scottish Living Wage. Even so, most councils in Scotland are still a long way from a quality care standard as set out in UNISON’s Ethical Care Charter.


The workforce lesson is that this approach results in workers that feel so undervalued that they don’t want to work in the sector and turnover rates soar. When you add Brexit to the mix, recruiting 20,000 additional workers to the sector is going to be beyond challenging.


So, my plea would be to learn the lessons of social care and don’t replicate them in ELC. We need a fairly paid, well trained workforce that can make the early year’s interventions that can close attainment and inequality gaps. We know all too well that privatisation and inequality go hand in hand.

Poverty is the real difference between school attainment levels

The Scottish Government's parentzone website has published data on the performance of school leavers. The Daily Record highlighted how these figures show a shocking class divide between the wealthiest and least well off areas of Scotland.

This is my opinion piece in the Daily Record that ran alongside the article. In it I argue that the difference tells us more about poverty than schools.

 

 

"These figures don’t tell us much about schools. What they tell us is that poverty ruins lives.

The enormous gap in qualifications between children in poor and wealthy areas is simply a reflection of the inequality that scars Scottish society. An appalling number of families are relying on foodbanks. You don’t need to be an educational psychologist to work out that a well fed child is going to be a better pupil than one who is hungry. Saying that looking at these figures tell you more about house prices than it does about standards in schools is no joke, it’s the truth.

They certainly don’t tell us much about the teams who deliver education in the schools. Arguably it’s the schools where fewer children are getting qualifications that are working the hardest, as the team in the school attempt to help the children overcome a host of social disadvantages in order to learn. Think about it – if it were simply a matter of the attitudes of the staff would the pattern of poor areas and supposedly poor schools be quite so consistent?

One of the things that drives attainment is the chance to undertake educational enhancing activities. It is clear that better off parents have resources to allow their children to take part in a wider range of activities than their less well-off peers. For example, going to see a play live makes it easier to get good marks in English than just reading it in a book or out loud in the class.

Those who have the least opportunity to do these activities out of school because of lack of money, need to have these opportunities through school. Cuts in local authority funding, made worse by the council tax freeze, mean that the cost of school trips, whether for a day or a week, and sports clubs are increasingly falling on parents. These are burdens that many families cannot meet. Here in UNISON we have been told by members on low wages or zero hour contracts of instances of their children, knowing the sacrifices their parents would make to find the money, of not even telling parents about school trips. These charges mean that far from narrowing the gap will see it grow.

There are some initiatives that could be taken in schools that might make some difference. Ensuring poorer children are not denied support that can't otherwise be offered would be a good place to start - for example by ending the trend of getting rid of Classroom Assistants.

And let’s hope that the political response to these figures avoids nonsense about ‘improving aspiration’. As if the poor, who lets remember are mostly working for a living, don’t or can’t care for their children.

No one should be in any doubt that the real key to reducing the gap between how children in poor areas do compared to children in rich areas is to reduce the gap between rich and poor."

 

Blog Action Day - Inequality

Today is Blog Action Day and the subject for this year is inequality. Very appropriate here in Scotland as this is Challenge Poverty Week and I make no apology for returning to this issue.

Yesterday, the STUC 'Decent Work, Dignified Lives' conference had a real focus on inequality with some excellent contributions that will be available on line.

Professor David Bell and David Eiser from Stirling University gave a very clear analysis of inequality in Scotland. They argued that the trickle down economics of the Thatcher era have been successfully challenged in books like 'The Spirit Level' and the more recent work by the French economist Thomas Picketty.

There is growing wider acceptance of the damage inequality does from contributors as diverse as the ILO, The Pope, Mark Carney and the World Bank. Even the IMF now accept that redistribution doesn't have a negative impact on growth.

The determinants of inequality are even better understood. Technological change and globalisation have changed trade, corporate power and deregulated labour markets. Taxation and benefits can have intended consequences towards redistribution, but regulation can have negative unintended consequences. For example, the price of utilities has been driven up by privatisation and regulation and that has a bigger impact on the poor because essentials constitute a larger part of their income.

The consequences are that as inequality rises the level of social mobility declines. In particular, there is less mobility between generations because wealth and other advantages are simply passed on to children.

Income inequality in Scotland is similar to the rest of the UK when you take London out of the equation. While still high in the league table of inequality compared to other EU countries, our level of tax redistribution is about average. It's income before tax that pushes the UK up the league.

