Tackling child poverty - progress report 2022 to 2023: annex d - cost of living focus report

Considerations for policy makers

Key Messages

The cost of living crisis has disproportionately impacted upon families living in low income households, who were struggling following the COVID-19 pandemic and a decade of austerity measures.

The cost of living support package provided by UK and Scottish Government is widely seen as progressive and has been welcomed by many stakeholders. A continuation of such support is still seen as urgent and required to minimise the impact of the crisis on low income households.

Emerging evidence, mostly provided by stakeholders, urges policy makers to consider:

1. Greater focus on targeted approaches with an active consideration of the varying needs and challenges facing households. Including those who are narrowly missing out on a range of support and who are increasingly struggling.

2. Boosting take-up of means-tested benefits (i.e. Universal Credit) particularly when used as a gateway to other sources of support. Further, consider approaches which aim to ensure that the basic rate of Universal Credit is enough to afford household essentials.

3. Providing adequate support and assistance in applying for benefits.

4. Wider systemic change is required to alleviate poverty and reduce the challenges faced by lower income households in the long term.

This section explores generic issues to consider when designing policies to support families in need. Specifically, it focuses on debates concerning targeted or universal interventions, the stigma surrounding access to interventions, and the need for longer-term systemic change.

Current cost of living support package

In response to the crisis, the UK government announced a raft of support measures during 2022-2023:

• The Energy Bills Support Scheme (EBSS). A £400 energy rebate for all households (paid over a six month period from October 2022) to help with energy bills over the winter of 2022/2023.^[83]
• The Energy Price Guarantee (EPG). This policy was introduced in October 2022 and limits the price households pay per unit of gas and electricity. In October 2022 this was set at £2,500, with this level to remain until April 2023, when it increased to £3,000.^[184]
• Cost of Living Payments. A £650 support payment, paid in two instalments to low income households on eligible means-tested benefits.^[185] For most households, this was paid in July 2022 and November 2022.^[186]
• Disability Cost of Living Payment. A one off payment of £150 for people with disabilities (in receipt of non means-tested disability benefits). This was paid between September and October 2022.^[186]
• Pensioner Cost of Living Payment. A one off payment of up to £300 for pensioners eligible for Winter Fuel Payment. This was paid as an increase to Winter Fuel Payment for winter 2022/2023.^[187]

Further, the UK Government has already announced the following support for the current financial year 2023-2024. This includes:

• Extension of the Energy Price Guarantee (EPG). In the Spring 2023 Statement it was announced that, due to energy costs remaining high, the current EPG level (of £2,500) would remain for a further three months to 30 June 2023. Therefore, the EPG increase to £3,000 will be implemented in July 2023.^[188] Additionally, in the UK Government Spring Budget 2023 statement, it was announced that from July 2023 the EPG would be adjusted to bring comparable charges for pre-payment meters and direct debit customers until April 2024 (when the EPG ends). Further, there is an aim to ensure the pre-payment meters premium is ended on a permanent basis beyond April 2024.^[188]
• Cost of Living Payments. A £900 payment for those eligible and on means-tested benefits. The first payment, of £301, was paid between April-May 2023.^[189]
• Disability Cost of Living Payment. A one off payment of £150 for people with disabilities (in receipt of non means-tested disability benefits). This will be paid between June-July 2023.^[190]
• Pensioner Cost of Living Payment. A one off payment of up to £300 for pensioners eligible for Winter Fuel Payment. This will be paid later in 2023.^[189]

Both last year and this, the Scottish Government has allocated almost £3bn to support policies which tackle poverty and to protect people as far as possible during the ongoing cost of living crisis. Measures include:

• The Cost of Living (Tenant Protection) Act. In September 2022, the Scottish Government announced emergency legislation which included a temporary freeze on in-tenancy rent increases (this moved to a rental cap of 3% in April 2023) and a moratorium on rental evictions.
• Continuation of Fuel Insecurity Fund. In March 2023, the First Minister announced increased support for households with energy costs. Up to £30 million will be provided to extend the Fuel Insecurity Fund over 2023-24. This funding provides support for vulnerable households, through partnership with third sector organisations, who are at risk of 'self-disconnection' or 'self-rationing' energy use.
• Cost of Living Award. In February 2022, it was announced that low income households and households in Council Tax Bands A-D, would receive a Cost of Living Award of £150 to assist with Council Tax. This was paid to eligible households before the end of April 2022.
• Islands Cost Crisis Emergency Fund. In November 2022, the Emergency Budget Review allocated a £1.4m fund to target immediate support to islanders struggling due to the cost of living crisis. The cost of living on islands is higher when compared to the mainland.
• Doubling the December Bridging Payment. In October 2022, the then First minister announced that the final quarterly bridging payment, due in December 2022, would be doubled to £260 to provide extra support over winter and help with cost of living pressures.
• Winter Heating Payment. In the Programme for Government (Sep 2022), a new Winter Heating Payment (WHP) was set out which replaces DWP's Cold Weather Payment. In 2022-23, this had a value of £50. Next winter, the payment rate will be £55.05 and will help around 395,000 low income individuals.
• Enhancing Discretionary Housing Payments. In the Programme for Government (Sep 2022), the Scottish Government committed to giving local authorities more flexibility to take account of energy bills in their prioritisation of households for Discretionary Housing Payments, as well as increasing the funding for Discretionary Housing Payments by £5 million.

Balancing the right approach to support

This section highlights recent discussions from stakeholders and some early emerging evidence on the approach taken by both the UK and Scottish Government to support families during the ongoing cost of living crisis. It explores generic issues to consider when designing policies to support families in need, specifically: targeting, the stigma surrounding access to interventions, and the need for longer-term systemic change.

Targeted or universal support

The range of support provided from both the UK and Scottish Governments during the cost of living crisis has been recognized by stakeholders as broadly progressive. However, there has been some concerns, mainly:

• Lack of consideration of varying circumstances. Some stakeholders argue, that blanket payments do not adequately account for varying circumstances between households. For example, larger households and households with disabled members have been identified as potentially losing out due to their higher energy costs.^[191] Additionally, people with incomes just above the eligibility threshold for means-tested benefits could be significantly worse off than those who just qualify.^[1] Finally, it has been argued that, even with cost of living supports, low income households still face a shortfall which would have been better addressed by more timely uprating of benefits in line with inflation.^[169]
• Ensuring that policies support those most in need. Many stakeholders were concerned about the universal nature of the Energy Price Guarantee (EPG) and the Energy Bill Support Scheme (EBSS) in supporting families with rising energy costs in 2022-2023. The Institute for Fiscal Studies (IFS) commented on how these interventions disproportionately benefitted higher income households due to their universal nature. The report states that the UK Government should have targeted those on lower incomes who would struggle most to cope with the higher energy costs over the winter of 2022-2023.
• Making sure that the support provided is sufficient. There are concerns that the support provided is not enough. The Joseph Rowntree Foundation (JRF) highlight that while the UK Government has announced a support package for those on means-tested benefits in 2023-2024 this does not go far enough in helping those on the lowest incomes. JRF state that four in ten households in the most economically disadvantaged fifth of the population are not receiving such benefits.^[192] Thus, these households are left without additional support during the continued crisis. JRF calculate that the UK Government support package for 2023-2024 will mean household budgets remain broadly steady for low income families. They estimate an increase of £6,050 in income across the past two years, which is slightly below the increase in prices, leaving a shortfall of £200.^[193]
• A need to consider those just missing out. Households marginally ineligible for means-tested benefits miss out on the cost of living payments. This means that those just above the threshold to receive support will be worse off. JRF assert that households who are on low incomes, but do not receive means-tested benefits, have been largely forgotten. Their analysis highlights that the increases in prices have left a £3,500 gap in the budgets of those households in the bottom 20% of household incomes (and not receiving means-tested benefits).^[193]

In order to provide those most at need with maximum support, the following interventions have been suggested by stakeholder groups:

• Encouraging Universal Credit take-up. This would ensure people get the support available to them when they need it most. Academic research, funded by the Health Foundation, found that during the COVID-19 pandemic almost half a million people, who were eligible did not apply for Universal Credit. For almost three in five (59%) this was due to the perceived difficulties of the application – including assessing if they were eligible, the claims process and the threat of sanctions.^[194]
• · Adequate support and assistance in applying for benefits. For the Scottish Child Payment, the Scottish Government worked with the Social Security Experience Panels, which include people with lived experience of the UK benefits system, in the development and design of disability benefits. The interim evaluation of Scottish Child Payment found that clients saw the application process as straightforward. For some, the simple application process created a sense that they were entitled to the payment, as opposed to feeling they had to prove themselves for it.
• Continue to explore the provision of a social tariff in the energy market. This proposed measure is welcomed across the evidence, with it being deemed cost-effective in the longer term,^[195] but also a beneficial support package for those families hardest hit by energy costs,^[196] and viewed as a source of consumer protection.^[197]
• Advocate for adequacy in reserved benefits. This would ensure the basic rate of Universal Credit is enough to afford household essentials, such as, food, household bills and travel costs.^[198]

Stigma in accessing support

In the wider UK context, poverty can be a contentious term with no clear definition and one that can be used to label and stigmatise.^[199]

During the cost of living crisis, it has been reported that adults can face stigma surrounding internalised feelings of shame, guilt and self-blame, but stigma may also be encountered when accessing services.^[52],[59]

Some parents have described hiding their financial status, in order to protect their child, by continuing to buy expensive clothing their children. For lone parents, the Poverty Alliance reports that this level of desire to hide from poverty can result in lone parents not asking for greater levels of child maintenance from an ex-partner.⁵⁹

For some recipients, the process of receiving support and benefits can be stigmatising. While a lot of effort has been put in place by those working to reduce poverty to highlight the structural nature of poverty, there still remains a perception that poverty can be attributable to individual choices and decisions.^[200]

Specifically, there are concerns about accessibility and take-up of social security and benefit entitlement in rural areas where the subjective nature of poverty, and stronger culture of self-reliance, can lead some to believe 'they are just getting by'. A sense of pride and the 'visibility of life' in smaller communities may impact upon uptake, in that people are more conscious of others in the community being aware of their circumstances.^[201]

Across the evidence base, there is a recurring call for cash-first approaches to help support lower income households. These are viewed as more dignified than vouchers and in-kind support due to offering the individual the opportunity to have a sense of control over their life.^[202] Recipients have also highlighted how cash-first approaches remove stigma as it is more discrete and does not highlight that the individual is in receipt of support (as opposed to vouchers).^[203] A cash first approach also communicates the idea of trust and that everyone is deserving of support when it is needed.^[200]

Longer-term, systemic change

Across the evidence, it is apparent that lower income households continue to face significant challenges. The ongoing cost of living crisis has emphasized the systemic challenges that families face when household budgets and household resilience are strained. These will be covered in the subsequent sections of this report and range from:

• The need for more accessible, flexible and high quality childcare.^{[59],[65],[204]} A recent review of the impact of childcare on parental poverty noted that formal childcare is an 'indispensable part of a policy toolkit' to tackle child and in-work poverty^[205]
• Improved digital access and connectivity across all of Scotland^{[68],[201],[206]}
• An employment system which provides secure jobs with flexible, family friendly support alongside a minimum income guarantee^[viii] in order to raise household incomes and reduce levels of in work poverty^{[68],[76],[207]}
• An accessible and supportive social security system.^[60] While it is welcomed across the evidence that benefits were uprated in April 2023 by 10.1%,^[124] this still leaves benefit rates at a historic low in real terms. Therefore, many families are struggling to make ends meet, and greater consideration needs to be given to providing adequate packages of social security support^[208]
• A greater need for mental health support, due to the deep links between poorer mental wellbeing and poverty^[60]
• A need for joined up and person-based services which deliver localised support^{[60],[65],[201]}