Europe 2020: Scottish national reform programme 2017

Chapter 7: Inclusive Growth and Equity

Promoting inclusive growth is central to Scotland's Economic Strategy. Improving equality and tackling inequalities - social, regional and inter-generational - are not only desirable outcomes in themselves, but are also essential for improving economic performance.

This chapter sets out the actions being undertaken throughout Scotland to deliver inclusive growth, tackle child poverty and income inequality and maximise the potential of all areas of Scotland. These policies and actions cover one of the European Commission's CSRs to the UK relating to improving the availability of affordable, high-quality, full-time childcare, and strongly support the Europe 2020 flagship initiative, "European platform against poverty and social exclusion".

Europe 2020 headline target:

The number of Europeans living below the national poverty line should be reduced by 25 per cent, lifting over 20 million people out of poverty.

Current Scottish Performance

Progress in Scotland in this area is measured through the Scottish Government's National Performance Framework, which includes measures relevant to poverty and social inclusion. Scotland's current performance is presented in Table 6.

Table 6 - Current Scottish Performance Against Poverty and Social Inclusion Indicators

Indicator	Current Level	Change Over Year	Reference Period
Solidarity target: "Increase the proportion of income earned by the three lowest income deciles as a group by 2017" [33] [34]	115	Increased from 111.6	2014-15
Reduce the proportion of individuals living in poverty - this is measured in terms of the percentage of people living in relative poverty (below 60 per cent of UK median income before housing costs) [35]	15.0% of the population in relative poverty	1% pts increase	2014-15
Reduce children's deprivation National Indicator - this is measured in terms of percentage of children in combined material deprivation (based on a suite of questions in the Family Resources Survey) and low income (below 70 per cent of UK median income)	10% of children in combined material derivation	3% pts decrease	2014-15

As indicated in Table 6, the share of income earned by the lowest four income deciles and the proportion of the population in relative poverty has remained broadly unchanged in recent years, while the share of children living in combined material deprivation decreased over the year to 2014-15.

Delivering Inclusive Growth

The Europe 2020 vision of inclusive growth is for a high-employment economy delivering economic, social and territorial cohesion. The Europe 2020 Strategy identifies that this will require making full use of labour potential; spreading the benefits of economic growth to all areas; ensuring access and opportunities for all throughout the lifecycle; and promoting gender equality.

As highlighted in Chapter 2, Inclusive Growth is a central priority of Scotland's Economic Strategy . The Scottish Government is committed to ensuring that economic growth is inclusive and is shared across all of the people and parts of Scotland. A more cohesive economy that improves the opportunities, life chances and wellbeing of every citizen in Scotland not only improves outcomes for individuals and households, but is a critical driver of economic performance over the long term. This approach - which includes investing in the early years, promoting fair work and protecting households from current economic pressures - is embedded in the foundations of Scotland's Economic Strategy .

Scotland's Labour Market Strategy

Throughout Scotland's Economic Strategy, there is a clear focus on the mutually reinforcing objectives of increasing competitiveness and tackling inequality. The Scottish Government has adopted this approach, not just because it ensures better social outcomes, but because there is growing international evidence that countries with more equal societies typically enjoy stronger, more sustainable growth over the long run.

Building on the Economic Strategy, the Scottish Government's Labour Market Strategy, published in August 2016 ^[36] demonstrates how a labour market that is fair and inclusive, and that provides sustainable and well-paid jobs, is key to tackling income inequality and addressing wider issues, including health, crime, deprivation and social mobility. As mentioned in Chapter 3, it sets out a vision for "a strong labour market that drives inclusive, sustainable economic growth characterised by growing, competitive businesses, high employment, a skilled population capable of meeting the needs of employers, and where fair work is central to improving the lives of individuals and their families".

The Labour Market Strategy sets out the steps the Scottish Government is taking to persuade and influence businesses of the benefits of fair and inclusive work. It also demonstrates the action we are taking to ensure that every person, regardless of background, has the opportunity to participate successfully in the labour market and in turn, to ensure that Scotland's workforce has the right skills and attributes to meet the needs of the evolving labour market.

Fair Work Convention

The Fair Work Convention provides independent advice to the Scottish Government on matters relating to innovative and productive workplaces, industrial relations, fair work and the Living Wage in Scotland. The Fair Work Framework ^[37] defines fair work as work that offers effective voice, opportunity, security, fulfilment and respect; that balances the rights and responsibilities of employers and workers; and that can generate benefits for individuals, organisations and society.

