Emergency Budget Review: equality and fairness - evidence summary

How is the cost crisis affecting equality and fairness in Scotland?

The Cost of Living analysis which accompanies the Emergency Budget Review^[5] draws from a wide range of sources, and provides an overview of emerging evidence of the effects of the current Cost of Living crisis.

It finds that the high rate of inflation has contributed to a cost crisis, which follows on from the Covid-19 pandemic, Brexit and a period of prolonged austerity. In this landscape of a sustained period of change, it is clear that further analysis will be needed over the coming months to more fully understand the emerging consequences of the crisis.

The analysis sets out a wide range of impacts, including on businesses, and on the demands for public services, and flags up that public and third sector services will come under sustained pressure this winter.

Of particular relevance to understanding Equality and Fairer Scotland impacts, the analytical report examines evidence on the types of households that are likely to be most negatively affected by the cost of living crisis. Its over-riding conclusion is that

"Low income households are most at risk. Low income households with particular characteristics are likely to fare worse."

This is because low income households as a whole are likely to be disproportionally negatively affected by increases in the cost of living^[6] due to for example:

• Spending a higher proportion than average on energy, food and transport and therefore being more affected by inflation and having less flexibility in their budget to cope with price rises. In Scotland in 2017-20, households with the lowest 15% of income spent 61.5% of that income on housing, fuel & food; those in the remainder spent 20.5% of income on this.
• Being more likely to be financially vulnerable, and entering the cost of living crisis in a position of financial hardship. Among the 20% of households in Scotland with the lowest incomes 50% did not have enough savings going into the crisis to keep them above the poverty line for one month should they lose their income, compared with 30% of households overall.^[7]

The evidence in the analytical report highlights some of the equality and socio-economic impacts of the current cost crisis in Scotland. Some of these are outlined below, but further information can be found in the report itself:

Minority ethnic people are significantly more likely to live in larger households^[8], to be unpaid carers, and to live in private rented accommodation. Minority ethnic households in Scotland are also more likely to experience severe poverty^[9] and so a greater proportion of their income is likely to be spent on essentials which are subject to inflation.

Gypsy/Travellers are more likely to be in seasonal work, saving money in the summer to last through the winter, and therefore may find it more difficult to access lending or benefits depending on their lifestyle. These issues were highlighted during the lockdowns as a result of the Covid-19 pandemic.

People who arrive in the UK as refugees and are seeking asylum also face particular hardship that will be exacerbated by the rising cost of living, as they are on very low fixed incomes and do not have the right to work. Women with 'no recourse to public funds' who are excluded from claiming social security benefits are at high risk of poverty, and often destitution, if they lose work or separate from a partner

Women are likely to experience indirect effects of cost pressures that are not always apparent in routine data. This can, for example, be due to formal or informal caring responsibilities and consequent loss of income or career progression, and the unequal division of domestic labour.

Women are more likely to live in lone parent households, households with an unpaid carer and larger households.

• Lone Parent Households make up 25% of all family households in Scotland. 92% are headed by women. 90,000 children living in relative poverty are in a lone parent family, and 80,000 children are living in absolute poverty.^[10] Lone parent households are the least wealthy household type in Scotland, and also the most financially vulnerable. 64% of lone parent households were financially vulnerable in 2018-2020, meaning that their savings could only replace their income for a month before falling below the poverty line. Lone parent households were also the most likely to have unmanageable debt, compared to other household types.^[11]
• Reduced ability to work can push carers into poverty - unpaid carers already have lower financial resilience as caring is often unpredictable and can be difficult to plan for financially, reducing their capacity to work to earn money, with carers working part time, in lower paid jobs or having to give up work entirely in order to care. This situation is likely to be worsened for people with more intensive caring roles.
• The risk of relative poverty increases with number of children and overall, larger families require higher levels of income to achieve an adequate standard of living. In Scotland, 32% of children in households with three or more children experience relative poverty, compared with 24% of children overall.^[12]

In addition, the six child poverty priority family types identified within the Child Poverty Delivery plan, which are more likely to include women, feature prominently within the groups identified.

