International review of approaches to tackling child poverty: Comparative summary report and key learnings for Scotland

Executive Summary

In 2017, the Scottish Parliament unanimously passed the Child Poverty (Scotland) Act 2017, setting legally-binding targets to significantly reduce levels of child poverty, including that by 2030 less than 10% of children in Scotland should live in relative poverty after housing costs (AHC). This report – and the series of case studies that underpin it – explores different European countries’ choices and routes to tackling child poverty and how the Scottish Government might learn from them to improve the lives of families. The focus of this report is to:

• Draw out the key factors that have either reduced child poverty levels or kept them consistently low;
• Identify the policies that have been central to achieving those outcomes;
• Explore the extent to which national governments and/or wider factors have, in each case study, influenced these poverty-reduction outcomes; and
• Examine the feasibility of applying these approaches in a Scottish context, accounting for both historical differences and availability of policy levers.

The four case study countries considered here are Croatia, Denmark, Finland and Slovenia. These case studies explore the varying approaches taken to addressing child poverty levels against the backdrop of different historical, political, social, and economic factors. Key data has been compared with Scotland’s where possible, and with the UK where the data is only reported at that level. This research is completed with a further analysis undertaken by Alliance for Microsimulation and Policy Analysis CIC on behalf of the Scottish Government quantifying the extent to which differences in child poverty rates between Scotland and other countries are due to differences in demographics, labour market trends and/or the tax-benefit system.

All of the case study countries are broadly comparable to Scotland in terms of their overall population, but there are differences across the economic indicators, especially Gross Domestic Product (GDP) per capita, and family composition. This is explored in depth in the Demographic and economic context chapter of this report.

The Key poverty, inequality and labour market trends chapter looks in detail at the case study countries’ poverty rates, at-risk groups, income inequality and employment rates. The headline findings are that Scotland’s before housing costs (BHC) child poverty rate is higher and has been trending upwards over the last decade, whereas in the case study countries it has either fallen (Croatia and Slovenia) or remained low and stable (Denmark and Finland) over the same period. However, AHC child poverty rates in Scotland have remained relatively stable since 2011/12. At-risk groups have higher rates of poverty than other household types across the case study countries and in Scotland. Income inequality is higher in Scotland than the comparator countries, and there is a mixed picture on gender equality depending on what metrics are compared. Scotland also has high employment rates (especially amongst parents) and lower unemployment than in the case study countries. However, Scotland has a greater prevalence of in-work poverty and lower levels of working intensities than the case study countries.

The policy-based chapters are broken down into three areas focused on policies that are centred on employment, social security and cost of living . There are several lessons that can be drawn from the successes of active interventions here, but across the board it is important to note that poverty levels are also impacted by the underlying economic and demographic context explored in depth in each of the case studies. It is also notable that none of the countries studied had specific child poverty strategies; rather, they have instead focused on joined-up approaches that combine policies targeted at labour market participation, economic growth, gender equality and child wellbeing with poverty reduction.

That said, it is clear that high employment rates help to reduce poverty but they are most effective where full-time employment is high and during periods of wage growth. All four countries studied experienced greater reductions in child poverty during periods of economic growth, where GDP per capita grew. Furthermore, high levels of labour market participation in all the case studies are supported by a cultural norm amongst parents towards working full-time, longer hours and at higher intensity, with policy support via generous parental leave schemes and affordable childcare. Childcare provision and subsidy levels are important to support labour markets and this is an area of opportunity for Scotland to provide a more comprehensive system.

Turning to social security , child poverty reductions are achieved when the social security system recognises and supports families with children. Child benefits are an important part of family policy and contribute to reductions in poverty in all countries studied. As such, this underlines the importance of Scotland’s efforts to increase financial support for children and low-income families through the Scottish Child Payment and Best Start Grants. In addition, several of the countries studied provide more generous support through their social security systems to single-parent families. This is a key at-risk group in Scotland, like many of the countries studied, and a similar approach could be beneficial in Scotland. Of course, funding generous welfare spending is difficult, and this is a common challenge, even in countries with Nordic welfare systems where there is higher general acceptance of redistributive cash transfers.

Finally, from a cost-of-living perspective, housing is recognised by the Scottish Government as forming not only the foundation for family life – as a safe place for children to grow and learn, and for families to come together – but also as one of the most significant costs which families must continue to meet on an ongoing basis. All countries covered here provide support with housing in the form of means-tested housing benefits, as well as social housing in Scotland, Finland, Denmark and Slovenia. However, it is notable that in Finland and Croatia, housing benefits also explicitly intend to cover at least some utilities, such as heating and water costs, whereas this is not the case in Scotland. Childcare costs are key here too: several of the countries studied offer greater subsidisation of childcare costs, backed by a right to a childcare place for all children under school age, as well as local authorities taking a proactive role in ensuring adequate provision. Looking at child wellbeing in the round, there is a key role for in-kind support, especially if it is offered universally. Scotland already does this in a number of key ways, such as providing all children in primaries 1-5 with free school meals during term-time (regardless of financial circumstances), offering 1,140 hours of childcare for all 3-5 year olds and eligible 2 year olds, and providing all newborn babies in Scotland with a Baby Box of essential items.

Overall, this summary report finds that, rather than there being any single silver bullet, context matters alongside implementing a combination of policies that, taken together, deliver poverty reduction. At the heart of this is social security – including family and child benefits – working alongside policies to support parents to enter and remain in the workplace, such as childcare and tailored support through active labour market policies. Being more generous in the support offered – particularly to families at risk of poverty – is likely to be key in Scotland but is constrained by the extent of devolved powers and funding challenges. Economic growth is also central to supporting a reduction in child poverty, in part because this allows for more generous welfare spending but also because it shapes the level of redistribution that is socially acceptable within a specific geography. Finally, not everyone is impacted equally. The need for more dedicated support for at-risk groups is critical, with the Danish experience highlighting how this can be achieved as a multi-lever response that both improves employment rates and provides more tailored parental leave and discounted childcare.