Publication - Publication

Income supplement: analysis of options

Published: 26 Jun 2019

Analysis undertaken to inform the development of the income supplement policy, a flagship commitment in our Tackling Child Poverty Delivery Plan for 2018-2022.

54 page PDF

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54 page PDF

728.9 kB

Contents
Income supplement: analysis of options
Footnotes

54 page PDF

728.9 kB

Footnotes

1. Child Poverty (Scotland) Act 2017, Child Poverty Targets

2. Scottish Government (March 2018), Tackling Child Poverty Delivery Plan: 2018-2022

3. Poverty and Inequality Commission (2018), Advice on the Scottish Government's Child Poverty Delivery Plan 2018

4. Scottish Government (June 2019), Scottish Child Payment Position Paper

5. Equivalised income is income adjusted to take into account the size and composition of the household, reflecting the notion that in order to enjoy a comparable standard of living a larger household would require a higher income than a smaller one. Income is net of: income tax payments; National Insurance contributions; contributions to occupational, stakeholder and personal pension schemes; council tax; maintenance and child support payments made; and parental contributions to students living away from home.

6. Scottish Government (March 2019), Poverty and income inequality in Scotland: 2015-2018

7. Scottish Government (March 2019), Experimental Statistics – Persistent poverty in Scotland: 2010-2017

8. Resolution Foundation (March 2019), Wrong direction – Can Scotland hit its child poverty targets?

9. Scottish Parliament Information Centre (April 2019), Child poverty in Scotland: forecasting the impact of policy options

10. Scottish Government (March 2018), Tackling child poverty delivery plan: forecasting child poverty in Scotland

11. National Archives, Social Security (Scotland) Act 2018

12. Scottish Government (January 2019), Social Security Scotland Charter

13. Scottish Fiscal Commission (May 2019), Scotland's Economic and Fiscal Forecasts

14. Scottish Fiscal Commission (May 2019), Scotland's Economic and Fiscal Forecasts

15. Scottish Government (June 2018), Council Tax Reduction in Scotland 2017-18

16. Department for Work and Pensions, Benefit expenditure and caseload Tables 2017/18

17. Scottish Government, Government Expenditure and Revenue Scotland Tables 2017-18

18. HM Treasury (2018) The Green Book – Central Government Guidance On Appraisal And Evaluation

19. Cooper and Stewart (2017), Does money affect children's outcomes?, Centre for Analysis of Social Exclusion

20. Cooper and Stewart review the literature examining the causal relationship between household finances and children's outcomes. This includes evidence from Randomised Control Trials (RCTs) as well as quasi-experimental and longitudinal studies.

21. Hoynes et al (2015), Income, the Earned Income Tax Credit and Infant Health, American Economic Association

22. Dahl and Lochner (2010), The impact of family income on child achievement, National Bureau of Economic Research

23. Boyd-Swan et al. (2016), The earned income tax credit, mental health and happiness, Journal of Economic Behavior & Organisation

24. Cooper and Stewart (2013), Does money affect children's outcomes?, Joseph Rowntree Foundation

25. Joseph Rowntree Foundation (October 2008), Estimating the costs of child poverty

26. Joseph Rowntree Foundation (October 2018), Estimating the costs of child poverty

27. Joseph Rowntree Foundation (September 2007), Experiences of poverty and educational disadvantage

28. Joseph Rowntree Foundation (October 2008), The costs of child poverty for individuals and society

29. Joseph Rowntree Foundation (October 2008), The costs of child poverty for individuals and society

30. Journal of children and poverty (March 2008), The economic costs of childhood poverty in the United States

31. Joseph Rowntree Foundation (October 2018), Estimating the costs of child poverty

32. The National Archives, Scotland Act 2016

33. Institute for Fiscal Studies (November 2017), The IFS tax and benefit microsimulation model,

34. Institute for Public Policy Research Scotland (February 2018), How much would it cost to reduce child poverty in Scotland? p.8

35. De Agostini, P. (December 2018), EUROMOD Country Report – United Kingdom 2015-2018

36. Annex III contains more detail about reweighting.

37. Individuals in Scotland are defined as being in poverty if their equivalised net disposable household income is below 60 percent of the UK median. The median is the income value which divides a population, when ranked by income, into two equal sized groups.

38. Household income takes into account taxes, social security payments and housing costs. It also accounts for the household size and composition, i.e. how many adults and children live in the household.

39. It should be noted that because all options, apart from Option 3, are based on uniform payments per child which are not tapered, the distributional impacts are the same regardless of which measure is adopted.

