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

2. Introduction

The first Tackling Child Poverty Delivery Plan committed to produce a quantitative assessment of the impact of Scottish Government policies on child poverty, acknowledging that such analysis would be crucial to developing effective policies and ultimately to meeting the child poverty targets. To that end, this report models the impact of a package policies which are either in place already or which will take effect over the life of this Delivery Plan. Taking these policies into account along with the wider range of factors which affect household incomes, the report presents a projection of child poverty in future years to gauge both our progress toward meeting the targets and the scale of the remaining challenge.

Our main tool for this analysis is UKMOD, a microsimulation model based on the same data which underlies the official poverty statistics, namely the Family Resources Survey (FRS). Microsimulation is a powerful technique which allows us to manipulate the data in order to estimate the impact of a given intervention, or set of interventions, on child poverty. However, all modelling results rely on a range of assumptions and are subject to a degree of uncertainty, particularly when projecting into future years. Further information on the model, along with a detailed description of our methodology, can be found in the final section of this report.

A list of policies included in the assessment is set out in Table 2.1. As shown in the table, we simulate these policies in three years, depending on when they come into effect: the latest year of official statistics at the time of writing (2019/20), the year of the interim targets (2023/24), and the final year covered by this Delivery Plan (2025/26). We do not explicitly model the intervening years, during which child poverty could fluctuate significantly, in particular due to the economic disruption caused by Covid-19 and other economic shocks. Nor do we model 2030/31, the year of the final targets. The latest version of UKMOD projects to 2025/26, and the underlying economic forecasts produced by the Office for Budget Responsibility extend to 2026/27. The degree of uncertainty involved in projecting beyond this horizon would be unduly large.

√ - Policy included

* New commitment in Delivery Plan

A key feature of the modelling is that it is concerned with cumulative impacts. Due to interactions between the policies in the package, their cumulative impact may be more or less than the sum of their individual impacts, particularly given the way that poverty is measured. For example, if either Scottish Child Payment or Best Start Grant would be sufficient to lift a household out of poverty, the cumulative impact of the two policies would be less than the sum of their individual impacts, since the household would be counted as exiting poverty when assessing the impacts of either policy. For another household, neither policy may be sufficient to lift the household out of poverty in isolation, but the household may rise above the poverty line if it receives both benefits. In that case, the cumulative impact of the two policies would be greater than the sum of the individual impacts. Given that we are ultimately concerned with the lived reality of households in poverty, it is the cumulative impacts of our policies that are most significant, noting that binary measures of poverty do not capture the full complexity of that lived experience.

The policy package is not exhaustive, however. Notably, it does not include:

• Disability benefits. Disability benefits are included in the background of the model as per their reported amounts in the FRS, although no distinction is made between the reserved disability benefits which are reported in the latest data and the devolved benefits which are replacing them. However, these benefits are significantly underreported, and simulating eligibility is problematic when it involves a disability assessment. We therefore do not attempt to assess the impacts of these policies by including them in the policy package.
• Heating-related benefits. These are reserved, depend on the weather, are targeted at pensioners, or are linked to disability benefits. Winter Fuel Payments are included in the background of the model as per the FRS, and Child Winter Heating Assistance is simulated based on reported receipt of disability benefits, but neither are included in the policy package.
• Carers Allowance. This is currently administered by DWP and the details of Scottish Carers Assistance had not been fixed at the time of writing. Carers Allowance is included in the background of the model as per the FRS, but not in the policy package.
• Existing employment-related policies. It is too early to assess the impact of the expansion of funded Early Learning and Childcare to 1,140 hours, which was suspended to August 2021 due to Covid-19. Meanwhile, employability policies such as Fair Start Scotland have not yet generated the levels of parental employment required for us to incorporate them into our model. However, we do model the expected outcomes of the employability programmes as outlined in the Delivery Plan.
• Other policies in the Delivery Plan. To model the impact of a given policy on child poverty, we must be able to quantify the extent to which it will impact household incomes or housing costs. This is not to say that other policies will not have an impact, only that there is insufficient information to estimate that impact.

We model two of the four statutory measures of child poverty, namely relative and absolute child poverty. The other two measures are more challenging to model: persistent poverty involves the additional dimension of time, while combined low income and material deprivation depends on the ability to afford specific items of expenditure. However, all of the measures are important, and may not necessarily move in tandem; indeed, as the report will show, this is true even for the two measures of poverty which are modelled.