The Living Wage

The Scottish Government has long championed the payment of the Living Wage and the real benefits to Scotland's economy of treating people who work more fairly. It has demonstrated its commitment by becoming an Accredited Living Wage Employer, and by increasing funding for the Scottish Living Wage Accreditation Initiative to £300,000 to reach the target of 1,000 accredited Living Wage employers by Autumn 2017. The Scottish Government is using all the powers at its disposal to promote fair pay and conditions and Scotland has the highest proportion of employees - around 80% - paid the Living Wage of all the four countries of the UK.

Furthermore, the Scottish Government is providing the resources to enable local authorities to commission care services that pay care workers supporting adults the full Living Wage. This will give up to 40,000 people, mainly women, doing some of the most valuable work in Scotland, a pay rise.

Equity

Making growth more inclusive is important for improving both Scotland's economic competitiveness, reducing wider inequalities, and improving opportunities for all. As highlighted in Chapter 3, the Scottish Government is working with partners to drive this agenda across a range of areas, including:

• Initiatives to improve the quality of workplaces in Scotland, such as the Business Pledge; and
• Carrying out an Enterprise and Skills Review to ensure that public agencies are delivering the support that young people, universities, colleges and businesses need.

Tackling poverty and inequality is central to what the Scottish Government is seeking to achieve. In October 2016, the Scottish Government published the Fairer Scotland Action Plan ^[38] , which sets out 50 selected actions over this Parliamentary term under five themes of: A Fairer Scotland For All; An End To Child Poverty; A Strong Start For All Young People; Fairer Working Lives; and A Thriving Third Age.

Key commitments within the Fairer Scotland Action Plan include:

• A significant increase in the level of funded early learning and childcare provision by 2020.
• The introduction of a new Best Start Grant for low-income families in the early years.
• A new socio-economic duty on public authorities, which will ensure that public bodies are all working consistently towards the same anti-poverty goals.
• Commitments to promote good flexible working to help families maximise their incomes and achieve a better work-life balance.

The Fairer Scotland Action Plan is underpinned by a new £29 million programme, including £12.5 million from the European Social Fund, to tackle poverty across Scotland.

In addition, a Child Poverty Bill was introduced to the Scottish Parliament on 9 February 2017. This sets ambitious statutory income-based targets for 2030, underpinned by a robust framework for measuring and reporting on child poverty.

There are also a number of social security powers that are being devolved through the Scotland Act 2016 that will help people on low incomes, in particular Universal Credit flexibilities and the Job Grant. Making Universal Credit payments more flexible and adaptable will give people on a low income in Scotland more choice in how they manage their household budget, by offering choice on the frequency of payments and on the ability to pay the housing element of Universal Credit direct to landlords.

The Scottish Government will also use new powers to provide young people aged 16 to 24, who have been unemployed for six months or more, with a Job Grant to help them with the costs of getting into or back into work. This will be a payment of £100 for young people without children and £250 for young parents. The Scottish Government will also provide all those eligible for the Job Grant with free bus travel for three months.

Expanding Early Learning and Childcare

As part of its CSRs to the UK, the Scottish Government has noted that the Commission recommends that action is taken to improve the availability of affordable, high-quality, full-time childcare ( CSR 3). This is an area where the Scottish Government continues to take strong action.

In Scotland, through the Children and Young People (Scotland) Act 2014, entitlement to funded early learning and childcare increased to 600 hours for all 3 and 4 year olds and to eligible 2 year olds. The Act also made it a legal requirement for local authorities to consult parents in order to increase flexibility and choice over how the funded hours are accessed. Since 2014, the Scottish Government has provided local authorities with £500 million to fully fund these changes.

The Scottish Government is committed to further expanding the entitlement and will nearly double free early learning and childcare entitlement to 1140 hours per year by 2020. This will require substantial increases in the workforce and investment in infrastructure. The Scottish Government has allocated over £60 million in the 2017-18 Scottish Budget to support the first phase of developing the capacity to support the delivery of 1140 hours by 2020.

The total benefit to families from 1140 hours of funded entitlement is estimated to be worth around £4,500 a year per child, enabling more families to keep more of their income. This will make a vital contribution to the Scottish Government's priorities to grow Scotland's economy, tackle inequality, and close the attainment gap.

As of December 2016, the Scottish Government has committed over £383 million in grant from 2014-20 European Structural Funds programmes to individual projects. These projects, some of which will support inclusive growth and/or improve equity, will:

• Support over 24,000 businesses to start up or grow
• Support 850 low carbon projects
• Create 9,400 new jobs
• Help to grow 150 social enterprises, supporting more than 100 new jobs
• Increase the level and industry relevance of skills for over 34,500 individuals
• Increase the number of people choosing to travel by foot, cycling or public transport by 1.5%
• Support over 5,000 businesses to become more resource efficient
• Help 17,000 unemployed young people access support to get into work or education
• Support over 70,000 individuals with multiple barriers to work into employment or training, or to gain improved qualifications

Updated April 2017