Blog: When Paying Tax Could Save You Money

30th October 2024

Shelagh Young reflects on today’s budget announcements in the context of our recent Great Risk Transfer research on the changed relationship between employees and employers in the context of financial wellbeing.

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Has the Government broken its promise not to increase taxes on working people by increasing employer’s payroll costs?

No one can pretend that the 1.2% increase in employer’s National Insurance Contributions (NICS) and reduction in the threshold at which this tax kicks in announced in Rachel Reeves’s budget statement won’t increase costs to business.

But, is arguing, as many critics have, that this amounts to a tax on workers backed by evidence?

The immediate budget post-mortem, driven partly by the opposition’s outraged response, delved into questions of whether voters were betrayed. But while the trustworthiness of Governments obviously matters, these are surely not the most important questions to be focused on in the aftermath of what is generally agreed to have been a very significant budget indeed.

Trotting out common sense assumptions that a tax on employers is a tax on the workers simply isn’t good enough.

Superficially it seems obvious that many employers will pass on this cost - for example in higher prices to consumers, lower wage rises, redundancies or reductions in growth through recruitment meaning a contraction of the jobs market. 

Indeed the same was said when the National Minimum Wage (NMW) was first introduced and will no doubt be said about other measures in this budget which will increase the NMW significantly in 2025.

Unfortunately for the critics there is very little evidence that such measures do have the dire negative impact on “working people” so often predicted by the business sector and its representatives.

For one thing this budget, like others before it, maintained and, in some cases increased the corporate welfare measures that will reduce the impact on some employers.

In the case of NICS, the Employment Allowance was increased significantly meaning that the smallest employers with four or fewer employees on the NMW will pay no employer NICS at all. But, over time, there will be other ways in which many employers can compensate for higher taxes.

Paying more to spend less

For example, if this budget really does lead to greater investment in the NHS and other important public services, might employers need to spend less on mitigating the impact of poor public services by providing ever more costly employee benefits?

Earlier this year we explored how employers were addressing diminishing employee wellbeing.  Measures being taken ranged from enhanced private healthcare plans including services such as “virtual” GPs to schemes offering loans for rent deposits.

The reasons for investing in employee wellbeing were clear - employers are seeking to reduce absenteeism and increase productivity by mitigating the stresses and strains affecting their employees many of which they attribute to matters such as the difficulty people have in accessing NHS care, expensive housing and childcare and even, poor public transport

So the question we would like to add into the budget debate mix is why employers and their representatives rarely mention the costs to business of what the Chancellor referred to as public services that are “on their knees”?

Whether or when this budget will achieve the Government’s stated goal of “rebuilding Britain” remains to be seen but the hope that it could help rebalance the burden of risk employers currently bear for the poor health and wellbeing of their workers should not be ignored.

Blog: If directly elected mayors are the answer, what is the question?

6th September 2024

Esther Roberton spoke recently as part of our Forgotten Wisdom? event and was asked a question about directly elected mayors. In this blog she expands on her response. Find out more about Esther at the end of this blog.

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In recent times momentum has been building behind the idea of elected mayors in Scotland. Besides the distraction about whether they would be mayors or provosts lies a bigger and more significant question: what is the problem elected mayors are expected to solve?

The common denominator behind many of the arguments in favour seems to be that Andy Burnham has done a great job in Manchester. There is certainly plenty of press coverage of his significant achievements around transport and capital projects. What we don’t see is much about how the people of the area feel or how engaged they are in the decisions being made. Nor do we hear much about other mayors in England. Turnout in mayoral elections is notoriously low and in some areas the decision to have a mayor has been reversed. Likewise, this approach does not extend to much of the country and risks a very uneven form of devolution. There are also significant risks in centralising power in the hands of one individual.

So why do some people think mayors would be a good idea in Scotland? We are certainly one of the most centralised countries in Europe and the commitment of the Constitutional Convention to devolve power out of Edinburgh has not been honoured. In fact, subsequent governments have drawn ever more powers to the centre. Trust and confidence in politicians and democracy is low and most people feel powerless and disengaged from the decisions that affect their lives.

Donald Anderson and Stephen Purcell, former leaders of Edinburgh and Glasgow City Councils, wrote recently about their effective cooperation between our two biggest cities: they worked in partnership rather than competition for the greater good of both cities and the wider country.

It seems a leap, however, to suggest that regional mayors, structures and powers are needed to continue their efforts, and that those two mayors would cover 14 local council areas. I’m not convinced the people of Fife or other areas would welcome that. The approach would also continue the focus on the central belt and leave our rural areas even more disadvantaged.

Over the years, both the Accounts Commission and the Auditor General have called for bolder leadership from council leaders. As councils are stripped of power, the role of councillor and especially council leader becomes less attractive. More local councils with more autonomy and more powers – especially to raise more of their income locally – might attract bolder leaders.

While the idea of directly elected mayors appeals as a simple solution to the continuing democratic deficit, it seems unlikely they would address the real challenges facing our democracy.

I would urge policy makers to consider the evidence and engage with the public before jumping on the mayoral bandwagon: I believe the answer is to address the unfinished business of the democratic renewal we were promised by the Convention and build truly local democratically elected councils.

About the author

Esther Roberton was Co-ordinator of the Scottish Constitutional Convention, whose 1995 publication ‘Scotland’s Parliament, Scotland’s Right’ provided the blueprint for devolution. Esther is currently a non-executive director of Scotland’s Futures Forum. She has spent a lifetime in public service, most recently as Chair of NHS Lothian and Fife Cultural Trust. Before that she was Chair of NHS24 and a Non-Executive Director of the Scottish Government. In 2017 she was asked to chair the Independent Review of Legal Services Regulation for the Scottish Government and was a Press Complaints Commissioner from 2007 to 2014.

Blog: Are we singing a new song?

29th August 2024

by David Gow, DHI Trustee

"Fings can only get worse," Sir Keir Starmer intoned in the 10 Downing Street rose garden on August 27 in a reverse reprise of Labour's 1997 campaign song . "Before they get better." He added that the UK should "accept short-term pain for long-term gain." It's a tough ask but maybe Scots at least are up for it.

Perhaps, indeed. What emerges from our latest quarterly survey of voter sentiment towards the Scottish Economy, Understanding Scotland, is that Scots are increasingly torn between feeling (a shade) more upbeat and anxious, between modest optimism and continuing pessimism.

Certainly, more than half (56%) of the 2227 respondents to the survey conducted exactly a month after the July 4 General Election still think Scotland is heading in the wrong direction but that's six points down on the record 62% in May while those believing the opposite are up four points at 23%. 

What's more, fears about the cost of living/inflation at 58% are down close to levels last seen in January 2022 (56%), probably reflecting the upturn in earnings and even (some) lower prices. (The survey pre-dates Ofgem's announcement of a 10% hike in energy guide prices). Most tellingly, those thinking that general economic conditions are worse than 12 months ago have fallen to 52% (net) or the lowest level since the survey began in October 2021. Personal negativity is down to 42% from a high of 65% in November 2022 while optimism is up to 15% (net) - hardly a dizzying decline but worth monitoring to see if it upticks

As we and our colleagues at the Diffley Partnership say in the report's intro, "a growing proportion are unsure about the country’s direction, suggesting a populace still searching for clarity in uncertain times." As we point out, there remains a significant sense of precarity, notably among families with children.

Unhealthy options among the poor

More than one in five (22%) is still cutting back on fruit and veg to cut food bills, a bad signal for a nation fighting rampant obesity, while a similar number is reducing meal/portion sizes to save money - the same goal pursued by the 14% skipping meals. It's surely bad news that more than a half (52%) admits to shopping on price rather than health, while a quarter or more is eating processed food and/or cheap food requiring little or no cooking. And we know from here and elsewhere that it's poorer parents, particularly young mothers, who skimp on meals so they can feed their kids.

Financial resilience remains worryingly high among less well-off households. A third of households with children are not confident they could raise £100 in an emergency without borrowing, a level that rises to 58% when the required loan is £500. Inequality may not be a substantial policy issue (at just 8%) but poverty remains among the biggest priorities (27%).