40. It is noted that for Option 3a, whilst the total number of children benefitting is the same with Option 2a, because of the targeted payments in this option the impact on spend in each decile can be marginally different, as some children would be paid £5 whereas some children could be paid £10 if they have priority characteristics. This also means for Option 3a that the impact on children benefitting in each decile can be marginally different to the impact on expenditure.

41. It is noted that for Option 3b, whilst the total number of children benefitting is the same with Option 2b, because of the targeted payments in this option the impact on spend in each decile can be marginally different, as some children would be paid £5 whereas some children could be paid £10 if they have priority characteristics. This also means for Option 3b that the impact on children benefitting in each decile can be marginally different to the impact on expenditure.

42. As discussed in Section 5.2 this is provided for comparison purposes and can be interpreted as an application-based approach with full (100%) take-up.

43. Scottish Government (April 2017), Social security agency in Scotland: outline business case

44. Scottish Government (September 2017), Social security agency: central functions location analysis

45. To be liable for Council Tax, an individual needs to be the main occupier of a chargeable dwelling for Council Tax purposes.

46. HM Revenue and Customs (December 2018), Child Benefit, Child Tax Credit and Working Tax Credit 2016-17

47. Office for Budget Responsibility (October 2018), Economic and Fiscal Outlook, p. 150

48. Joseph Rowntree Foundation (February 2019), Where next for Universal Credit and Tackling Poverty?, p. 10

49. HM Revenue and Customs (December 2018), Child Benefit, Child Tax Credit and Working Tax Credit 2016-17

50. Department for Work and Pensions (February 2012), Income Related Benefits: Estimates of Take-up in 2009-10

51. Eurofound (2015), Access to social benefits: Reducing non-take-up

52. Institute for Fiscal Studies (July 2012), Tax and benefit policy: insights from behavioural economics

53. Scottish Fiscal Commission (March 2019), How we forecast behavioural responses to income tax policy

54. Scottish Government (November 2017), The role of income tax in Scotland's budget

55. Mastrogiacomo, M. et al (2013) A structural analysis of labour supply elasticities in the Netherlands

56. Institute for Fiscal Studies (December 2009), Labour Supply and Taxes

57. Institute for Fiscal Studies (December 2009), Labour Supply and Taxes

58. Institute for Fiscal Studies, (February 2013), An ex-ante analysis of the effects of the UK government's welfare reforms on labour supply in Wales

59. Institute for Fiscal Studies (December 2009), Labour Supply and Taxes

60. Institute for Fiscal Studies (December 2009), Labour Supply and Taxes

61. Mastrogiacomo, M. et al (2013) A structural analysis of labour supply elasticities in the Netherlands

62. Institute for Fiscal Studies, (February 2013), An ex-ante analysis of the effects of the UK government's welfare reforms on labour supply in Wales

63. Mastrogiacomo, M. et al (2013) A structural analysis of labour supply elasticities in the Netherlands

64. Institute for Fiscal Studies, (February 2013), An ex-ante analysis of the effects of the UK government's welfare reforms on labour supply in Wales

65. Institute for Fiscal Studies, Mirrlees Review, Chapter 4

66. Scottish Government (June 2019), Scottish Child Payment Position Paper

67. Other elements include the Carer, Childcare and Limited Capability for Work element.

68. See Li, J. and O'Donoghue, C. (2013) for an overview of micro-simulation modelling: A survey of dynamic microsimulation models: uses, model structure and methodology

69. See the Universal Credit 2011 business case as an example.

70. For around 20,000 households per year, the FRS collects information on income from all sources, housing tenure, household characteristics, employment, caring, disability, and pension participation. Department for Work and Pensions, Family Resources Survey Collection

71. The PSM uses the calibration software CALMAR. For a methodological description see: The calibration software CALMAR – What is it?

72. A dynamic model, by contrast, would change the attributes of individuals over time rather than altering their weights.

73. A working paper explores this here: Balarajan, M. and Collins, D. (2013) A review of questions asked about receipt of state benefits on the Family Resources Survey

74. See an example of this given in the OBR's 2018 Welfare Trends Report

75. Office for Budget Responsibility, Where can I find the latest forecasts?

76. HM Revenue & Customs (October 2018), Income Tax: Personal Allowance and basic rate limit from 2019-20

77. Department for Work and Pensions (March 2019), Households below average income: 1994/95 to 2017/18

78. HM Revenue & Customs (December 2018), Child Benefit, Child Tax Credit and Working Tax Credit Take-up rates 2016 to 2017, Table A.1

79. HM Revenue & Customs (December 2018), Child Benefit, Child Tax Credit and Working Tax Credit Take-up rates 2016 to 2017, Table B.4


Contact

Email: vana.anastasiadou@gov.scot