Billion pounds cash to fight poverty ‘disappears’

The paper by finance expert Professor Arthur Midwinter concludes the SNP government 'no longer has an anti-poverty programme'. Picture: TSPL

In a controversial review of Scottish public spending, the paper by finance expert Professor Arthur Midwinter concludes the SNP government “no longer has an anti-poverty programme” and says giveaways to the middle classes and high earners should be reduced to target help at the most needy.

Midwinter says the council-tax freeze should end, and that Scotland cannot afford such populist policies with the “severest cuts” to public spending in Scotland still to come.

The SNP government rejected the findings last night, pointing to recent budget measures to reduce the impact of the bedroom tax on families in social housing. Nationalist MSPs also seized on Midwinter’s call for reduced spending on “free” benefits as evidence that Labour was promoting a “cuts agenda”.

The Midwinter review follows a bitter feud between Labour and the SNP in the Dunfermline by-election last week over the future of popular policies in Scotland such as free personal nursing care, free university education, free bus travel for the elderly, free prescriptions and free eye tests.

Labour yesterday said it was not proposing to axe those policies but a debate was overdue on how to target public spending in the face of austerity and an ageing population.

Writing in today’s Scotland on Sunday, Midwinter – who was asked by Labour leader Johann Lamont to examine Scottish public spending – says that the focus on “free” benefits and on a council-tax freeze has led to cuts in efforts designed to help people out of poverty.

The squeeze on such programmes will only get worse after the next general election, says Midwinter, when he estimates the Scottish block grant of £25 billion being cut by a further £2.2bn.

Consequently, he says a major rethink is required to slow down the rocketing cost of the freeze and the benefits. His report concludes that spending on universal services and the council-tax freeze has gone up from £568m in 2007 to £1.6bn in next year’s budget.

“There is no sound financial reason why universal benefits or subsidies should be exempt from the resource constraints which other programmes are facing, resulting in major savings,” he writes. “The  major gainers from these universal benefits have been the middle and upper income households.”

He adds that a Scottish Government decision to hand local authorities control of a billion pounds worth of anti-poverty measures was done in a way that failed to ringfence this spending for its intended purpose. Councils were therefore free to use it as they wished, and as a result it had “disappeared”.

These projects included the Community Regeneration Fund, worth £113m; the Supporting People Fund, worth £384m; and the Fairer Scotland Fund, worth £145m. In addition there had been a £307m cut in the housing and regeneration budget, and a £15m cut in Education Maintenance Allowance.

Midwinter says: “Around £1bn of targeted spend on poverty has disappeared. Scotland no longer has a national anti-poverty programme, despite the Deputy First Minister [Nicola Sturgeon] claiming in 2008 that her government would ‘address the root causes of poverty once and for all’. In fact, poverty levels have increased since then.”

However, a spokesman for the Scottish Government said: “This government is committed to reducing poverty, as was seen by the support we are offering to people hit by the Bedroom Tax.” In the most recent budget announcement the finance secretary, John Swinney, dedicated £20m to councils to offset the impact of the benefits reform.

The question of whether to rein back on universal benefits and universal tax breaks was raised by Lamont last year in a speech in which she said she was “calling time” on the “dishonest auction” of offering “bribes” to voters.

Since its formation in 1999, the Holyrood parliament has backed the introduction of free personal care, free prescription charges and free bus travel for the over-60s. The SNP government also pledged to pay all tuition fees for university students. But Labour has warned these commitments have led to cuts in college education, in frontline council services for the vulnerable, and in the quality of care.

Midwinter says “free” benefits do not necessarily need to be axed, but adds that new restrictions should apply in order to reduce costs – by, for example, raising the age at which pensioners can claim free bus travel.

Public finance experts are warning that all public services now need to prepare for two more years of deep cuts, signalled by Chancellor George Osborne. An SNP commissioned report, led by former Scottish Enterprise chief executive Crawford Beveridge, said three years ago that universal benefits should be examined for savings.

Responding to the findings last night, a Scottish Labour spokesman said: “Professor Arthur Midwinter is among many respected experts who have warned that the worst off will pay the price from the cuts unless we face up to the substantial drop in public spending to come.”

He added: “We know this is why John Swinney commissioned reports from Crawford Beveridge and [the late] Campbell Christie and outlined his fears in private in his leaked paper to Cabinet. It is time the SNP government faced up to this challenge and started being honest about the hard decisions we face.”

However, Nationalist MSP Linda Fabiani said: “This raises more questions than answers about Johann Lamont’s Cuts Commission – Labour are facing in completely different directions. In Dunfermline, they published a ridiculous last-minute leaflet which said ‘We continue to support a freeze’ in the council tax, yet the chair of the Labour’s Cuts Commission says he is against it – what is Labour’s position? Contrary to what Labour tried to pretend in Dunfermline, they are clearly proposing a cuts agenda to Scotland’s public services, which threatens the gains of the Scottish Parliament.

“The services delivered by the SNP government are already effectively and efficiently managed – what Labour are talking about is removing free prescriptions from people with long-term conditions, and taking away people’s bus passes.”