Tax and spend alerts

Ahead of the October 30 Budget (UK) and the Scottish Government's renewed brake on spending, concern about manging public finances is on the up - at 29% compared with 24% a year ago. And a third remains convinced spending on public services is an important issue facing the Scottish economy. Rachel Reeves' "black hole" is clearly and understandably putting the wind up a lot of folk., including actual and/or potential pensioners (a concern for 12% or up three points on May.)

Will hospital consultation/treatment waiting lists come down? Obviously, it's too soon to tell but healthcare and the NHS remain by far the biggest concern (51%) - compared with the mere 8% thinking of the constitution, an issue that does not win elections. Nor, surprisingly, do green/climate change issues (just 11%, down one point on May).

Unsurprisingly, however, immigration and crime are rising up people's political agenda, with the former at a survey peak of 13% (up three points on May) and the latter at a new high of 11% (up two points). The two are often wrongly linked, notably in tabloid media, but both may well prove growing headaches for the new UK government. We shall closely monitor trends here.

Overall, it's clear from this survey that the new UK government and whichever administration emerges from the elections to Holyrood due in May 2026 have a lot to do to convince a sceptical population that those "sunlit uphills" can be glimpsed around the corner. Again, hardly surprising after this dreich summer...

End

Press Release: Green shoots of optimism as fewer Scots concerned by cost of living

Thursday 29 August 2024

Cost of living concern falls, while immigration worries rise

Our independent quarterly tracker has revealed that one in three (36%) people living in Scotland consider the cost of living as one of their top concerns, down 12 percentage points year on this time last year.

According to the Understanding Scotland Economy Tracker from the David Hume Institute and polling experts the Diffley Partnership, while concern about the cost of living has fallen, healthcare remains the key concern for the public, selected by over half (51%) of respondents as a key worry.

The data was collected at the start of August, a month after the General Election, against a backdrop of economic insecurity, mounting concern about public expenditure and a wave of anti-migrant riots.

The proportion of people in Scotland stating immigration as a major concern is at its highest level since the tracker launched in 2021, up three percentage points to 13%. Immigration is now ranked 8th in the ranking of public concerns, behind poverty and inequality (18%), the economy (17%), housing (16%), trust in politics (16%) and education (14%) and of course, cost of living and Health.

The Understanding Scotland tracker found that:

• Over half (54%) of people in Scotland believe that general economic conditions are worse now than a year ago, representing a considerable fall from the two in three (66%) that agreed with this statement in May.

• One in three (35%) of those that express an opinion believe that general economic conditions are about the same as they were in August of last year, an increase of 11 percentage points. In contrast, only one in ten (11%) believe that conditions have improved in the last year, up a mere two percentage points.

• In the latest data,15% of households with children say they feel better off than a year ago, compared to 10% reporting the same in August 2023 and 9% in August 2022.

  Scott Edgar, Senior Research Manager at Diffley Partnership, said:

“While it is encouraging to see that people are feeling more optimistic about the cost of living crisis, which has dominated public discourse for a very long time, it may be too soon to say that people’s everyday experiences and finances are improving.

“What the latest tracker tells us is that the public is concerned with a broad range of issues, and that discontent on key issues such as poverty, the economy, housing, and education is likely here to stay.

“It’s fair to say that Scotland has a long way to go before the green shoots of optimism truly take hold.”

Susan Murray, Director of the David Hume Institute said:

“While showcasing a glimmer of hope, these findings underscore ongoing economic challenges for many people in Scotland. With the announcement of rising energy bills in October and the Prime Minister saying there are more tough choices ahead, many are not looking forward with optimism.”

Notes to editor:

• The Understanding Scotland Economy Tracker survey received 2,227 responses from a representative sample of the adult population, aged 16+, across Scotland. Invitations were issued online using the ScotPulse panel, and fieldwork was conducted between the 1st-5th August. Results are weighted to the Scottish population (2021 estimates) by age and gender.

Press Release: Bare minimum from many employers driving poor productivity

A “tired and stressed workforce” could derail the new government’s efforts to boost the UK economy.

New research published today by the David Hume Institute shows that a third of employers only provide the bare minimum when it comes to sick pay and pensions.

The report, “The Great Risk Transfer”, highlights how staff in hospitality, retail and social care are the most financially vulnerable and that over a quarter of Scots lose sleep over money worries.

The research finds:

• more than two-thirds of employers (70 per cent) are concerned over the impact of financial strain on their employees and their productivity, citing increased stress on managers and other staff (35 per cent) and a rise in absenteeism due to poor health (28 per cent)

But

• a third of employers (33 per cent) in Scotland do not offer any enhanced benefits as part of their employee benefits package. 

• more than half (56 per cent) do not currently include financial wellbeing in strategies to support employees. 

Susan Murray, director of the David Hume Institute,said

“It is hard for the economy to thrive when a quarter of the workforce is losing sleep over their finances. Over two-thirds of employers have noticed the impact of financial strain on people’s performance at work. It is imperative that the UK Government forges ahead with plans to update employment legislation. Steps must be taken to rebalance the risks for people and the economy to thrive now and in the future.”

The Great Risk Transfer report recommends the need to:  

• Recognise employers’ power to drive change. Employers should recognise the connection between financial wellbeing and productivity and how their actions might alleviate employee’s pressures.  

• Increase understanding of Living Pensions: Government and employers should work together to increase understanding of the need for Living Pensions and that employees on auto-enrolment minimums are not currently likely to be saving enough to live well in retirement.

• Complete the Pension Provision Review. The review of pensions provision signalled by the Labour Party before the 2024 election should go ahead and include a specific focus on potential improvements and innovations in workplace pensions.

David Thomson, Head of Policy and Public Affairs at the Institute and Faculty of Actuaries, which part-funded the research, said: “The transfer of risk from institutions to individuals is not necessarily bad but the evidence suggests that this is falling unevenly, with many not always understanding the risk. It would be wise to ensure that the “dials are set” to balance the risk of the individual against the institution.”

Catherine McWilliam, from the Institute of Directors, which represents 1,000 business leaders and decision-makers in Scotland said: “The findings chime with feedback from our members. We have had a decade of uncertainty and fire-fighting in Scotland with rising costs against the backdrop of a tight labour market. We need to have an honest and transparent discussion to find solutions with the private sector working with the government.”

Scott Edgar, of the Diffley Partnership, said: “Our research shows that the majority of employers cite some concerns over the impact of financial strain on their employees. In particular, they highlight issues such as increased stress and rising absenteeism linked to financial wellbeing issues, which are affecting productivity and overall workplace wellbeing."

NOTES TO EDITORS

• The Great Risk Transfer: employment and financial wellbeing analyses the shift in responsibility for financial wellbeing from institutions, such as governments and employers, to individuals. The report is based on qualitative and quantitative research with employees and businesses – ranging in size from 60,000 employees to less than ten - across Scotland. Read the full report.

• The David Hume Institute commissioned the Diffley Partnership, an independent research agency based in Edinburgh, to investigate employer attitudes to the Great Risk Transfer. The survey was conducted in May and June 2024 and is based on responses from 550 businesses. The survey results is published as an appendix to the main report here.

Press Release: Globally renowned Scottish expert to shape policy to end the housing emergency

 12th August 2024

Professor Duncan Maclennan to lead a major project for the Edinburgh based think tank, the David Hume Institute

The David Hume Institute has announced a new programme of work with Professor Duncan Maclennan to look at the actions needed to transform the housing system in Scotland.

Housing is essential infrastructure for people and the economy. Currently too many people are unable to find a home or are living in poor quality housing that is affecting their health and their ability to be productive and thrive.

The work will look at the actions needed in the whole system from homelessness, unaffordable rents and planning, to skills shortages and supply-chain issues. 

Professor Maclennan has had a long and internationally distinguished career as an applied economist specialising in housing, neighbourhoods and cities. His professional roles have spanned senior positions in both academic and government settings, in the UK, Canada and Australia. At the University of Glasgow in the 1980s he established and led the Centre for Housing and Urban Research, and in the 1990s directed the ESRC Cities and Competitiveness Program and Joseph Rowntree Foundation programs on Housing Finance, Housing and the Macro-Economy and Housing and Area Regeneration. In recent years he has advised governments in Australia and Canada on housing system shifts to improve economic and environmental outcomes.