So what should the policy responses be?

The obvious startIng point is tax and benefits. The problem is that relatively small changes have a limited impact on equality. As highlighted above, it's income before tax that is a feature of inequality in the UK. The main impact of the benefit system is to subsidise poor employers, while tax cuts for the rich has just encouraged fat cat bosses to lobby for higher wages.

The next area is labour regulation. The minimum wage does reduce inequality, primarily by improving wages at the very bottom, although it has not maintained differentials throughout the pay scales. Action on insecure employment would help, particularly access to employment justice and ending zero hours contracts. However, it is only through support for sectoral collective bargaining that we will make big strides forward in tackling inequality. Maximum wage or ratios are are also important as this week's IDS study shows - directors pay has grown from 40 times average earnings to 120 times since 2000.

The third solution gets less attention - public services 'In kind' spending. As the OECD has highlighted, income inequality in the UK is mitigated by public spending. Preventative spending on health and education, particularly for the under three's, could have a major impact - tackling intergenerational Inequality. Government action can, albeit unintentionally, also exacerbate inequality. A good example of this is government driving down the cost of social care through lower wages and insecure working conditions for care workers. Public sector buying power should instead be used to positively address inequality.

We cannot say often enough that a more equal society benefits everyone. A radical change of direction is required using a range of policy interventions. Progressive taxation, labour regulation and stronger public services would be a good start.

 

 

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Challenging poverty

This is Challenge Poverty Week in Scotland. There will be a series of events culminating in a march and rally In Glasgow on Saturday.

The week started with the Poverty Alliance conference today. I was contributing to the final session and my focus was on the importance of reframing the narrative in the debate around poverty.

For Cameron, it is all about the ‘strivers, not the skivers’. This is the strategy and language of despots and the far right for centuries. Find a minority to blame to distract the majority from the real problems in our society. A problem you could do something about, but choose instead to defend the vested interests of your class.

We need to reframe the narrative in opposition to welfare cuts and the political myth making that unfairly blames poverty on those struggling. The percentage of households below a minimum standard of living has doubled over the last 30 years.

We can start by pointing out that more than half of those forced to claim benefits are the very ‘strivers’ that Cameron claims to represent. 52% of working age adults in poverty were living in households where at least one adult was in employment, as were 59% of children in poverty.

This has happened because the economy has seen a big shift from wages to profits. You have to go back to the 1860’s for a pay squeeze as long as this one. If the wage bill had just kept up with inflation there would be £5bn more spending power in the Scottish economy.

As we highlight in a UNISON Scotland report published today on wages, workers are struggling to meet even basic bills. Since 2007 the average rent for a Council House has increased by 26% and in the same time the wages of a Council Worker has increased by 8.3%. In today’s report we give a voice to many of our members who describe in their own words how they are struggling to make ends meet.

Families have been plugging the gap by using savings or getting into debt. 30% of families say they have less than £500 put away, compared with just 14% in 2013. A deeply indebted economy may be a political strategy to get Cameron to the next General Election, but there will be a serious hangover after it.

Even among those suffering, the pain is not evenly spread. Women in low pay have a pay gap of 34.2% and young workers classed as low paid has more than tripled over the past four decades.

Of course there is a minority that Cameron is not blaming – the 1% who are doing very nicely thank you.

The wealth of the richest 1,000 people in Britain doubled to £519 billion since 2009, about two and a half times the annual deficit. Today’s IDS study of FTSE 100 Directors shows that they had a 21% pay rise last year and now earn 120 times the average full time worker. In 2000 that ratio was 40 times. NHS workers in England are striking today, just get the Government to pay their own measly 1% pay policy.

And this isn’t just about Russian oligarchs buying up mansions in Knightsbridge. It’s here in Scotland. An Edinburgh fund manager reported recently that 7 directors earned an average of £2.5m each and settled a post retirement benefit on a former director of £31m.

There are some positive signs that we are not the only people who recognise the need to reframe the debate. The Pope, Governor of the Bank of England, even the CBI have said something about low wages and the damage it is doing to our economy. We may not get the bankers to even read The Spirit Level, but even they can see that they can't hide behind electric fences all the time. They can pay to get their bins uplifted, but their neighbours rats will still get under the fence.

