Income and employment: policy context

Fair work, employability and skills

Current Scottish Government policy emphasises the need to narrow inequalities and invest in life circumstances to improve health. 

The Scottish Government's Economic Recovery Implementation Plan (2020) aims to do this by protecting and create good jobs in partnership with business, consistent with sustainable, green growth, and helping people access those jobs. This is supported by the Future skills: action plan, the Fair Work Action Plan and and Fit for the Future (a review of the Skills Delivery Landscape in Scotland).  

UK Welfare Reform

Since 2010, the UK Government has embarked on a welfare reform programme, arguing this would improve health outcomes and reduce poverty  (Universal Credit: welfare that works, 2010). 

The centrepiece was to replace existing six benefits with a single payment, Universal Credit (UC). Roll-out of UC in Scotland started in 2015. The process is expected to be complete by 2028.  

Other reforms introduced between 2010 and 2019 had the impact of reducing material resources to low-income working-age families.  These included: freezes and cuts, sanctions, changes to assessment of people claiming incapacity and disability benefits, the benefits cap, the two-child limit, the five-week wait and deductions.

Since June 2021, there have been further developments in the reserved system:

• The Minimum Income Floor in Universal Credit was reintroduced from August 2021.
• The rate by which in-work benefits were reduced as earnings increased was lowered.
• Universal Credit sanctions rose. Hardship payments have also been rising (Webster, 2023).
• Those unemployed and seeking work were required to search more widely for available jobs from the fourth week of their claim (rather than after three months).
• In-work conditionality has been extended. From January 2023, low-paid part-time workers working less than 15 hours a week were required to take 'active steps' to increase the number of hours they work or else they will receive a benefit cut.

The National Institute for Health Research has funded a research project evaluating the mental health impacts of Universal Credit, which is expected to be complete by 2025.

Devolved Social Security

Under the Scotland Act 2016, the Scottish Parliament was given new powers over Social Security (mainly those related to disability, caring, pregnancy and children).  It also devolved delivery of employment support programmes to Scotland (SPICe, New Social Security Powers, 2016)

A new agency, Social Security Scotland, was established in 2018.  It currently has responsibility for administering the following benefits:

• Child Disability Payment. 
• Adult Disability Payment.
• Carer’s Allowance Supplement and Young Carer's Grant
• Best Start Grant, Pregnancy and Baby Payment
• Best Start Early Learning Payment (for children aged two to three and a half)
• Best Start School Age Payments
• Best Start Foods.
• Funeral Support Payment
• Scottish Child Payment (SCP).
• Child Winter Heating Assistance
• Job Start Payment.

Child Poverty

In 2016, the UK Government replaced a statutory obligation to report on trends in child poverty with a requirement to report on worklessness and educational attainment. For more, see Improving Lives: Helping Workless Families indicators 2022.

The Scottish Government did not support this, and introduced the Child Poverty (Scotland) Act 2017 instead.  This requires Scottish Ministers to ensure that four targets are met in 2030/31 (latest figures in brackets):

• Less than 10% of children are in relative poverty (24%, 2020-23)
• Less than 5% of children are in absolute poverty (21%, 2020-23)
• Less than 5% of children are in combined material deprivation and low income (10%, 2020-23)
• Less than 5% of children are in persistent poverty (14%, 2018-22)

The Bill requires Scottish Ministers to publish regular child poverty delivery plans, interim targets, and annual reports to measure progress; and a duty on local authorities and health boards to report annually their contribution to reducing child poverty. 

In March 2022, the Scottish Government published Best Start, Bright Futures: tackling child poverty delivery plan 2022 to 2026. Modelling suggests the plan will reduce child poverty in Scotland to 17% by 2023/24, with the Scottish Child Payment reducing child poverty by 5 percentage points.     

All of this is underpinned by Poverty and income inequality statistics and analysis, including a Local Child Poverty Dashboard.

 Public Health Scotland has published:

• Briefings on the scale, causes and consequences of child poverty
• A range of tools and case studies on responses to child poverty
• Reports on how the health of children in Scotland aged 2 to 7 years was affected by COVID-19 epidemic, highlighting the greater impact on children in low-income families. The latest findings from the third round of this survey, are available here.

Cost of living

In May 2022, as part of a package of responses to the cost of living crisis, the UK Government announced it would provide extra funding to low-income households dependent on state benefits (including the state pension). This included:

• £650 to those on means-tested benefits
• £150 to those on disability benefits
• £300 to pensioners

These benefits are likely to make the average full-time worker on the national minimum wage (whether or not they rely on UC to top up their earnings) better off.

It is also likely to mitigate against drops in income anticipated for median earners working full-time and for out of work lone parents which were anticipated without this support.

Richardson et al. (2023) found that the UK Government intervention mitigated against the impact of the cost of living, but were insufficient to offset anticipated increased population mortality or increased inequalities in mortality.