Professor Maclennan said

“I am delighted to be working with the David Hume Institute again to help understand the housing emergency. Difficult housing outcomes - homelessness, rising rent burdens and lengthening queues for social housing, falling home-ownership rates for the under 40’s - have spread and deepened for decades. They reflect a failure both of  income growth, especially for poorer Scots, and of the functioning of the housing system that has driven the sustained rise of housing prices ahead of incomes.

The roots of the emergencies in the overall housing system need to be understood and their consequences, not least for the economy and environment, recognised. Policy solutions may involve additional rights and fiscal resources, but the scale of emerging difficulties means that we urgently need to disrupt how we govern, plan and deliver new and improved homes that work for people, places, the economy and the environment. The work will aim to deliver proposals that can act to reduce difficulties now but will also frame a transformation of Scotland’s  housing system for the decades ahead”

Ken Ross, David Hume Institute Trustee and former Chair of both the Scottish Property Federation and Scottish House-Builders Association said

“I am proud that we have initiated this ambitious project to follow-up Duncan’s previous work for the David Hume Institute, A Scotland of Better Places. Business as usual is not an option. This project will help take Scotland’s housing system from a hideous emergency to one fit for the future to ensure this vital infrastructure is there to support people and the economy.”

ENDS

Notes to Editors

• The David Hume Institute is an independent think tank based in Scotland. The charity was established in 1985 to increase diversity of thought on the economy and related public policy. Find out more on our website

• About Professor Duncan Maclennan: Duncan was a member of the Board of Scottish Homes from 1989 until 1999 and then  spent a decade working in government, as special Adviser to the First Minister of Scotland, as a Chief Economist in the Government of Victoria and as Chief Economist in Canada’s Federal Department for Infrastructure and Cities. He has acted as adviser to Ministers in the UK, Scotland, France, Poland and Norway, Canada, Australia and New Zealand.  He is a fellow of the Royal Society of Edinburgh, the Academy of Social Sciences and Honorary Member of the Royal Town Planning Institute, The Chartered Institute of Housing and the Royal Institute of Chartered Surveyors. He was awarded a CBE for services to UK housing research in 1997. He remains affiliated to the University of Glasgow as an Emeritus Professor of Urban Economics and holds Professorial appointments in Housing Economics at McMaster University (Ontario) and UNSW (Sydney).

Blog: Shaking off our misery?

Blog by David Gow, DHI Trustee

If the public mood in Scotland, as measured by the latest quarterly Understanding Scotland Economy Tracker, is pretty much as bad as it seems, we might as well call off the final five weeks of campaigning in the UK general election and put the politicians out of their misery by voting now. 

After all, there are critical and more exciting events coming up like the opener in the Euros 24: Germany v Scotland on June 14 in Edinburgh's twin city Munich.

The latest tracker certainly paints a sombre picture of how we Scots feel. Almost two in three (62% compared with 58% three months ago) believe Scotland is moving in the wrong direction - the highest level since the series began. And less than one in five (19% compared with 23% in February) think it's heading the right way. These are devastating findings for our political class as a whole (which should read the findings and wake up to reality). 

The reality is that Scots are worried above all by Healthcare/the NHS - 52% view this as the top issue - and the cost of living (40%) though this latter concern is easing though hardly to the point where "turned the corner" talk is credible. And almost one in five (18%) list trust in politics as the critical issue - a number that's rising.

This does not amount to a conducive environment for a bog-standard campaign centred around "tax and spend" policies (like the one we're having now). Scottish voters are more than disgruntled. Their mood may not (or perhaps even may) amount to despair or rage but they certainly need a dose of hope and optimism. And please don't talk about the constitution - only 7% think it the priority issue.

The overall findings gave plenty of food for thought - and lively discussion - at the latest tracker's presentation in the historic home of RBS on St Andrew Square. It was a lovely late spring morning with sun shining through the upstairs windows and birds carolling us but the discussants were reflective, pondering the state we're in - not the one the politicians are peddling elsewhere.

Introduced by Scott Edgar of the Diffley Partnership, the tracker's results were analysed by Sebastian Burnside, NatWest Chief Economist, and João Sousa, Deputy Director at the Fraser of Allander Institute, with a strong emphasis on cost of living issues, labour market developments and fiscal outcomes and outlooks.

This attendee was struck by several things, notably João's point that the rise in average earnings in Scotland, albeit outpacing inflation now, still remains below the increase in prices - i.e., people do not feel and indeed are not better off than last they were when they went to the polls in 2019. Indeed, this is the first time this has happened. The tracker shows Scottish sentiment in line with this: "...economic pessimism may prove hard to shake despite incremental improvements."

Women, especially those with children, are among the most pessimistic.  Even if some of the pessimism has lifted overall only 11% think things generally will improve (be much better or somewhat better) in 12 months' time and, when it comes to personal wellbeing, this rises to just 17%. Still, fewer folk are cutting down on leisure activities to make ends meet or losing sleep over their finances albeit the decline is quite marginal - and three in five Scots are still cutting back on non-essential purchases.

Sebastian intrigued the audience with the bank's internal evidence that its customers are dipping into their savings/deposit accounts when they're forced to make bigger outlays such as repairing the car. Overall, it seems, the struggle to remain on top of the monthly budget is as tough as it can get, notably for lots of younger folk. More than half of Scots (53%) remain dissatisfied with income covering the cost of living.

Campaign mantras such as "change" or "stability" in this context seem beside the point, especially when the fear lurks that the next government will be forced, willy nilly, to raise taxes in order to deal with a worsening UK fiscal position as the IMF and others have warned. It's a frequent message from a weary public when the TV crews conduct 'voxpops' in the pub or coffee shop.

Will the next tracker findings - due in late August or several weeks after the July 4 general election - reveal an uptick in optimism?

Don't hold your breath! It's more than likely that, whatever the outcome, voters will be suspending judgement (as many may do by abstaining and driving turnout down to historic lows) . What they most want is services delivery, not warm promises things can only get better. Are the candidates paying attention on the stump?

Watch the event recording:

Understanding Scotland Economy Tracker - May 2024 Insights

Blog: People’s priorities laid out for politicians

Blog by Catriona Matheson, DHI Trustee

As any parent of young children will be able to tell you, a lack of sleep can be hugely detrimental to your wellbeing.

With two very young children at home, I wasn't surprised to learn that more than one in three Scots surveyed about their finances said their mental health had taken a nosedive when their money worries were keeping them awake at night.

The latest Understanding Scotland Economy Tracker recently surveyed Scots about their financial wellbeing. The reading was bleak, though unsurprising in the current economic climate. More than half (54%) of Scots reported that their financial wellbeing is worse than 12 months ago, and this was higher among women (57%) than men (50%). In addition to losing sleep and poor mental health, significant numbers reported a negative impact on home relationships (22%), a detrimental impact on physical health (16%) or feeling less effective at work (13%).

Only one in three (34%) of respondents expressed contentment with their income levels and their ability to cover the cost of living, down from 37% previously. This decline is particularly pronounced in the ability of Scots to meet household bills, reflecting the difficulties faced by families and individuals across the country as they continue to navigate increased costs against stagnant incomes.  

Interestingly, despite these figures the cost of living was prioristed second (40%) to healthcare (52%) as top issues facing Scotland. This means Scotland's political parties should focus on the NHS as much as economic recovery when speaking to the electorate over the course of the General Election campaign. 

While the survey presented nuanced attitudes, a prevailing sentiment was clear: there is unease with Scotland's trajectory. A striking 62% of Scots think things in Scotland are going in the wrong direction which marks a notable surge from 58% in February 2023, and is the highest ever recorded in the Understanding Scotland series. Conversely, the proportion believing that Scotland is headed in the right direction has dwindled to 19%, the lowest the David Hume Institute has ever recorded. This unhappiness among Scots regarding the direction of the nation presents a steep challenge for political leaders. Not only does Scotland's economic prospects need to improve but Scots will need to feel the benefit before they have confidence in the country's leadership.

Survey fieldwork took place in early May when First Minister Humza Yousaf announced his resignation, and there was still uncertainty over his successor. At a UK level, an election was on the horizon but the timings were unconfirmed.