So, lets build on that growing awareness to build a broad coalition around a new narrative and some practical solutions. By all means let's engage with the Smith Commission to strengthen devolution, but then focus on what we can achieve at UK, Scottish and local levels. At today's conference there was a really useful discussion about how we can harness the energy of the referendum debate to deliver social justice.

My frustration with the current political debate is that we need a little less rhetoric, telling people what they want to hear, and more action. For example, everyone agrees that the living wage can be expanded through procurement, but months after the Act was passed we haven't even begun to draft the statutory guidance. Meanwhile officials come up with every excuse for not taking action.

The best engagement events during the referendum campaign were not the 'shouty' hustings, but rather the genuine conversations. Educate and agitate is an old trade union adage, but if you explain the issues to people, they are much more willing to consider and come up with different and challenging solutions.

A different narrative in the debate around poverty is possible. We can win the arguments, persuade a majority that a more equal society is better for everyone, not just the poor. I am less interested in the 45 or the 55, than getting the 99%, who would benefit on our side. If we can do that we have a movement that really can create a just Scotland.

 

 

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Public service workers in the front line of the attack on wages

Tomorrow, UNISON’s local government members in England, Wales and Northern Ireland will be going on strike, joining with other public sector workers in their effort to secure a decent pay rise. In Scotland, local government workers have voted for industrial action by two to one in a consultative ballot and will be considering the next stage of their own pay campaign later this month.

Matt Sykes, at the Touchstone blog sets out why public service workers are taking action. He argues that it’s a wider manifestation of the anger and frustration felt by public sector workers over pay and living standards. Industrial action is the inevitable consequence when you have a government that makes announcements over pay, rather than engage in a meaningful dialogue. The declaration that pay restraint will continue until 2018 is another example of this.

UNISON’s Heather Wakefield sets out the local government case at the Public Finance blog with a damning set of statistics on pay and the long-term impact on pensions. Again, there have been no real talks and the employers have refused to join the trade unions in independent arbitration.

The TUC has published figures that show how the UK government has frozen or limited pay increases to well below the cost of living. This has left local government and other public service workers on average £2,245 worse off in real terms since this government came into office.

Concern about the standard of living stretches into retirement. Research published by Aviva indicates that a fifth of people in Britain believe they will have to “work until they drop” because they cannot afford to retire. Money worries mean millions of over-40s are expecting to carry on working until they cannot physically continue. Others are concerned about paying their day-to-day bills without the regular income from employment coming in.

An important element of current pay claims is the Living Wage. The final report of the independent Living Wage Commission, chaired by the Archbishop of York, Dr John Sentamu says that the number of people on low pay in the UK can be slashed by over 1 million by 2020. The Commission warns that, if the government does not support the voluntary extension of coverage of the Living Wage, some working families will continue to rely on emergency measures, such as food banks and unsustainable debt, to get by. Currently 5.2 million people earn less than the Living Wage in the UK and the majority of people in poverty are now in working households.

This message is reinforced in the largest study of poverty ever conducted in the UK. The Poverty and Social Exclusion in the UK (PSE) project details how, over the last 30 years, the percentage of households living below society’s minimum standard of living has increased from 14% to 33% – despite the fact that the economy has doubled in size over the same period. These findings seriously undercut the UK government’s claim to be lifting people out of poverty through work. Cuts to welfare benefits add to the low pay misery.

The Joseph Rowntree Foundation’s annual Minimum Income Standard report looks at how much people have to earn taking into account family circumstances, the cost of essentials and changes to benefits. This shows that a lone parent with one child now needs to earn more than £27,100, up from £12,000 in 2008. A couple with two children need to earn more than £20,200 each, compared to £13,900 each in 2008. Single working-age people must now earn more than £16,200, up from £13,500 in 2008.

Public service workers are at the front line of the attack on wages, while this government awards handouts to the super rich. Tomorrow is just the start of a fight back to keep workers out of poverty.

No recovery in living standards for working people

There is no recovery in the wages and living standards of working people since the rich and powerful crashed our economy.

A number of reports have analysed the latest data on household incomes and wages. The Scottish Government's paper highlights that the number of people living in poverty in Scotland increased to 820,000 last year. The 2012-13 figure, which accounts for 16% of the population, was 110,000 more than in the previous year. The number of children in poverty rose by 30,000 to 180,000.

