UK cuts will leave poorest Scots ’more than £800 a year’ worse off

IPPR ScotlandSpending reductions and benefit cuts imposed by the UK government could make Scotland’s poorest families more than £800 a year worse, a think-tank has warned.

IPPR Scotland said £500 million would be cut from those on benefits by 2020 as a result of decisions made by Chancellor George Osborne - and it would take the equivalent of a 1p rise in income tax by Holyrood to reverse it.

Ahead of the Scottish Budget on Wednesday, the independent think-tank looked at the impact of tax, spending and welfare decisions made by the UK government in its summer Budget and last month’s Autumn Statement.

The poorest households could lose £580 a year, while those who have their benefits cut will be on average more than £800 a year worse off by 2020, according to the analysis.

Overall, the think-tank suggested the bottom 60 per cent of households could lose out, while in contrast the richest third will benefit from the changes.

Scottish Government departments whose spending is not protected - such as local government and justice - could see their budgets fall by 2.9 per cent in 2016-17, IPPR Scotland said.

But it warned that by 2020, spending on these departments could be reduced by just over a tenth (10.7 per cent).

Russell Gunson, director of IPPR Scotland, said: “The poorest households in Scotland are facing a double whammy of cuts to benefits and potential cuts to public services in Scotland.

“Despite the headlines on the day of the UK Spending Review welcoming the scrapping of proposed cuts to tax credits across the UK, we can see that this was more about cuts delayed, rather than cuts avoided.

“By 2020, many thousands of the poorest households in Scotland will see their incomes drop by hundreds of pounds each year, while the richest households in Scotland will benefit through tax cuts.

“At the same time, the UK government’s spending decisions will see significant cuts to spending on public services in Scotland.

“Our calculations show that, for Scotland, departments outside of health, affordable housing and childcare could see cuts of over a tenth, leaving a shortfall of around £1.5 billion per year by 2020.

“From April next year, these non-protected departments could be facing cuts of over £400 million in real-terms.

“As the Scottish Government prepares to outline Scotland’s draft Budget, they will be carefully considering options for how the significant spending cuts facing Scotland could be reduced, and how the impact of benefits cuts facing families across Scotland could be lessened.

“It is clear that the UK’s spending cuts will bring serious cuts to Scotland. How these cuts are reduced in Scotland or where they are passed on will require some incredibly difficult choices, not just this year, but over the whole of the next parliament.”

A UK government spokesman said: “In cash terms next year, there will be £390m more spending available to the Scottish Government. This is not including its underspend, which brings the total to around £750m.

“There are also new tax-raising powers available to the Scottish Government - with the Scottish Rate of Income Tax coming into force in April 2016.

“The Scottish Government’s block grant will reach almost £30bn by 2019-20. Scotland’s share of increases in spending on health, education and policing, announced in George Osborne’s Autumn Statement and Spending Review, will be passed on to the Scottish Government via the Barnett Formula, allowing it to invest in schools, hospitals and security if it chooses to do so.

“We are supporting working people by introducing a national living wage and increasing the personal allowance. This means that people going out to work can be sure they will be paid a decent wage and get to keep more of what they earn.

“In addition, the UK government continues to support millions of people on benefits with an £80b working-age welfare safety net in place.

“Furthermore, the extensive range of welfare powers which are being devolved to the Scottish Government through the Scotland Bill means it can tailor its benefit system as it sees fit. Complete control over income tax rates and thresholds from 2017 will give it the ability to pay for them, but responsibility for those choices will rest with Scottish Government ministers.”

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