A few short weeks later, we now have John Swinney in Bute House and an imminent General Election with Labour poised to enter Number 10. The new First Minister has put economic growth at the heart of his plans for the Scottish Government, and Keir Starmer has already hit the campaign trail talking of "rebuilding Britain."

Whether our new First Minister and the next Prime Minister can turn the ship around remains to be seen, and whether Scots will start to see any benefit in their bank balance is even more uncertain. In the meantime, political leaders would do well to focus on the NHS and the cost of living crisis as they pound the pavements over the next few weeks. And let's hope, for the sake of getting a good night's sleep, the economy significantly picks up before too long.

Further reading:

Understanding Scotland Economy Tracker May 2024

Press Release: Healthcare and Cost of Living Top Priorities for Scots ahead General Election

Latest in the Understanding Scotland Economy Tracker series shows that healthcare and the cost of living remain the top concerns as candidates get set to make their offer to voters for the 4th of July election.

As Scotland gears up for the General Election, the latest survey from the Understanding Scotland Economy Tracker series reveals that healthcare and the cost of living are at the forefront of Scottish voters' minds as they get ready to decide how to cast their votes in July. 

Latest findings from the series show the top two issues for voters in Scotland are:

• one in two Scots (52%) cite healthcare and the NHS

• two in five (40%) the cost of living and inflation is a key issue

Graph to show the top priorities and issues cited in the Understanding Scotland Economy Tracker over time.

A host of other issues remain important to Scots, including poverty/inequality, trust in politics, the economy, and housing, which are regularly selected as top issues facing Scotland by upwards of 15% or more of Scots. However, there are notable changes in prioritisation among these issues, with emphasis on trust in politics rising two percentage points to 18% and emphasis on the economy falling two percentage points to 17%.

The constitution and devolution is reported as a top issue by only 7% of Scots in the latest figures for May 2024.

As parties craft their platforms and campaign messages, these results indicate that healthcare and the cost of living will be key battlegrounds in the upcoming election. 

Scott Edgar, Senior Research Manager at Diffley Partnership, said: 

“With 52% of Scots prioritising healthcare and 40% focused on the cost of living, it's clear that these will be decisive factors in the upcoming election. Parties who can effectively present solutions to these concerns over the course of the campaign are likely to gain a significant advantage at the polls.”

Susan Murray, Director of the David Hume Institute said: 

“These findings underscore the critical importance of healthcare and the cost of living for Scots as we approach the general election in July. Political candidates will need to address these issues head-on if they want to resonate with voters and secure their support”

Ends

Notes to Editor:

Designed by the Diffley Partnership and the David Hume Institute, the survey received 2,275 responses from a representative sample of the adult population, aged 16+, across Scotland. Invitations were issued online using the ScotPulse panel, and fieldwork was conducted between the 2nd-7th May . Results are weighted to the Scottish population (2021 estimates) by age and gender.

Press release: Top International diplomat captivates Edinburgh audience

28th March 2024

Photo credit: EICC

Baroness Catherine Ashton delivered a powerful message about the power of diplomacy at the Edinburgh International Conference Centre this week

The event organised by the David Hume Institute as part of the EICC Live conversations shared unique insights from someone who was “in the room” negotiating with global leaders, including Putin and Obama. 

Baroness Ashton, who likes to be known as Cathy, called for compromise to be reinstated in the dictionary as a positive word:  

"I want to see compromise put back in the dictionary as a positive word. For instance a compromise candidate means they are the one which everyone can agree on. They are the most popular."

The conversation, hosted by former BBC journalist Clare English, took us behind the scenes of Baroness Ashton’s life as an international diplomat, sharing insights from building trust in negotiations to constructing trade deals and conflict resolutions: 

"Often deals are complicated jigsaws which negotiators have to fit together. When there are entrenched positions there is no fit and that makes it hard to solve the jigsaw. You have to build enough trust in the room that people can test out ideas they don't have a mandate for."

David Hume Institute Director, Susan Murray said

 “The audience of over 200 people were captivated by Cathy’s practical approach and humble nature.  As the US Consul, Jack Hillmeyer acknowledged in his vote of thanks to Baroness Ashton, like the song in the Hamilton musical, she’s been in the room where it happens on so many of the top issues facing the world. It was a privilege to hear Cathy in-person in Edinburgh.”

The event recording is free to view here

Blog: Big or small - are numbers a tall order?

Blog by Helen Chambers

From my experience of the last three decades working in policy and service delivery, many people have a poor underpinning foundation of statistical analysis and struggle to meaningfully read and interpret data. 

And for good reason. Most people in social policy, political and public service realms have had absolutely no training in how to go about this.

Tim Harford, the economist, Financial Times columnist and BBC broadcaster often asks in his programme More or Less “is this a big number?” when starting to get under the skin of any rather dubious number assertions. 

In the UK, I don't think we ask ourselves often enough "is this a meaningful number?". 

And often, even if we did, would people have the mental analytical tools to be able to give a competent answer?

An example lies within the statement, exaggerated for the purposes of illustration: “the success of this intervention has increased by 100%”. If the initial success rate was 0.0001% then increasing it to 0.0002% is close to meaningless; but often that second step of analysis isn’t taken and the initial declaration accepted. 

You might find this example derisory. Perhaps you can find your way round a set of financial or economic outputs but how comfortable are you with a paired t-tests, chi square tests and p-values? 

And what about your colleagues? 

These are fundamental tools when it comes making sense of the world, especially in social policy. Development of policy, public services and their delivery sits across a very wide realm in Scotland: from small charities, the NHS, private companies and government at all levels. 

The Scottish Government is able to retain the services of qualified and skilled analysts, but in many of the spaces that are crucial to changing the outcomes for communities, access to this type of support is absent. 

So we rely on thousands of individuals being able to understand the material put in front of them in various oversight, governance and decision roles. 

A high percentage of the time, people do not have significant comfort or understanding when they are reviewing the reams of data we are currently capable of producing and sharing with each other, in the name of evidence for decision making.

Developments in AI mean we are experiencing the dawn of some of the strongest analytical tools ever seen. But this brings risks, if we do not understand the data we are manipulating with AI or potential malevolent actors wish manipulate our perception and understanding of the world. 

We are now at a point where this matters more than ever.  AI could make things worse rather than better. In computing worlds there is the concept of GIGO, ”Garbage In, Garbage Out”.

Decision makers as well as the general public need to be able to sense check and interrogate numbers that are placed in front of us. 

And beyond that, with so many organisations in a position of extreme resource squeezing, we have to know how to allocate assets whether financial, human or physical to have the greatest impact. 

Right now I don't think we are in a position to do that at the level required. Perhaps it is time for a little more honesty, humility and access to Statistics 1.01, until more of us are confident in understanding and working with the data and evidence placed before us.

About Helen Chambers

Helen is a freelance consultant specialising in strategy, implementation, and influencing skills. She works with senior teams to optimise impact and resources for social good across the private, public and voluntary sectors. Her practice is underpinned by a belief in using strong critical thinking skills to deliver conscious intent. 

Further reading and listening

• Tim Harford’s More or less and Cautionary tales podcasts

• Blog and discussion podcast from the Office for National Statistics, Communicating Uncertainty: how to better understand an estimate.

Press release: First Co-chairs announced to lead the David Hume Institute

Ahead of its 40th anniversary DHI announces changes to the board

19th March 2024 

For the first time in its history, the David Hume Institute board will be led by Co-chairs. Professor Jan Bebbington and Liz Ditchburn were elected to the new roles on Tuesday evening.

Professor Jan Bebbington and Liz Ditchburn take over from Kenneth Barker, former partner of Baillie Gifford, who will stand down as Chair after six years on the board. Also standing down as a trustees after six years is Christine O’Neill KC, Chair of Brodies LLP.

The David Hume Institute, a leading Scottish think tank, was set up in 1985 to increase diversity of thought on the economy and society.  Its recently launched Economy in Plain in English events underline their mission to demystify the economy and build on its quarterly Understanding Scotland Economy Tracker which collates people’s spending intentions and perceptions of the economy.