The figures indicated:

• 16% of people (820,000) were living in relative poverty in 2012-13 - 110,000 more than the previous year and an increase from 14%.
• 19% of children (180,000) were living in relative poverty in 2012-13 - 30,000 more than the previous year an increase from 15%.
• 15% of working age adults (480,000) were living in relative poverty in 2012-13 - 70,000 more than in 2011-12.
• 15% of pensioners (150,000) were living in relative poverty in 2012-13, 10,000 more than the previous year and an increase from 14%.
• Typical income in Scotland in 2012-13 was £23,000, equivalent to £440 per week.

For some real stories behind the statistics you can read a survey, commissioned by UNISON's NHS Greater Glasgow branch. Nearly a third of respondents said they constantly struggled to pay household bills, with 11% falling behind on mortgages or rent. 17% were behind on council-tax bills, 15% on hire purchase payments and 20% on credit-card payments. Borrowing from family was common and 16% of workers used credit unions. 4% had used payday loans. 58% said they could not meet an emergency expense of £500.

The Scottish Parliament research unit (SPICE) has produced an interesting analysis of long term trends in Scottish household income. There is a lot of discussion about how wealthy Scotland is in the referendum debate. However, this tends to focus on GDP rather than the incomes of people that actually live in Scotland. This paper shows that the average level of disposable income per head in the UK is £16,791. Scotland comes in just below this at £16,267. However Scotland is catching up since devolution. Between 1997 and 2012 household income in Scotland increased by 27% as against 24% in the UK as a whole. Within Scotland we still have significant inequality. Glasgow City has the lowest level of disposable income with just over £14,000 per head, compared with just over £19,000 per head in Edinburgh.

Official UK figures from the ONS still show median and mean incomes in 2012-13 6% and 9% below their 2009–10 peaks respectively. This follows a period of slow income growth that began in the early 2000s. The net result is that the official measure shows both measures of average income no higher in 2012–13 than in 2001–02.

In 2012–13, 10.6 million individuals in the UK (17%) had a household income below the official absolute poverty line (e.g. below £272pw for a childless couple, net of taxes and inclusive of benefits). This is actually a poverty rate no higher than before the recession. However, when incomes are measured after deducting housing costs, the number below the poverty line (e.g. below £235pw for a childless couple) rose by about 600,000 in 2012–13 to 14.6 million (23%). This is about 2.0 million higher than in 2007–08.

Of course not everyone is suffering. The bankers in the City and their friends in the media may not have noticed growing poverty, because the share of post-tax income captured by the richest 1 per cent leapt from 8.2% to 9.8% in 2013/14.

There may be a modest economic recovery, but the official data shows that household incomes have not recovered, except for those who caused the crash. And they won't, until we see real wage growth.

 

 

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Fiscal devolution as a route towards reducing inequality

Fiscal devolution is about more than just transferring powers from one parliament to another. It has to be part of a strategy to reduce inequality in Scotland.

That was the key message in my Sunday Times (£) column yesterday. I set out the options for fiscal devolution and my own preferred option as described in the Red Paper on Scotland and UNISON Scotland’s ‘Fairer Scotland – Devolution’ paper. This approach devolves all property-based and income taxes, including the power to vary the rate in each band. Business and consumption taxes are retained at UK level, because business tax competition simply leads to a race to the bottom.

I also took the opportunity to rebut some of the recent criticisms of fiscal devolution, including the impact on the Barnett formula and the risk that further devolution will lead to independence. Both in my view miss the point completely.

However, the main thrust of my column was that powers, including fiscal devolution, have to be for a purpose. That purpose is a fairer and more equal Scotland because more equal societies perform better on every measure.

The Yes campaign and the White Paper makes much of the OECD 2011 paper that appears to show the UK as the fourth most unequal society in the developed world. However, this selective use of the paper only deals with income inequality. The OECD paper actually emphasises the role of public services in reducing inequality. The paper says:

“But public services improved their impact on reducing inequality. Social spending in the UK relies more on public services (such as education, health etc.) than on cash transfers: spending on services amounts to over 15.4% of GDP while spending on cash transfers is some 10%. These services reduce inequality more than almost anywhere else, and this impact has increased over the 2000s.”

This is why the strongest argument for fiscal devolution is that Scotland is suffering from the financial consequences of English public service reform as the Tories shrink the state. Having the power to develop our own public service model is weakened if the financial rug is pulled from under it. University privatisation and NHS cuts are two recent examples. The IPPR ‘Devo More’ paper makes a similar point.

