As the cost-of-living crisis intensifies, responses from governments at Westminster and Holyrood have taken distinctly different tones. When the UK Chancellor chose to cut the budgets of those on the lowest incomes by failing to increase benefits in line with rising living costs in his spring statement, the Scottish government responded the following day by publishing its new plan to deliver against legally binding targets to reduce child poverty. The latter plan pledged to increase the value of the Scottish Child Payment (a new payment for low-income families) to £25 a week; mitigate the impact of the benefit cap on larger families; and to publish a strategic plan for the expansion of early years education and care.
However, the Scottish government’s targets are threatened by strengthening headwinds: core social security payments are failing to keep up with inflation, in-work poverty was rising prior to the pandemic, and essential costs such as housing and childcare continue to rise faster than incomes. Without further action, the current crisis risks spiralling into a living standards catastrophe.
Our work at IPPR Scotland
At IPPR Scotland, our work over the past two years has focussed on the policy action needed to deliver financial security for more people living on low- and middle incomes. This work has focussed on the action needed on three fronts:
1. Boosting incomes, through social security
2. Improving earnings, through fair work
3. Reducing costs, through collective services
Over the past year, IPPR Scotland’s living income programme has made the case for a minimum income guarantee as a guiding principle for Scotland’s approach to social security, work and services: setting a floor on living standards, beneath which no one should fall.
Our work so far has explored in detail how a devolved social security system could begin to deliver a minimum income guarantee; and how a fair work recovery could secure minimum pay, hours and conditions. Most recently, we’ve started to explore how extending universal basic services could reduce the cost of life’s essentials for families on low-and middle-incomes.
Universal Basic Services (UBS)
Universal Basic Services are collective services that are sufficient to meet people’s essential needs, regardless of their ability to pay. The idea of universal basic services (UBS) is not a new one: our NHS and our primary and secondary education systems are founded on this approach. As we look to rebuild from the Covid crisis, we make the case for extending a UBS approach to meet the needs of people living in Scotland in the 2020s and into the decades to come.
The first Programme for Government brought forward in the new Scottish parliament made a commitment to exploring a ‘universal basic service approach’ to key services, including childcare, transport and digital. This was accompanied by commitments to introduce a wrap-around childcare offer for school-age children and extend free available childcare hours to one-and two-year-olds. In early 2022, the Scottish government introduced free bus travel for under-22s.
Universal basic services have a critical role to play in containing and reducing basic costs over the longer term. Alongside rising housing costs – particularly in the private rented sector – childcare, energy, transport and digital costs represent a substantial portion of the costs a household needs to meet to achieve what the public see as an acceptable standard of living (as measured by JRF and the University of Loughborough’s Minimum Income Standard). Figure 1: What costs do families need to cover to meet a Minimum Income Standard?
Transport
Transport costs represent a significant portion of families’ spending to meet basic needs (see figure 1). We find that reducing transport costs through universal provision would substantially reduce the gap between current household incomes, and a Minimum Income Standard (see figure 2).
For a lone parent family, a 50 per cent reduction in transport costs could halve the cash gap between their current income and achieving a living income, as measured by the Minimum Income Standard. Reducing the transport costs of a couple with two children by 50 per cent would bridge nearly two thirds of the gap between their current income, and a living income.
Figure 2: Reducing transport costs through universal service provision could substantially reduce the gap between household incomes and a Minimum Income Standard
Childcare
For families with children, rising childcare costs have been outstripping earnings over the past decade. Through our research, we heard from lone parent families with young children struggling with childcare costs that outstripped their rents. Parents described feeling that they were caught in a vicious cycle: working to afford the childcare they needed to go out to work.
Our research found that a lone parent in low-wage work making maximum use of childcare support on offer will still fall short of a minimum income standard by £140 a month, even when working full time.
Universal childcare provision can make a critical difference. Parents who were able to access means tested childcare made available to ‘vulnerable’ two years olds described the stigma associated with the label badged on their children.
The Scottish government’s extended offer of 30 free hours provision per week for all three- and four-year-olds, however, significantly eases the pressure on families’ finances. In addition, we find that free childcare provision significantly improves the work incentives of low-income parents, playing a critical role in moving them towards a living income.
Where next?
The Covid-19 pandemic underlined how much we rely on one another and on collective institutions to live secure and healthy lives. Now, the deepening cost of living crisis is exposing the vital role collective services have to play in containing costs.
While significant tax raising and borrowing powers are reserved to Westminster and a fixed budget at Holyrood, the Scottish government will have difficult choices to make over the next parliament. To help guide these choices and to decide which services are best suited to a UBS approach, we have proposed the following criteria:
The potential for a universal basic service approach to improve financial resilience for families and individuals.
The potential for a universal basic service approach to improve efficiency where a collective approach stands to lower costs for providers as well as those accessing services.
The potential of a universal basic service approach to generate public goods through, for example, improved health or education outcomes, or reduced carbon emissions.
CONCLUDING THOUGHTS
Looking further into the future, ambitions to deliver UBS in Scotland need to grapple with a new set of considerations and trade-offs. These include appropriate models for service provision, where and to what extent universalism should shape provision, and what role, if any, for-profit providers should have to play in the provision of basic services.
While urgent action is needed to protect incomes, we should not lose sight of the major costs that have driven household budgets to breaking point – even before the additional pressures of rising prices.
The scale of exposure to this crisis calls for longer term solutions, beginning with rethinking how we can better provide and protect an acceptable standard of living for everyone.
To tackle the root causes of our current crisis, governments in Edinburgh and in London will need to set their sights on the longer term – in which universal basic services have a vital role to play.
Rachel Statham is Associate Director for Work and Welfare State at IPPR, and was formerly Senior Research Fellow at IPPR Scotland