Income and employment: policy context

Scottish Government economic strategy

Current Scottish Government policy emphasises working to narrow inequalities and investing in life circumstances to improve health, building on the work of previous administrations. This is likely to be informed by the recent report by the Independent Advisor on Poverty and Inequality to the First Minister. 

The 2015 Economic Strategy argues that "creating a fairer society is not just a desirable goal in itself, but is essential to the sustained, long-term prosperity of the Scottish economy". Of particular relevance to public health is the priority given to promoting inclusive growth and creating opportunity through a fair and inclusive jobs market and regional cohesion.  The Fair Work Convention, which reported in 2016, set out its vision for Fair Work in Scotland based on five dimensions: effective voice, opportunity, security, fulfilment and respect.  Both agendas are supported by the new Scottish Labour Market Strategy (2016). 

Working for Growth: A Refresh of the Employability Framework for Scotland re-iterated the Scottish Government’s belief that “overcoming barriers to work remains at the heart of employability…from age and gender to skills, physical ability, and addiction”. To achieve this, they emphasise the need for greater integration between different parts of the employability sector, as well as between the economic development and employability sectors in Scotland.

UK welfare reform

The UK Government believes that tackling poverty among working-age families and their children requires radical reform of the welfare system. These policies aim to merge out-of-work and in-work benefits, imposed stricter conditions on those receiving benefits (a new ‘claimant commitment’) and ensure "all amounts of work will be more financially rewarding than inactivity", are outlined in Universal Credit: welfare that works (1.7Mb).  This was accompanied by stricter assessment of people claiming Employment Support Allowance benefits because they are too sick to work (the Work Capability Test), increased financial penalties (called ‘sanctions’) for people judged not to be meeting their obligations and the introduction of a new benefit (Personal Independence Payment) for working-age adults with disabilities, also accompanied by stricter testing of claimants in order to qualify for it. 

Further changes have been announced since 2015, and are summarised by Beatty and Fothergill (2016).  In addition to freezes in the value of most working-age benefits, cuts in eligibility and increased conditionality which are likely to affect many low-income households in Scotland, there are a number of specific changes which are likely to impact on adults claiming health-related benefits, Employment Support Allowance (ESA) and Personal Independence Payment (PIP):

  • From April 2017, new ESA claimants who are placed in the Work-Related Activity Group (WRAG) will receive the same rate of benefit as those claiming Jobseeker’s Allowance.  The equivalent limited capability for work element will be abolished from Universal Credit.  The DWP has announced these groups will receive additional support to help them take steps back to work.
  • In October 2016, the UK Government published a Green Paper, Improving Lives, which included a proposal to consider extending conditionality (including sanctions) to ESA claimants in the support group.
  • The continued roll-out of PIP is expected to reduce incomes in 70,000 Scottish households by an additional £2,600 per annum by 2020/21.

Devolution of New Social Security Powers to Scotland

Under the Scotland Act 2016, the Scottish Parliament will be given new powers over certain areas of Social Security, including powers to:

  • Determine the structure and value of range of benefits for those who are sick or disabled (including Disability Living Allowance and PIP, but excluding Employment Support Allowance), parts of the regulated Social Fund and some other benefits (e.g. Industrial Injuries;
  • Design and delivery of employment programmes replacing the Work Programme and Work Choice;
  • Discretion to change payment arrangements for Universal Credit and vary the housing costs elements of Universal Credit.

This is not exhaustive – a SPICE briefing gives more detailed information on the New Social Security Powers.

Child poverty

Under the Child Poverty Act 2010, both the UK and Scottish Government were legally required to substantially reduce Child Poverty.  However, in July 2016 the UK Government introduced legislation to make significant changes to the Child Poverty Act 2010, via the Welfare Reform & Work Bill.  The Child Poverty Act was renamed the Life Chances Act and the UK Government is no longer be required to report on child poverty targets relating to relative low income, combined low income and material deprivation, absolute low income, and persistent poverty income targets.  They will instead be required to report on measures of worklessness for the whole UK and educational attainment (based on GCSEs) for England.  The UK Government has argued that this approach will more effectively improve inequalities in children’s life chances.

The Scottish Government did not support these changes, and committed to coming forward with a Scottish approach to tackling child poverty.  In February 2017, the Child Poverty (Scotland) Bill was introduced to in the Scottish Parliament.  The Bill as introduced included four statutory income targets; a duty on Scottish Ministers to publish regular child poverty delivery plans, and annual reports to measure progress; and a duty on local authorities and health boards to report annually on activity to contribute to reducing child poverty.  A number of amendments were agreed at stage 2 of the Bill:

  • Interim targets on the face of the Bill, to be met by 2023/24; these are calculated based on the mid-point between 2015/16 levels and the 2030 target.
  • Key areas which must be covered in the Child Poverty Delivery Plans.
  • A forward looking aspect to Local Child Poverty Action Reports, with Local Authorities and Health Boards now required to outline action they propose to take in future years.
  • The establishment of a statutory Poverty & Inequality Commission. 

The third and final stage of the Bill’s parliamentary process will take place later in 2017.  The first of Scottish Government’s Delivery Plans, which will set out actions to be taken to reduce child poverty over the a 4 year period, will be published in April 2018.