The OECD key policy recommendations are also noting:

·       Employment is the most promising way of tackling inequality. The biggest challenge is creating more and better jobs that offer good career prospects and a real chance to people to escape poverty.

·       Investing in human capital is key. This must begin from early childhood and be sustained through compulsory education. Once the transition from school to work has been accomplished, there must be sufficient incentives for workers and employers to invest in skills throughout the working life.

·       Reforming tax and benefit policies is the most direct instrument for increasing redistributive effects. Large and persistent losses in low-income groups following recessions underline the importance of government transfers and well-conceived income-support policies.

·       The growing share of income going to top earners means that this group now has a greater capacity to pay taxes. In this context governments may re-examine the redistributive role of taxation to ensure that wealthier individuals contribute their fair share of the tax burden.

·       The provision of freely accessible and high-quality public services, such as education, health, and family care, is important.

The Yes campaign would of course argue that we could do all of this with independence. There is a certain irony that the SNP’s currency union could actually result in greater financial control from ‘London’ than fiscal devolution. The SNP (Stewart Hosie’s line in the last BBC debate) would still have us believe that Scandinavian levels of public services are possible on current tax rates. Scandamerica is simply not a credible proposition for anyone who is serious about tackling inequality.

All the polls make it clear that the majority of Scots want to see greater devolution short of outright independence. Scottish Labour has to go with that majority by arguing for the fiscal powers that can help deliver a vision of the fairer and more equal society. Anything short of that really would encourage a drift to independence.

Let's challenge poverty

Challenge Poverty Week is an opportunity to highlight the extent of poverty in Scotland and to build support for further action.

The Poverty Alliance is coordinating Challenge Poverty Week (CPW) this week. The key messages are:

Poverty is a real problem in Scotland, affecting large and growing numbers of people;
Wide inequalities between groups and individuals damages our whole society;
Poverty is created by the decisions we make as a society;
People living on low incomes have a voice and should be heard;
Change is possible!

The Trussell Trust has revealed today that five times more Scots are turning to food banks for emergency aid than last year. Between April and September, 23,073 people were referred to the Trussell Trust for three days’ worth of food – comprising 16,465 adults and 6,608 children. That compares with 4,021 people in the same months of 2012 – 2,786 adults and 1,235 children. The Scottish figures are significantly higher than in the UK as a whole.

As TUC General Secretary Frances O’Grady put it: "One only has to look at the huge rise in foodbanks to see how little support is being given to people who fall on hard times. But instead of recognising the tremendous difficulties people are facing, ministers are blaming them for their plight. The Chancellor is talking up a recovery – but for who? These new figures show that despite trying desperately hard to make ends meet hundreds of thousands of people still can’t afford to put food on the table for their families. Welfare reforms like the Bedroom Tax have pushed more households into food poverty.”

The long term picture is no better. A study by SCVO showed that one in four Scots will be living in poverty by the end of the decade if the coalition government forges ahead with “criminal welfare reforms” that draw together a range of benefits into one universal credit.

A common myth perpetrated by the UK Government is that welfare is for skivers. In fact the biggest element of social security expenditure (42%) goes to pensioners. Then housing benefit is next, accounting for 20%, of whom one-fifth are in work. Then 15% goes on children, through child benefit and child tax credit. Some 8% goes on disability living allowance, 4% on income support mainly for single parents and carers, 4% on employment and support allowance to those who can’t work due to sickness or disability, and 2% on carer’s allowance and maternity pay. Just 3% is spent on jobseeker’s allowance.

So if we achieve only one thing this week, let's remember that poverty demeans us all and it doesn't have to happen in a rich country like ours. And if you don't like the moral argument, accept the economic case. More equal societies do better on every measure, so pure self interest should drive you to challenge poverty.

Welfare spending in Scotland

The Institute for Fiscal Studies has today published a report entitled “More spending on disability benefits and less on housing benefit per person on Scotland than in the rest of GB”.

The report finds that higher spending on old-age benefits and disability is offset by lower spending on housing benefit. It states that the ageing population of Scotland will mean that spending will grow more quickly than in the United Kingdom as a whole. Independence for Scotland would provide the Scottish Government with the opportunity to make reforms to its benefit system. However, an independent Scotland would have to spend more on benefits than is spent at the current moment in time or it may risk creating a group of “losers”.