Professor Jan Bebbington said: “I am delighted to be elected Co-Chair of the David Hume Institute at this critical time where we enter a new age and stage of the organisation.  Our society has big challenges ahead and DHI will be there supporting Scotland’s decision makers to better understand data and trends.

Liz Ditchburn said: “The David Hume Institute has been at the centre of public debate for almost forty years. I am thrilled to be joining such a strong board and take up the role of Co-Chair alongside Professor Bebbington.”

David Hume Institute Director, Susan Murray said “We would like to thank Kenneth Barker as Chair and fellow long-standing trustee, Christine O’Neill KC for their hard work and dedication.  It is only because of volunteers like them that DHI exists and can continue to deliver rigorous research and thought-provoking events. We are delighted to welcome Jan and Liz to their new roles as Co-chairs and look forward to the organisation going from strength to strength in the years ahead.”

About Jan

Professor Jan Bebbington is Director of the Pentland Centre for Sustainability in Business at Lancaster University where she researches the intersections between sustainable development concerns and organisations. Alongside her academic work, Jan has been Vice Chair of the Sustainable Development Commission from 2006 to 2011. In 2018 the Royal Scottish Geographical Society awarded her an Honorary Fellowship.

About Liz

Liz Ditchburn has more than 35 years’ experience as a public sector leader.  Her last executive role was as Director General for Economy for the Scottish Government.  She is currently a Non-Executive Director of the Net Zero Technology Centre, a board member of Women’s Enterprise Scotland, Trustee at NESTA and an honorary professor at the Adam Smith Business School, University of Glasgow.  She has recently been appointed as a Commissioner for the UK Independent Commission for Aid Impact.

Press Release: Two-Thirds of Scots continue to reduce spending

Latest in the Understanding Scotland series continues to shed light on Scots’ survival tactics during challenging economic times

The Understanding Scotland Economy Tracker survey tracks economic attitudes and spending intentions from more than 2,000 members of the Scottish adult population every 3 months.  The fast turnaround time, this data was collected only two weeks ago, means early identification of changes in trends to support decision-makers.    

The latest insights show two in three Scots (67%) have resorted to reducing non-essential purchases, while significant proportions continue measures such as cutting back on energy use (64%) and leisure activities (62%). Additionally 45% report decreased savings contributions, and over a third are tapping into them for everyday expenses. These coping mechanisms are particularly prevalent among younger age groups, underscoring the disproportionate impact of the high cost of living on  working-age individuals.

The study reveals a cautious outlook among Scots regarding future spending. Both essential and non-essential spending expectations show little change, indicating ongoing caution amidst economic uncertainty.

Furthermore, the latest findings highlight generational divides in priorities.  Healthcare and the NHS are paramount among older age groups, whilst younger individuals are more focused on addressing rising living costs.

The study also reveals growing doubts among Scots about Scotland's trajectory, with the majority (58%) believing that the country is heading in the wrong direction. This marks a three-percentage-point increase from the previous wave and reflects an increasing sense of pessimism about the future.

Mark Diffley, Founder and Director of Diffley Partnership, said:

“The latest findings from our regular Understanding Scotland series continue to shed light on the economic landscape in Scotland today. The fact that seven in 10 Scots think that economic conditions are worse than 12 months ago and six in 10 think conditions will be worse in 12 months’ time, reveal ongoing and widespread pessimism. The data also again reveals the challenges posed by rising living costs and offers a glimpse into the daily struggles of many Scots, particularly those from disadvantaged backgrounds, highlighting that the cost-of-living crisis is far from over in terms of real life experiences.”

Susan Murray, Director of the David Hume Institute said:

“These findings reveal  a stark snapshot of the economic reality  of living in Scotland today. For anyone wanting to improve productivity or economic growth, focus on the number of Scots continuing to lose sleep over their finances, which creeps up another one percent this quarter to 30% and rises to 43% of 35 to 45 year olds. With so many of your workforce affected, we can only hope that things don’t get worse before they start to improve.”

The full report can be found here.

Notes to editors

Designed by the Diffley Partnership, the survey received 2,305 responses from a representative sample of the adult population, aged 16+, across Scotland. Invitations were issued online using the ScotPulse panel, and fieldwork was conducted between the 1st-5th February. Results are weighted to the Scottish population (2020 estimates) by age and gender.

Blog: Scotland's new generational divide - the economy

by David Gow, DHI Trustee

The Germans have a great (long) word for it: Politikverdrossenheit. Or a state of being pissed off by politics. Scots are far from alone in Europe in being disenchanted by their political leaders – in Holyrood as much as in Westminster. Politics is broken is a common sentiment. Government doesn’t work. No wonder then – albeit alarming – that increasingly sullen, weary voters are tempted by extremists on the fringes such as the Far Right.

Pessimism is indeed the leitmotif of the latest (February) quarterly survey in the Understanding Scotland series. Talk of the economy “turning the corner” or being “on the right course” falls on deaf Scottish ears: a majority (58%) believe the contrary – Scotland is heading in the wrong direction in their eyes.

This 3% rise in negative sentiment matches the highest percentage in the series that was last seen in May 2023 while less than a quarter of Scots (23%) believe things are heading in the right direction – a new record since this survey began in autumn 2021. Again, this is hardly surprising – the economic forecasts are almost universally pessimistic about the UK and/or Scotland exiting the perennial cycle of low growth, low productivity.

What is especially concerning is that this pessimism is prevalent amongst young adults. GenZ, like many millennials before them, sense they’ll be permanently worse off than their parents, let alone their grandparents who “never had it so good” at the same age. More than likely unable to buy their own house/flat or afford soaring private sector rents, their faith in the NHS to deliver lifelong good health is wavering to say the least.

A stark generational divide, shown up in previous surveys but now more and more salient, is marking Scotland. During 25 years of devolution the divide was increasingly between Yes and No to independence on the constitutional question but this latest survey in the series shows just 9% think this is one of the three most important issues facing the country compared to 25% in October 2021. That’s even fewer than those still concerned about Brexit (11%) – even though Scotland, especially its young folk, voted decisively against it and the overwhelming evidence is of the hugely damaging effect this is having on the economy.

As in the UK as a whole, healthcare is the top issue for Scots, with 49% citing it compared with “just” 41% pointing to the cost of living/inflation even though the latter remains untamed. Of course, the NHS is the most pressing concern for the elderly (55% of the over-65s), whether frail or not, but it is cited by 45% of 16-34-year-olds too. Again, unsurprisingly, the youngest generation (54%) thinks the cost of living matters most compared with just one in four (27%) of those of pensionable age who can rely on the ”triple lock” and their own savings/capital. Young people especially are cutting back on non-essentials such as leisure and even essentials such as heating.

A picture emerges from the survey of a nation, whatever its demographic, pre-occupied with personal/private concerns: food and energy costs, income, health. Reflecting similar trends in mainland Europe, the environment/climate change has slipped down the agenda (from 18% to 11%) while that shift in priorities is even more marked for issued such as mental health (-10 points) or poverty/inequality (-14) throughout the life of this series.

This is not to say that Scots have lost their sense of collective responsibility for society: between 75% and 87% back a safety net and the duty on employers to provide a (real) living wage and they recognise that neglect for people’s basic needs proves more costly in the long run.

However, a third of Scots (versus 23% two years ago) now rank spending on public services as a top priority, followed closely by managing public finances (tax and spending) at 27%.  The elderly are particularly concerned about managing public finances, with only a fifth of young people finding this a salient issue. Maybe the latter generation already sees greater private provision of services such as health inevitable…?

Overall, this survey re-emphasises that the governments in Westminster and Holyrood have a mountain to climb if they are to rebuild voters’ trust in politics and in their personal and collective future. There can be little optimism that the upcoming Scottish and UK Budgets will adequately address these issues. We owe it to our younger generation to do so: they have every right to feel badly let down.

Blog: Avoiding the cost of living carnage

By Shan Saba, Director of BrightWorks Staffline

and Founder of Scotland Against Modern Slavery

I remember lots of arguments in my house about money when I was growing up. Whilst I was too young to know the value of a pound, the anxiety about my parents being able to make ends meet is still a sore memory for me.  

