Tackling child poverty delivery plan 2022-2026 - annex 4: cumulative impact assessment

1. Executive Summary

This report assesses the cumulative impact of a package of Scottish Government policies on child poverty. The package includes a number of benefits which are already in place, along with the expected outcomes of policies in the Delivery Plan which are aimed at increasing income from employment over the coming years.

Using the latest data at the time of writing, the modelling indicates that around 17% of children will live in relative poverty in 2023/24. This would represent a reduction of around 9 percentage points compared to 2019/20, the latest year of official statistics. Our assessment shows that the policy package plays a significant role in driving this reduction. However, external factors also play a role, introducing a significant degree of uncertainty into our projections – particularly in the context of the cost of living crisis and increasing international instability. What is more, the impacts of these factors cannot be fully separated from the impacts of the policy package, due to the way that reserved and devolved policies interact and the fact that both are shaped by the wider economy.

These external factors are also not entirely positive. For example, the high rates of inflation which are expected to continue in the medium term will tend to reduce the relative measure of child poverty by triggering higher benefit payments, even if living standards deteriorate in practice. This mechanism is largely nullified on the absolute measure of child poverty, since the absolute poverty line is also uprated with inflation. Recent reserved decisions likewise appear to have less of an impact on absolute child poverty, since they target households which are in employment and thus have higher incomes. Consequently, we project that absolute child poverty will fall by 7 percentage points between 2019/20 and 2023/24, compared with a 9 percentage-point fall in relative child poverty, even though the impact of the policy package is broadly similar. Combined with the fact that the initial gap is wider on this measure, the result is that absolute child poverty is projected to be around 16% in 2023/24.

Beyond 2023/24, the scale of change will increasingly depend on the outcomes of the policies announced in the Delivery Plan, along with external factors. Based on the measures we have modelled, our projections indicate that child poverty will stay broadly constant by 2025/26. The remaining challenge would therefore be substantial: in the subsequent five years, relative child poverty would need to fall by a further 8 percentage points, and absolute child poverty by a further 12 percentage points, to meet the final targets.

All figures in this report should be treated as indicative. By definition, models purport to capture the features of the world which are most essential to the topic in question, while abstracting from its full complexity. The outputs of our model therefore come with a degree of uncertainty, particularly as we use survey data and project into the future. We have used the available tools and data to ensure our estimates are as robust as possible, but they remain estimates.