The main findings of the report are as follows:

• Benefit spending (including spending on tax credits and the state pension) in Scotland amounted to £17.2 billion in 2011–12, the last year for which full figures are available. This is around 30% of all government spending in Scotland and 11.4% of Scottish national income (including a geographical share of North Sea output).

• Benefit spending per person in Scotland in 2011–12 is estimated to have been £3,238, 2% higher than the average for Great Britain as a whole (£3,176). This was lower than in Wales (£3,540), and the North and Midlands of England (£3,320), but higher than in London (£3,082) and the rest of the South of England (£2,962).

• There are substantial differences in spending on different types of benefits. Expenditure on disability benefits per person in the population was 22% higher in Scotland (£593) than in Great Britain as a whole (£485). This, at least partly, reflects the fact that a higher proportion of Scots report having a disability or health problem that limits their activities than is the case in Great Britain as a whole.

• Spending per person on housing benefit was around 12% lower in Scotland than in Great Britain as a whole. This reflects both lower private and social sector rents, and a larger fraction of people on housing benefit living in social housing.

• Spending per person on old-age benefits was 4% higher than for Great Britain as a whole, while spending on child benefits and tax credits was 9% lower. But this reflects the different age profile of Scotland. The amounts spent on child benefits and tax credits per child and old age benefits per person aged 60 or over were essentially the same in Scotland as in Great Britain as a whole in 2011–12.

This report supports the financial case for keeping welfare generally at UK level as we have argued in Red Paper publications. The exception is Housing Benefit, which should be devolved because it is a key element of the already devolved housing policy. There would also be a proportionate financial gain because Scotland spends less than our population share of the the UK budget.

Given the UK Government’s damaging welfare cuts, it has been an important part of the Yes campaign’s case that independence would enable Scotland to take a different path. While that is clearly the case, what this paper shows is that such a path comes at a price and the SNP have to demonstrate that they are prepared to commit to paying that price. The evidence so far is that Scandamerica is their policy and that simply is not credible.

Poverty and constitutional change

I was at the Poverty Assembly in Glasgow today taking part in a panel debate on constitutional change. A lot of agreement on what’s required to tackle poverty, somewhat less on the constitutional approach required to achieve it! 

My central point was that poverty will not be addressed in Scotland unless we make inequality the central dialogue of public policy. Social justice should be about creating a Scotland based on equality and solidarity. This requires properly funded public services and a progressive tax system. Certainly by taxing the wealthiest and cracking down on tax dodging, but also a dialogue with all Scots that social justice costs and it is all our interests to contribute more towards achieving a fairer society. Scandamerica is not only fantasy politics, it’s also fundamentally dishonest. 

In response to a range of questions on pensioners, wages, education and personalisation, I found myself having to point out that many of the policy solutions could happen now, with existing powers. What’s missing is the political will. On that basis I remain sceptical that all will be solved with additional powers or independence – we need something more.  

If electable politicians are not pursuing these policies then it’s because they don’t believe the public is yet at that point. Yes Scots may be more egalitarian, but not by that much. As one of my colleagues pointed out, in the last social attitudes survey the greatest support for public ownership in the UK is in South-East England. So we need to win broad public support for a fairer Scotland, if we are to use additional powers effectively. 

I do have to confess that there is one aspect of the debate that does irritate me. In order to make the case that Britain is broke and the UK will not reform itself, it appears necessary to exaggerate inequality and denigrate everything that past Labour governments have achieved. One delegate told me over coffee that London is the most unequal city in the world and one speaker came very close to making the same point. Sorry, but no it isn’t. Cities like Delhi, Mumbai, Johannesburg and Washington DC have equally wealthy individuals and nothing like our welfare state. We should remember that there is no Office of National Statistics in most developing countries, citizens don’t complete records and the poor frequently die unnoticed. 

The last Labour Government did a lot to tackle child and pensioner poverty. Through pension increases, tax credits and much more, pensioner poverty in Scotland fell from 33% to 15%. Child poverty fell from one in three to one in four.  I covered more of this in my article in this month’s Scottish Left Review so I will spare everyone a long list.

 

By all means let’s have a debate about universal services, but don’t let it overshadow the importance of targeted financial and other support for those living in poverty. Feel free to make a pitch that an independent Scotland will be a socialist nirvana, although you might show us the roadmap to getting there. But please don’t claim that nothing has been achieved by Labour politicians, who may not have got it all right, but they did make a difference to the lives of many.