Our family finances were very tight back in the 80s, despite both my parents having “good” jobs in the NHS. Sadly, now this seems the same for a significant number of Scots.

The last Understanding Economy tracker from the David Hume Institute brought back those arguing voices in my head again.  Three in every ten Scots are losing sleep over their finances. This is huge. Financial stress causes family tensions and creates a lasting impact on the next generation.   

Pay rates have risen for some to keep up with inflation and unemployment is low. The jobs market is stable, for the moment. But people are worried about what is ahead, especially those not in permanent employment.

The lack of sleep data is just the tip of the iceberg. 

Sickness rates are high and many older workers are leaving the jobs market.  On top of this there is pessimism about the economy which can translate into that horrible feeling that you might not have a job if the economy does not improve next year.  There’s little doubt that financial worries will be increasing for some.

In 2023 employers saw this translate into higher absences across all sectors and whilst this has a huge impact on productivity, we will never truly know the damage being inflicted to struggling households behind closed doors.

Some employers understand this and support staff through salary advances and with financial well-being programmes but sadly the data shows fewer people are able to find £500 for an emergency than there were at the start of last year.  

Although money worries have always affected some households, the carnage caused by the scale of the challenges posed by cost of living rises feels worryingly deep. 

The long term implications are more than distressing memories as we know people’s health is being affected by the high levels of financial stress and lack of funds to buy nutritious food or heat their homes. 

If the way out of this crisis is greater productivity to create higher growth, this requires action beyond individual behaviour. Reducing financial stress is a critical part of creating a healthy, focused workforce and every employer can help make a difference.

Press Release: Two years of tracking shows Scots struggling with turbulent economic times

Research shows Scots continue to cut back, skip meals and lose sleep over their finances

The Understanding Scotland Economy Tracker, produced by the David Hume Institute and the Diffley Partnership, marks its second birthday, showing many Scots continue to take extreme measures to navigate turbulent economic times:

• 1 in 6 people (17%) report skipping meals

• 1 in 5 people are using ‘buy now pay later’ payment plans

• 2 out of 3 people (67%) are not putting the heating on to reduce costs

For many, the ongoing challenges with the cost of living are dominating their lives with:

• 3 in 10 (29%) Scots telling us they are losing sleep due to their personal finances

Many Scots are living with severe financial precarity:

• 3 in 10 people (28%) are not confident of covering a £100 emergency expense – up three percentage points since February 2023. 

• This rises to 1 in 2 (49%) for an emergency expense of £500. 

The survey also shows 8 in 10 Scots perceive the economy as favouring the wealthy (78%), while 53% believe it primarily serves business interests.  Only 1 in 10 (10%) believe that the economy works in their own interest.

Healthcare (48%) and cost of living (42%) remain among the top concerns for Scots. 

Over three-fifths of Scots (62%) view the cost of living and inflation as a key economic priority, though this is down five percentage points from August. Poverty has become a significant concern for 32% of respondents, up three percentage points from August.

The Understanding Scotland Economy Tracker survey gathers economic attitudes and insights from more than 2,000 members of the Scottish adult population every 3 months to track changes over time. 

Mark Diffley, Founder and Director of Diffley Partnership, said: 

“Broadly speaking, our latest data confirms that the public is still gripped by the costs of living crisis.  There are signs that the economic outlook of Scots is becoming slightly less pessimistic. Compared to last year, a smaller proportion of Scots think economic conditions will continue to get significantly worse; however, the underlying trend remains, including the fact that the economic crisis continues to have greatest impact on the most economically vulnerable and it feels like it still has a long way to run.”

Susan Murray, Director of the David Hume Institute said: 

“Since we started the survey two years ago, we’ve sadly seen people struggling to make ends meet.  One in three people are now telling us they couldn’t cope if they had an emergency expense of £100. It is not surprising to see more people getting into debt. 

Worrying about money all the time will take its toll on people’s health and the health of the next generation. This survey poses challenges for the Chancellor - who gets prioritised in the Autumn statement – those who are sitting comfortably or those living on the edge?”

Ends

Additional notes

Designed by the Diffley Partnership, the survey received 2,218 responses from a representative sample of the adult population, aged 16+, across Scotland. Invitations were issued online using the ScotPulse panel, and fieldwork was conducted between the 1st-9th November. Results are weighted to the Scottish population (2020 estimates) by age and gender.

Blog: Who pays the price of long short-termism?

by Susan Murray, DHI Director

Today, Storm Ciarán is turning people’s lives upside down.  For some people, the impact has been devastating and will last long after the news cameras move on.  

Photo credit: Eileen Groome

The increasing frequency of storms has got me thinking about building standards and transferring of risk.

Again and again advisors have recommended stronger building standards to cope with the effects of climate change – higher wind speeds, heavier rainfall and intense heat to name just three.

But we have seen little change in those standards. A strong industry lobby against any changes has argued that changes would drive up costs.  

But who really pays?

Our weather is changing and we need to prepare our buildings for the changes. A series of papers from 2013/4 from the National Building Standards are fascinating.  They deal with everything from excess heat, drought, wind, flooding and subsidence - if you get that sinking feeling, it could be a sinkhole as we will be seeing more of them.

So why are our buildings not more resilient and providing safe refuge in a storm?

Reading the NBS papers, comments jump out like “Consideration should be given to specifying single car-width garage doors in preference to double car-width – the increased size can enhance wind deflection… and the roof can be subjected to additional uplift action, thereby increasing the risk of the roof being damaged.”  

Do you think all the people buying shiny new homes with double garages know that they have a higher risk of their roof blowing off?

Long after the developers have moved on to new sites, some home-owners find they are carrying the risk of the lower standards and any resulting repair costs. Even with the current standards, increasingly there is evidence of “weak compliance” and “indifference around build quality” according to the Hackitt Review of Building regulations. 

A new industry is emerging of professional snagging companies, one of which is now a hit on social media after capturing their horrifying findings on youtube and TikTok.  However, not everyone can afford a professional snagging company.

Standards matter. 

But if the current regulations are not being enforced and politicians continually bow to pressure against raising standards, this will cost us all more in the long run.

I was introduced to a new acronym this week NIMTO – not in my term of office.  Building standards might not be seen as a vote winner but they matter. We need to end this long short-termism and face up to the challenges ahead or ultimately the state will be picking up the pieces of shattered lives.

Further reading:

UK Housing - Fit for the Future, Climate Change Committee

The Hackett Review: Independent Review of Building Regulations and Fire Safety, Uk Government

DHI announces five new Trustees

The David Hume Institute (DHI) has announced the appointment of five new trustees to the board.  The new trustees are: 

• Dr Aveek Bhattacharya, Interim Director of the Social Market Foundation

• David Gow, journalist with over 50 years experience

• Catriona Matheson, communications consultant and former special advisor

• Dr Samuel Mwaura, Lecturer in Entrepreneurship and Innovation at the University of Edinburgh Business School

• Ken Ross, who has a portfolio of interests in the built environment and current chair of the Glasgow School of Art trustee board.

DHI's staff, trustees and partners work together to encourage diversity of thought, applying the rigorous approach which has long defined DHI to encourage action which addresses the contemporary issues of our time. Central to DHI's work are the people of Scotland, as they engage, listen and collaborate with people from different backgrounds, genders, and ages, to encourage action towards a more prosperous, sustainable, inclusive and fair Scotland.

Susan Murray, director of the David Hume Institute, said: "We are delighted to welcome such talent to our board at a crucial moment for public policy debate in Scotland. Since 1985, the DHI's research and events have provided insights to increase understanding of the economy and related public policy.

 "The new trustees bring additional breadth and depth to our board to complement the existing Trustees as we work towards our fortieth anniversary.  We are particularly pleased to be supporting Aveek, Catriona and Samuel in their first Trustee roles. 

Ken Barker, Chair of the Board of Trustees said “I would like to thank outgoing Trustees, Will Dowson, Agent for Scotland for the Bank of England and Steven Drost, COO Codebase for their support throughout their time on the board. Their tenure saw the David Hume Institute expand our work, increase the range of voices heard in our research and grow the reach of the organisation”

"We face a complex and rapidly changing world. Our new trustees position the David Hume Institute well to expand our contribution to independent analysis and diversity of thought in Scotland. We are pleased to be able to welcome our new trustees ahead of November's 2023 Trustee Week so they can join the celebrations and training with the thousands of other volunteer trustees in Scotland.”

