Income supplement: analysis of options

1. Introduction

This paper sets out the analytical evidence used to inform the income supplement policy to help tackle child poverty in Scotland. It includes modelling of policy options, as well as an additional assessment of some of the other aspects that can be considered when making policy choices.

The Child Poverty (Scotland) Act 2017 places a duty on Scottish Ministers to ensure that interim and final child poverty targets are met by 2023 and 2030 respectively to reduce the number of children who live in poverty.^[1]

In March 2018, the Scottish Government published the Tackling Child Poverty Delivery Plan (TCPDP) for 2018-22 that set out new policies and proposals to make progress towards these targets.^[2] One of the flagship commitments in the TCPDP was that the Scottish Government should work towards introducing an income supplement for low income families.

The TCPDP recognises that child poverty is a multifaceted issue and that reductions in child poverty can be achieved by focusing on three main drivers:

• increasing income from work and earnings

• reducing household costs

• maximising income from social security and benefits in kind

The Poverty and Inequality Commission in their advice on the TCPDP warn that "reaching the targets through use of devolved social security powers alone is not realistic and would require billions of pounds of additional spending".^[3] Therefore, while an income supplement for low income families would contribute towards meeting the child poverty targets, a suite of other policies and programmes targeting the other main drivers would also be needed.

As advised by the Poverty and Inequality Commission, the TCPDP states that work on developing an income supplement should be guided by the following tests:

i. The income supplement is targeted on families who need it most, helping to lift the maximum number of children out of poverty;

ii. There is a robust and viable delivery route to get the additional income to those families.

Analysis provided in this paper aims to help assess the options against the first test and provide additional evidence for the direction of the policy. The rationale for the choices made in relation to the income supplement is set out in the policy position paper,^[4] which also discusses the delivery route considerations required to satisfy the second test.

Section 2 of this report provides the necessary context for the analysis, covering the child poverty targets and the most up-to-date statistics on families with children in poverty. Section 3 sets out factual information on devolved and reserved powers of social security. Section 4 outlines the policy objectives and the process of generating the options. Section 5 presents and compares the policy modelling results, whilst Section 6 provides a discussion of additional considerations relevant to the policy decision. Section 7 provides concluding remarks.