In praise of Anas Sarwar's speech - well sort of!

Scottish Labour’s Deputy Leader Anas Sarwar made a set piece speech earlier this week that has been attacked from the fringe left and the right. It is worth reading in full rather than relying on some of the commentary that doesn't do it justice.  

I am someone who is likely to consider his words with a critical eye. I didn’t support Anas as Deputy Leader largely because he was a Vice-Chair of Progress, although he has subsequently resigned that post. I am also not a great fan of professional politicians, although in fairness he did at least do a real world job. His strengths are presentational rather than ideological, so a policy speech focusing on political principles is interesting. 

So what did he say? The introduction covered some common Miliband themes of social justice and inequality, broken politics, attacking the banks, energy companies and tax dodging. While not new, these are themes even the right recognises are dangerous for them. Hence Cameron is at least talking tough on tax dodging and energy prices. 

His pitch for Scottish Labour’s principles of Community, Solidarity, Fairness, Equality
and Social Justice won’t find many opponents within the party, although many of us would add a few more. He wisely targeted the references to universal provision, learning lessons from the less well crafted Johann Lamont speech on the subject. As I commented at the time, the reaction from some quarters to that speech was hysterical as she no more condemned universal provision than the SNP have adopted it. The legal aid debacle has demonstrated that. However, while I understand the differentiation strategy over universalism, I still believe it does more damage than good. 

But for me the most interesting part of the speech was when he, at least partially, tackled the issue Johann ignored – taxation. While his focus was on geographical redistribution he also pointed to a gap in Nicola Sturgeon’s speech, which he argued had, “No progressive argument in favour of those with the broadest shoulders sharing the biggest burden. How can you talk about social justice without talking about wealth redistribution?” 

So overall it wasn’t the speech that I would have written and of course it doesn’t go far enough. But it was none the less a significant move in the right, or left, direction. For a former Vice-Chair of Progress to even talk about wealth redistribution is real progress with a small ‘p’. It is a recognition that faced with the most reactionary government for a generation; this is the territory we need to be on. Anas Sarwar may not be a conviction politician, but he appears to at least recognise that Scottish Labour needs more than managerialism to motivate members and capture the support of Scottish voters. 

I won’t spend much time commenting on the predictable reaction to the speech from the fringe, exemplified by Robin McAlpine’s rant at the Reid Foundation. The key is in the last line of his post, “Or stay where you are”. This reflects the fringe left view that if Labour moved to the murky middle they can capture the left vote in Scotland. That isn’t going to happen and in real world politics you have to build broad alliances to achieve change.

 

In that context, if I can adapt Mark Antony’s words - I come to broadly praise Anas’s speech, not to bury him.    

Welfare cuts

I was speaking at an Edinburgh Trades Union Council event last night on the impact of welfare cuts. Part of a series of meetings to take forward the STUC's 'A Just Scotland' initiative.


For the decade up to the 2008 crash there were measurable improvements in welfare support for children and pensioners. Child poverty in particular was reduced, even faster in Scotland than in England as the recent Rowntree report on poverty in Scotland highlighted. This did not, as the Tories would have you believe, result in a welfare budget that was spiralling out of control. In fact as a percentage of public spending, welfare spend had reduced compared to 1997.

However, this was not a sufficient response to poverty in Scotland or across the UK, certainly for the working poor. It still leaves today;

• 780,000 (15%) of Scots in relative poverty and 490,000 (10%) absolute poverty;

• 658,000 households (28%) living in fuel poverty;

• 90,000 under 25 year olds unemployed. That’s doubled since 2008;

• for the rest part-time and self-employment is masking the true levels of unemployment;

• The number of low-income, working families has increased from 125,000 to 150,000

The consequence of this is growing inequality with a 14 year life expectancy gap between those living in the most deprived and least deprived areas of Scotland.

Putting the wider impact of austerity economics aside, it is about to get much worse. Major welfare cuts are to be imposed at time of weak job prospects and underemployment, especially for young people.

The main driver is the introduction of Universal Credit. Seven in and out of work benefits are to be combined including; Income Support, Job Seekers Allowance, Employment Support Allowance, Housing Benefit, Child Tax Credit, Working Tax Credit, Support for Mortgage Interest.

