Stephan Köppe, Research Fellow, University of Dundee.
You cannot joke about poverty in Scotland. Shortly after the independence referendum I performed at the Bright Club Dundee which is, believe it or not, a stand-up comedy club of academics. Just in the opening line I made joke that I came from Germany to Scotland to study real poverty. It did not go down well. Only when I continued to make jokes about how poor Ireland and the North of England are, the Scottish audience cheered up. What does this tells us about poverty in Scotland and in particular in Dundee? And what can we learn from international research about how a Scotland with more devolved powers could reduce its poverty?
The first lesson I learned is you cannot make jokes about your own deprived situation, unless you find people who are in a worse situation. And it is difficult to find a country in Europe that has a lower poverty rate than the UK, but is on a similar economic development. The UK as a whole has one of the highest relative poverty rates in Europe, considering how affluent the UK is (EU-SILC 2012, OECD 2011). And my reference to Ireland just referred to a stereotype that is not valid anymore. Modern Ireland has a higher GDP per capita and a lower relative poverty rate even after the severe effects of the global economic crisis. So perceptions about poverty and wealth lag behind reality and my audience still sees Ireland as the poor house of the British Isles. However, for comical purposes this widely held belief still worked pretty well.
I received even more laughs, when I continued to claim it can only be worse in the North of England. But this stereotype is also dated. Scotland has actually a lower poverty rate than England as a whole. When you compare all four nations of the UK, Scotland has the lowest income poverty rate after housing costs according to the latest Household Below Average Income statistics. Only when income before housing costs is considered, do Scotland and England have a similar share of the population living on low incomes. But the higher housing costs and prices for everyday goods in the affluent parts in South England make life hard for people on low incomes. Scots seem only to recognise the wealth down South, while the stark inequalities are obfuscated. Still the Yes Campaign managed to challenge this perception among 45 per cent of the Scottish electorate, while 55 per cent were still worried that Scotland would not be affluent enough on its own. And it is true, Scotland is not as affluent as the South of England, but it is more affluent than the rest of UK as a whole and, more importantly, more equal. However, compared to our closest neighbouring country, Ireland and the rest of wealthy European nations, Scotland – and the UK as a whole – performs poorly in terms of poverty reduction and distributing wealth equally.
My biggest mistake might have been that I made the joke in Dundee. Dundee City is among the top five Scottish councils with the highest income deprivation (Scottish Index of Multiple Deprivation 2012). The independence referendum has shown that in particular people in poor areas have tended to vote yes (FT 2014). Though the Bright Club audience tends to have a higher middle class background, they see poverty and deprivation everyday with their own eyes. About 57 per cent of Dundonians voted for independence and not all of these are poor, but among other things they seem to have hoped that an independent Scotland would have the powers to change the economic outlook and inequality of their city.
What can we learn from these observations and what are the options for a Scotland continuing to be part of the United Kingdom, but potentially with more powers? In a recent report for the Joseph Rowntree Foundation, Beverley Searle and I have reviewed the evidence of how personal savings, housing wealth and assets have a potential to reduce poverty (see also the summary findings and further information). We have highlighted that Britain is trapped in the ‘poverty paradox’. The more policies are targeted at the poor and demand individual responsibility to save and invest, the more poverty we will observe. Comparative evidence shows that universalistic welfare states with generous basic income protection schemes and high quality services linked with mandatory social insurances have the lowest poverty rates in Europe.
Last month, the majority of Scots expressed their wish to share their future with the rest of the UK, but a significant minority would have preferred more powers in Scotland to potentially alter the British ‘poverty paradox’. A devolved Scotland will have only limited powers on tax and welfare to universalise eligibility criteria, alter benefit formulas and raise taxes to change income poverty, but it can mitigate some of the effects on multiple deprivation through better social services. In our review we have shown that assets are not a way out of poverty, though they can serve as a cushion against temporary income shocks. With the new Scotland Act 2012 the Scottish Government will gain more powers to tax land transactions. We know that wealth is distributed more unevenly than income and has strong effects on transferring poverty between generations. These new powers to tax wealth could be used more progressively than currently and revenues raised channelled into more universal programmes and services to the benefit of all Scottish people.
I would love to look forward to be able to make a joke on poverty in Scotland in 2024 and get laughs for it, because my audience would laugh about their deprived past and not about their present situation. However, considering the limited fiscal powers Scotland has on welfare issues, I doubt that ten years down the line a devolved Scotland will have broken through the British ‘poverty paradox’ alone. A cohesive poverty reduction and prevention programme remains a UK-wide task. Only a nation state can achieve that efficiently and successfully. It is in the hand of the British people to seize the post-referendum opportunity to reduce poverty together and reunite people North and South of the border through shared values and solidarity.
As of Jan 2015 Dr Stephan Köppe will be a lecturer in Social Policy at University College Dublin, Ireland. Until then you can contact him at email@example.com