ENDS

Find out more about our Trustees

Blog: Justice, markets and the Great Risk Transfer

Tuesday 26th September 2023

by Dr Owen Kelly

This blog is based on a speech Dr Owen Kelly gave at a David Hume Institute event on Monday 18th September 2023 at the University of Edinburgh Business School discussing the Great Risk Transfer.

Owen is a Doctoral Researcher in the Department of Philosophy at Edinburgh University, examining how ancient ethical ideas can be applied to modern business practice. He also works at the University of Edinburgh Business School as Director of Engagement, and at the Edinburgh Futures Institute, where he is the Deputy Director. From 2008 to 2016 he was Chief Executive of Scottish Financial Enterprise, the representative body for Scotland's financial services industry. Before working for the financial services industry, he worked for 20 years as a civil servant in the UK and Scottish Governments.

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The David Hume Institute ‘encourages diversity of thought’. The Institute and Faculty of Actuaries acknowledges that the Great Risk Transfer is multidisciplinary in its implications. I am taking both of them at their word in offering some thoughts from a philosophical perspective. 

The work of the Institute and Faculty is profoundly empirical in nature, as befits a professional body; and the DHI’s research is similarly grounded in evidence, gathered from primary sources.

My approach is philosophical and more, metaphysical. Such thinking has its place, however. As Dr Myra Hamilton notes in her excellent introduction to the issues, the political and social context of the Great Risk Transfer provides its conceptual justification. That context is, in turn, shaped by philosophical ideas about markets and, ultimately, what the good life for human beings consists in. 

I want to cover three broad areas: justice; freedom; and the nature and consequences of financialization.

First, justice. It is rarely invoked in discussions of commercial or business affairs. Usually we talk about ethics and compliance with codes and rules. But few philosophers, if any, argue that justice is not in some way essential to human life. Since business is part of human life, it must be essential to that, too.

Is the Great Risk Transfer an injustice and, if so, to whom? There are plenty of examples of how it is unfair, or unequal, in its effects but is it unjust? 

Myra Hamilton refers to the idea that taking on risk is seen by some as part of the ‘natural moral order’. This is based on the view that  people should be more self-reliant and take more responsibility for their own situation. But it is also based on the idea that desert is what should guide us in determining whether someone has been justly treated. A sort of ‘you get what you deserve’ view. Desert is part of what is ‘due’ - and the idea of justice as something ‘due’ is ancient, and one of the foundations of the definition of justice put forward by the Emperor Justinian in the 6th Century AD, and still accepted as the closest anyone has got to a working definition of justice.

What is desert based on? 

The philosopher Michael Sandel says that meritocracy is a story we tell ourselves about desert, based on the idea that ‘merit’ can be measured and rewarded. He points out that the dominant measure of merit in most market-based societies is wealth. On that basis, we might say that the unequal consequences of the Great Risk Transfer, where the wealthy are better equipped to take advantage of it and are in any case protected against the downsides, are deserved by all involved. To the rich, more should be given, sort of thing. But Sandel draws out the failings of meritocracy as a measure of actual merit, noting that merit is socially determined and very much in the eye of the beholder. Goodness, kindness and similar qualities, for example, don’t usually figure in the calculations of those seeking to apportion ‘merit’ in a meritocracy. And we should remember that the inventor of the concept of meritocracy, the philosopher Michael Young, did so to sound a warning, not to promote the idea. So the idea that risk has been transferred on the basis of merit, or desert, seems weak.

Also, the bearing of a risk is a harm in itself. The risk transferees – those who have received it – did not seek it and they are, it is fair to say, unsettled and discontented by it. 

For something to be considered an injustice, according to the Code of Justinian, which still stands up as a working definition used by philosophers, there must be an agent. The weather is not usually seen as unjust, though it can be seen as unfair, because there is no agent involved. 

But the Great Risk Transfer is not like the weather – it has agents, identified if not named in the Institute and Faculty’s papers – governments, companies and regulators. I therefore suggest in philosophical terms there has been a big dose of injustice in all this. It may not be common practice to ask around board tables whether a company’s actions are just but given that it is a key question in every other aspect of our lives, perhaps it should be asked more often.

Moving on to the philosophical foundations of markets. It is commonly held that markets and freedom are closely related to one another. The Great Risk Transfer emerges from a philosophical belief that freedom is a good thing in itself.  It is hard to disagree with that belief. But, moreover, that markets give us more freedom. This is true both at the superficial level, as in the greater freedom of choice that came with UK pension reform, and at the more philosophical level – markets add to the good for humans.  They provide a sort of theatre within which freedom is exercised. We are all familiar with the idea that free markets buttress free societies.

But in the case of the Great Risk Transfer, this freedom is, for most people affected, just an abstract concept with little practical content. Immanual Kant proposed that the basis of morality, at least as far as humans are concerned, is that people should be treated as ends in themselves, not as means to an end. Because of the asymmetry in the market between consumers and providers, in terms of knowledge and expertise, highlighted by the Institute and Faculty of Actuaries, consumers are being treated as means, not ends. They are being used as ill-equipped participants in a shift away from the collective, towards the individualised.

The Institute and Faculty does recommend that this is addressed; but companies have, following government and regulatory actions, acted in their own interests, not those of customers. Why should they do otherwise? 

There are many ways to make money in the new individualised world and they are companies after all – but consumers are the means, not the ends, in this great shift, and Kant would find fault with the companies and the policy makers, accordingly.

Finally, there is a reference in the interim report to financialisation. This is a well-recognised phenomenon, and we see it everywhere. I want to highlight two points. The first is that financialisation creates new opportunities for what economists call ‘rent seeking’. This is when the way in which markets are organised creates pinch points, at which money can be made. A good current example is the emergence of credit scoring agencies. These large financial companies – there are only 3 in the UK – provide a service to lenders. They offer to check the creditworthiness of borrowers, interposing themselves between the lender and the borrower. Sure, the lenders pay for their services but to get credit, you need to have a newly-contrived thing called a credit score. To get the credit score, you need to use their products. They create the barrier, then charge you to get over it.

This rent-seeking behaviour is relevant to the Great Risk Transfer because there is a social requirement for risk management - things like insurance and pensions, as well as things like health and safety and flood prevention. 

Oliver Wendell Holmes, the great American jurist, said: ”Taxes are what we pay for a civilised society” - all of us benefit from people paying taxes, just as all of us benefit from the management of risk. 

Put bluntly, we do not have destitute old people on the streets. Risk management, like taxation, is a collective public good that helps create a civilised society. But these risk mitigators are only available through private providers, and they are required by society, like car insurance – not an optional purchase, you need it, by law, and society needs you to have it. Pensions, health and other things are the same. They, like taxation, are part of the price we pay for a civilised society.

It is doubtful that private, profit-orientated organisations can provide these services, which we are obliged to use, without rent seeking at the pinch point; and financialisation intensifies this problem. Financialisation creates the environment, abstracted from the world as we encounter it day to day and trading today off against tomorrow, where pinch points can be created and tolls exacted as the price of passage.

 I would like to see companies campaigning to remove these pinch points and encouraging regulators to do so. I realise this is a provocative comment but that is what philosophy is sometimes for!

Ends

Read more about the Great Risk Transfer

Blog: why aren’t more people talking about the Scottish Child Payment?

18th September 2023

by Liz Ditchburn

The Scottish Child Payment is a bold policy intervention with cross-party backing targeting child poverty and its long-term consequences. This blog aims to stimulate discussion about this Scottish policy innovation and calls for investment and action to ensure we learn from its implementation, generating evidence about what works that will be useful in Scotland, the rest of the UK and beyond.

About the Author

Liz Ditchburn CB has more than three decades of experience in the UK civil service and devolved administrations in both domestic and international settings. Most recently, she was Director General for Economy for the Scottish Government, leading on all aspects of the economy and the drive towards net zero in Scotland. Although at the Scottish Government during the development of the Scottish Child Payment she has not worked on the policy itself.