The UK government claims this will simplify the benefit system. In my view sticking benefits together is not simplifying. This is an all or nothing reform. If something goes wrong it could cut the sole source of income to vulnerable people and the complexity of the IT systems makes that distinct possibility. To that you can add:

• monthly payment in arrears;

• A household payment not individuals that will leave vulnerable women particularly exposed;

• Digital by default for groups that have limited computer access.

And all that’s before straight cash cuts by:

• increasing benefits in line with CPI, a lower measure that will impact on 200,000 children, 300,000 adults;

• uprating by only 1% a measure that alone will drive a further 200,000 children into poverty across the UK;

• switch from DLA to Personal Independence Payments with 20% budget cut;

• 60,000 Scots will lose some of current DLA mobility component;

• families with two children will lose £1079 by the end of 2015. The Labour Party has also added up cuts to child tax credits, the three-year freeze on child benefit, the 1% cap on the rise in statutory maternity pay and the abolition of the maternity grant - into a £1700 'Toddlers Tax'.

Let's also not forget the economic consequences. There are 570,000 benefit recipients in Scotland. These cuts mean £2.5bn taken out of Scottish economy. Money that would be spent locally supporting businesses and jobs.

Then we have the rhetoric – strivers and skivers.

This seeks to play to a perception of public opinion. As recent NatCen research shows the public is sceptical about impact on recipients, believing that some are more deserving than others. Many of these perceptions are actually wrong. For example most people support welfare for children although 68% think they are in poverty because their parents are addicts. More worrying for the ConDem's they still see the Government, not individuals, as being responsible for welfare. These perceptions appear to apply to the company delivering the Welfare to Work programme. According to a piece on GMS recently they described clients as ‘lying and thieving’.

The reality is somewhat different from public perception:

• the biggest losers from the 1% uprating are people who are employed;

• benefits for unemployed constitute only 4% of the welfare budget. Only 8% claim for more than a year;

• 60% of the welfare budget goes on pensioners.

Then we have that other myth, welfare fraud. That actually costs only 70p out of every £100. Compare that to the £120bn tax dodging by the rich.

It is also argued that we have a culture of worklessness that welfare reform will tackle. This is another myth the JRF Study in Glasgow & Middlesborough shows. There was no evidence at all as two generations of claimants are rare (0.3%) and not surprising children don’t want to follow their parents down this route. Oh and by the way, only one-third of incapacity benefit claimants were long term.

The architect of all this is Ian Duncan Smith. Some will remember him coming to Easterhouse eleven years when he was the Tory Party leader to meet Bob Holman and learn about poverty. He said and did some interesting things for a Tory, driving compassionate Conservatism. I would recommend Bob's interview in Holyrood Magazine to see what he thinks of IDS today!

Poverty is as real for those in work and if this is the route out of poverty then work has to pay. However, real wages are falling while the combined worth of the country's 1,000 wealthiest people is £414bn, up 4.7%.

I have focused in this post on the impact of UK Government policy, because I believe the impact is not fully understood. One in four Scots could be in poverty by end of decade. However, finally I will look forward.

The Scottish Government has done some small and useful things to mitigate the worst effects including; passported benefits, covered the Council Tax Benefit cuts for one year, the Scottish Welfare Fund and extra funding for advice agencies. Perhaps more worrying for them is that two-thirds of Scots think they are responsible for welfare benefits! But we need a more radical approach at all levels. At its basic level it's simply about raising incomes creating the sort of fairer and more equal society that underpins the Just Scotland approach to constitutional change.

The problem is not devising a constitutional arrangement. You could envisage an independent or devolved set of powers and then produce a wonderful vision of the sort of welfare system many of us would wish to see - largely on the Nordic model. The problem is political will. There is no indication that any of our political parties are yet ready to have the necessary conversation with the voters about the taxation system needed to sustain a Nordic model of welfare.

To be positive all is not lost on this issue in Scotland or even in the UK. The Scottish Government has taken some small actions as I have set out above. I will also pay credit to Ed Miliband for challenging the Tories on welfare cuts when there were those in the Party, armed with polls and focus groups, arguing that Labour should duck the issue. As TUC research has indicated public opinion is also changing and that can only move in our direction as the cuts bite. Remember, there is much worse to come as Cameron and Osborne seek to dismantle the state and reduce welfare to the most basic of safety nets.

There will be no quick fixes, no vanguard actions by trade unions or others. Instead we need to steadily build support for a better way.