The Women's Budget Group produced a recent briefing on the gendered dimension of the cost of living crisis based on analysis of UK evidence and argued that women in the UK are more exposed to cost of living pressures, due to lower earnings and savings (amongst other factors and structural inequalities) as well as some of the harmful consequences of the crisis, such as domestic abuse.^[13][14]

Households in Scotland including disabled people were more likely to be financially vulnerable, and more likely to have unmanageable debt.^[15] Furthermore there are 100,000 children living in relative poverty, and 90,000 people in absolute poverty in families with a disabled person.^[16] Analysis shows that:

• 29% of children in families with a disabled person are in relative poverty^[17]
• overall, it is generally recognised that disabled families face higher costs of living than non-disabled
• families where someone has a long-term condition find it harder to afford childcare and there are barriers around finding the right childcare to support children's needs
• they are less likely to have savings (among families with long-term conditions).^[18] In Scotland as of 2017-19, 45% of households with children where someone had a long-term health condition had no savings, compared with 34% of all households with children.^[19]

There is also likely to be intersection and overlap in relation to the household types identified above, and within them, people's membership of multiple interconnected social categories, and experiences of structural inequalities.^[20] A person could have a number of protected characteristics and experiences, for example being a minority ethnic disabled renter on income-related benefits, or a mother with caring responsibilities heading a rural low income, lone parent family. Some of these overlapping characteristics may interact with each other in a way that compounds negative outcomes.

It is also important to consider major life events and points of transition, which can affect a range of different types of low income households. For example, additional costs may be incurred due to the arrival of a new baby, a child starting school, parental separation, bereavement, retirement, or the onset of poor health. There are also individuals within households with complex needs that may not be captured within the groups included.

The report also highlights the impacts of the cost crisis on those experiencing socio-economic disadvantage in Scotland. For example, this includes:

• Households in Receipt of IncomeRelated Benefits - who are likely to be disproportionally negatively affected, due both to the starting point of financial hardship following a sustained period of austerity and a series of benefit reductions since October 2021.
• Households Narrowly Ineligible for Means-tested Benefits - there could be a significant number of households in Scotland who narrowly miss out on qualifying for the £650 Cost of Living payment for low income households. For example, there could be around 10,000 households in Scotland who earn just too much to qualify for Universal Credit,^[21] who would have been better off earning less, and remaining on Universal Credit.
• Households who rent their homes -the rented sectors have a higher proportions of people who are in relative poverty and who are in fuel poverty, as well as of children in relative poverty.
• Rural and island householders - approximately 100,000 off-gas-grid households were considered to be in fuel poverty in 2019, representing a fuel poverty rate of 34%, above the national rate of 25%. This is likely to have increased with rising costs.^[22]

Analysis by the Office for National Statistics for Great Britain as a whole,^[23] using data from the Opinions and Lifestyle Survey, looked at which people have been affected by an increase in their cost of living, in the period June to September 2022. Amongst the findings were that:

• Over half (55%) of disabled adults reported finding it difficult to afford their energy bills, and around a third (36%) found it difficult to afford their rent or mortgage payments compared with 40% and 27% of non-disabled people, respectively.
• Around 4 in 10 (44%) White adults reported finding it difficult to afford their energy bills, compared with around two-thirds (69%) for Black or Black British adults and around 6 in 10 (59%) Asian or Asian British adults.
• Around half of those with a personal income of less than £20,000 per year said they found it difficult to afford their energy bills; this proportion decreased as personal income increased, with around a quarter (23%) of those earning £50,000 or more reporting this.
• Adults in the youngest and oldest age groups appeared less likely to report having difficulty with or being behind on rent or mortgage payments. This possibly reflects younger people not yet being responsible for such payments and older people being more likely to own their home outright.