Previously, she was the Department for International Development’s (now Foreign, Commonwealth and Development Office) Policy Director and its first Value for Money Director. Across her executive career she has worked to integrate economic, social and environmental change to secure better outcomes for people, place and planet.  Liz is now an Honorary Professor at the University of Glasgow, a Non-Executive Director of the Net Zero Technology Centre and a Trustee of NESTA.

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I’ve lost track of the number of times I’ve mentioned the Scottish Child Payment to colleagues and friends based elsewhere in the UK (even some involved in public policy work) and been told they’ve never heard of it. The next reaction when I describe the level and scale of this initiative, is “Wow! That’s big!”. It is indeed.

For those unfamiliar with this new payment to low income families in Scotland (broadly those in receipt of Universal Credit or similar), here are some headlines and a brief timeline:

• First payments began in February 2021 at the rate of £10 a week for each child under 6.

• Doubling of the payment to £20 a week per child was announced in November 2021 with payments at that level starting from April 2022. (In advance of the expected extension of the eligibility to under 16s, a system of bridging payments was put in place for children between 6 and 16 – in effect advancing the formal roll out)

• Payment increased to £25 a week per child and eligibility was formally extended to under 16s in November 2022.

What makes the Scottish Child Payment remarkable and worthy of more debate inside and outside Scotland?  And why does it matter beyond Scotland?

Firstly, impact for individuals: the numbers above bear repeating. If you are a low income family in Scotland, on top of UK child benefit and any other benefit, you can receive £25 per week for each child under 16. There are no limits to the number of children an eligible family can claim for.   To get a sense of impact for a typical family, a family with 3 children will receive £3,900 a year.  That’s a significant addition to a low income household. And it’s each year and every year, not a one-off boost.  At a societal level, modelling puts the impact on child poverty rates at a reduction of around 5% 

Secondly, coverage: when the payment began in 2021, Social Security Scotland estimated it was being paid for 106,000 children.  With the extension to under 16s, around four times more children could be covered. The Scottish Fiscal Commission (SFC) produced costings estimates when the extension to the scheme was proposed, calculating that around 41% of under 6s and 48% of over 6s would be eligible.  This translates roughly into an estimated 400,000 children being eligible (with actual coverage dependent on uptake). The latest statistics just published by Social Security Scotland show payments are being made in respect of just over 316,000  children.

Thirdly, scale:  this is a fiscal anti-poverty intervention at scale, not a small tweak at the margins.   Earlier this year, the Institute of Fiscal Studies produced some budget analysis for the Scottish Parliament during budget deliberations showing that tax and benefit changes are in effect a significant transfer from richer households to poorer households with children.   Graphics  in their published paper, analysis of Scottish tax and benefit reforms, are well worth a look. 

Fourthly, cost.  The SFC costed the Scottish Child Payment for 2023/24 at £405m.   The recent actual figures for Q1 23/24 published by the Scottish Government confirm this scale with £104.1m spent in the quarter.  To help put these figures into context for readers elsewhere in the UK, a very rough guide is to multiply by 10 to get an idea of an equivalent whole of UK scale – so such an initiative covering all the UK might be in the order of £4.2bn.

Fifthly, political consensus and societal attitudes:  both the introduction of the Scottish Child Payment and its increase to £25 per week per child has been marked by a pretty strong level of political and cross-party consensus.   Indeed, some of the challenge that the Scottish Government received (and still receives) in debates was along the lines of why not go further, faster, why not increase the rate beyond £25? That there is consensus around the idea that child poverty is a bad thing is not surprising; that there is agreement that direct cash transfers to families are an important part of the answer and affordable is more remarkable. 

Sixthly, the tone of the debate:  coverage and discussion around the payment have been mercifully free of language around “handouts” or whether people are “deserving” or not. When cash transfers first began to be adopted in an international aid setting, concerns about whether poor people could be trusted to do sensible things with cash were never far away. The evidence since has shown pretty consistently that given cash, people in poverty use it well.  (The Overseas Development Institute (ODI) has published a great review of the evidence around cash transfers, Cash transfers: what does the evidence say? | ODI: Think change.

What do we know so far about the impact of the Scottish Child Payment – does the evidence suggest that it is going to have the impacts the Scottish Government expects?   

The diagram below shows the short, medium and long term changes that the designers of this policy are looking for – the “logic model”. 

Source: Scottish Child Scottish Child Payment Interim Evaluation

The only published evaluation I’ve seen so far (please send links to any others if you know of them) is from March 2022: the interim evaluation published by the Scottish Government. It was conducted early in the life of the Scottish Child Payment and therefore necessarily focused on the immediate and short-term outcomes, and critically, refers to the period when the payment level was at £10. Nevertheless, it provides some interesting glimpses and areas for deeper exploration.

There was broadly positive evidence supporting some of the short-term outcomes: reduced money-related stress, increased child-related spend, children able to participate in social and educational opportunities and reduced pressure on household finances, with less clear evidence for an improved position of main carers within households. The findings on children’s opportunities and stress are really interesting. Finding out whether and how cash transfers can support better learning outcomes for children rather than just having a direct impact on material poverty is one of the big questions for cash transfers policies.  And we know that persistent stress can have a pervasive impact on long-term health.

These two quotes in the interim evaluation are compelling and provide a glimpse as to how this might be impacting:

 “[Scottish Child Payment] did lessen my worries quite a lot to be honest.  Money's the one thing I'm always stressing about, always thinking about, always worrying about. It was a relief to have that extra boost.  (Parent 22, age 18-24, care-experienced, 3+ children)  

[Scottish Child Payment helps with] not having to stress out because you know it’s coming. When I get stressed, I don’t sleep. I don’t deal well with stress. I don’t want the kids to see me stressed. (Parent 18, age 25-34, single parent)”    

Will these findings still hold at the higher level of £25, under the changed economic context and even sharper cost of living challenges?

The interim evaluation includes lots of detail around the application process and uptake.  As a “passported” benefit (that is one that you’re entitled to because you already receive another benefit), applications should be more straightforward and administratively less costly than standalone benefits.   

However, this also brings with it often complex interactions with other parts of the tax and benefit system and a particular challenge for policy makers when different parts of the tax and benefits system are owned and delivered by different governments; understanding the implications of these interactions – the potential for cliff edges or disincentives to employment for example – will be important.   

Currently, Scotland is the only part of the UK with this system.  For policy makers, differentiation of policy creates a precious opportunity to find out what works, to learn from the experience of implementation and to better understand how best to create the changes we want.  There are other ways to learn of course as well. Randomized Controlled Trials (RCT) are often seen as the gold standard.

NESTA (full disclosure, I am a Trustee) is considering the value of RCTs in this area and also keen to look at what we can learn from Scotland Welfare reimagined: could cash transfers combat child poverty? | Nesta.

We only learn if we invest explicitly in learning - putting in place the impact evaluations, gathering the data, quantitative and qualitative, listening to the stories, testing out our assumptions, doing high quality research.   Few policies work in practice exactly as we intended at the design stage – and sometimes they don’t work at all to produce the change expected.  They can evolve and improve based on experience.  

At a recent event in Edinburgh, Prof Danny Dorling described the Scottish Child Payment as the single policy intervention that has created the largest fall in child poverty anywhere in Europe for at least 40 years.  

Impartiality runs deep in the soul of a longtime civil servant so I am not writing this paper as an advocate of the Scottish Child Payment, important though it will be to the many thousands who receive it, but as a call for us all to invest in learning about what works in tackling child poverty and inequality and to debate these issues throughout the UK with evidence, humility and an open mind. 

Ends

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Why is DHI thinking about the Scottish Child Payment?

We heard at our recent event with Professor Danny Dorling about how rising poverty and inequality is shattering our nation. We know from our Understanding Scotland Economy Tracker that at least 1 in 4 people are consistently affected by financial stress which is affecting their sleep and nutrition.

Beyond heart-breaking individual stories, poverty results in significant intergenerational consequences for the labour market and public spending especially through long term health conditions.  As pressures rise on public spending, this is the biggest move yet by the Scottish Government to get up-stream and move towards a preventative agenda as laid out by the Christie Commission.