Scotland faces 'difficult decisions' to hit target on child poverty cut

However the three scenarios they modelled all involved spending billions on child welfare benefits which were paid for by eye-watering income tax rises that shrank the economy almost as much as Brexit.

Under one scenario, benefits increased eight-fold and every income tax band rose 9 per cent.

The respected thinktank did not make any recommendations, and stressed the models were neither realistic nor desirable.

Rather, they illustrated the “scale of the challenge facing the Scottish Government”, as well as the cost and benefits of different approaches.

They also showed the greatest impact on child poverty could be achieved by increasing benefits to low income families, with free childcare having a marginal effect.

The study, produced in partnership with the Poverty Alliance and Poverty Evaluation Research Unit at Manchester Metropolitan University, comes ahead of the Scottish Government setting out its new plan for tackling child poverty in March.

A quarter of children in Scotland currently live in relative poverty, defined as a household income below 60% of the UK median income after housing costs.

Under a 2017 Holyroood law, the Government is under a duty to reduce the proportion of children in relative poverty to 10 per cent by 2030/31, a drop of 15 percentage points.

The report says this would be an “unprecedented reduction”.

The researchers modelled three scenarios, with options including 50 hours of childcare per week, more child benefit and employability programmes, and rises in the devolved Scottish Child Payment.

The report admitted the scale of measures required to reach the target “may be surprising” but that reflected their huge ambition and the limited modelling.

For instance, even if low-income families had 50 hours free childcare per child week, it would still take a rise in the Scottish Child Payment from £20 per child per week to £160 to hit the national target.

The three scenarios would also cost the Scottish Government between £4.2billion and £6.6billion a year, requiring a 6 to 9 per cent rise on all five income tax bands.

Holyrood’s budget is £50bn.

Although the extra benefits would give the recipients extra spending power, the net effect would be to shrink Scotland’s economy by 2 to 3.5% of GDP as the better off lost their spending power and tax hikes drove inflationary wage demands.

The report said the analysis was “to help inform understanding of how the targets could be met”, but was not intended to be an answer on how the targets should be met.

It said: “Tackling child poverty will have far reaching benefits.

“The scale of poverty reduction that meeting the targets would realise is likely to lead to significant improvements in other areas including education and physical health, but potentially areas such as justice, child protection and mental health as well.”

Author Emma Congreve, of the Fraser of Allander Institute, said: “Meeting child poverty reduction targets will mean structural change in our economy and our analysis shows some of the options available with the associated challenges.

“Bold decisions will need to be made if the government is to fulfil its statutory obligations.”

Poverty Alliance director Peter Kelly said: “Meeting our child poverty targets is a moral responsibility. With the interim child poverty targets needing to be met in 2023, we must now see a ramping up of action across a range of areas.

“Bold policies exist that can stem and reduce the rising tide of child poverty. The next Scottish Government child poverty delivery plan must embody this boldness.”

Rebecca Graham of report funder abrdn Financial Fairness Trust said the Government had “difficult decisions to make, but we will all benefit from a financially fairer society.”