The Sustainability of Scotland’s Finances

The Scottish Women’s Budget Group (SWBG) is an independent analysis and campaign group that aims to promote gender analysis in public policy and public finance decisions through budgetary processes. SWBG brings together a wide range of women from across Scotland who have an interest in women’s equality and want to achieve better gender equality in our society and has focused on encouraging active gender analysis in the Scottish Budget process since 2000.

A key point to ensure that the Scottish Government’s Budget 2024-25 and any other future budgets better respond to the challenges posed by financial pressures is to make use of intersectional gender budget analysis across all policy portfolios.

Intersectional Gender Budgeting is an approach to budget analysis focused on achieving equality by analysing the effect that the collection and spend of public resources has on women and men. It also recognises how other characteristics may affect women and men’s lived realities, such as age, socioeconomic situation and background, disability, race, ethnicity, religion and rural or urban location.

By using this approach, the government can identify opportunities and priorities for budget allocations. Furthermore, Intersectional Gender Budget Analysis can help avoid any unintended bias or consequences when using public resources that could hamper progress towards gender equality goals, also ensuring that fiscal decisions do not result in widening inequalities.

Women and men continue to experience inequalities in pay, in employment and promotion opportunities, and in the harassment and abuse they receive, with women being more likely to experience poverty at all points in their life. In addition, women still have more responsibility for unpaid work including childcare, care for older or disabled people, and domestic work. For many women, this means a greater reliance on public services and can limit the time they have for paid work and other activities. Intersectional Gender Budgeting draws attention to these key issues which are often overlooked in policy, particularly the uneven distribution of unpaid work. The Medium-Term Financial Strategy published in May 2023 hinted at the need to make tough decisions to ensure a balanced budget given Scotland’s fiscal position. It is therefore particularly important to incorporate a gendered perspective to the Budget 2024-2025 and any subsequent budgets to avoid deepening existing gender inequalities and worsening outcomes for women, both in the short and long term.

In addition to this, and considering the Scottish Fiscal Commission’s demographic projections, Gender Budget Analysis brings to the fore other important aspects to be considered for future policy development, such as the role of care as an enabler of economic activity, the need to fully account for people’s caring needs and the economic impact that this will have on spending as well as on revenue generation. In relation to this last point, our care-cost modelling research details the multiplier effects that investing in care would have in Scotland. For example, it calculates that additional direct and indirect tax revenue would yield an estimated additional £1.5bn annually (or 46% of the estimated additional investment required in the transformative scenario).

In order to embed this type of analysis, the Equality and Budget Advisory Group has published core recommendations for equality and human rights budgeting in this parliamentary session. These recommendations touch on the following areas: the budgetary process, communications, organisation and culture, and knowledge and understanding. We invite the Committee to embed these recommendations as part of its scrutiny processes to guarantee that an intersectional gender perspective is used by Committee members in the way they review Scotland’s public finances. For example, in relation to budgetary processes, it would be important for the Committee to ensure that any existing cumulative and ongoing spending commitments are subject to assessments of equality outcomes, evaluating progress towards both human rights and national outcomes. In relation to the recommendations on organisation and culture, the committee could also seek evidence as to how an equalities and human rights analysis has informed final budget decisions. This would be a key step in ensuring that public finances are being used to drive and deliver fair and just outcomes.

The Scottish Government’s ‘three pillars’ strategic approach to managing finances covers the most important areas to address upcoming financial pressures in the Scottish Budget 2024-2025. Yet, there is an argument to make about the need to use intersectional gender budgeting to increase the effectiveness of the Government’s strategy. As highlighted above, women and men have different lived experiences, which consequently impact on their levels of income and wealth, with women being more likely to be responsible for unpaid care and to experience poverty. Considering these disparities, any decisions and policies resulting from each of the three pillars, particularly in relation to public spending and revenue raising policies, need to examine any potential gendered impacts to avoid increasing inequalities, and/or unequal outcomes. If the Scottish Government is to successfully deliver its objectives, specifically its missions on equality, opportunity and community, it is imperative that intersectional gender budget analysis is embedded as part of the Government’s strategic approach to responding to financial pressures.

The Scottish Women’s Budget Group is supportive of Scotland’s Just Transition to a Net Zero and climate resilient economy and is aware of the opportunities that this transition could bring to communities across the country. Therefore, the SWBG would like to see the Scottish Government prioritising investment in the Just Transition. However, it would be important to consider what capital expenditure covers, and how the Just Transition should include not only projects linked to physical infrastructure, but also those focused on the development of social infrastructure. Furthermore, it is critical to use an Intersectional Gender Budget Analysis to deliver these projects, so equality analysis is embedded in the process.

Following the evidence gathered throughout the past year, the SWBG would like to draw attention to the gendered impacts of public spending and revenue raising policies. We will then analyse what this evidence means from an intersectional perspective, and how it can inform the prioritisation of spending.

Women and men have different lived experiences, which consequently impact on their levels of income and wealth, with women being more likely to experience poverty. This is particularly true for women from Bangladeshi, Pakistani and Black ethnic groups, disabled women, single parents (of which at least 90% are women) (OPFS, 2020), survivors of abuse, unpaid carers, and women with no recourse to public funds (WBG, 2022). Women are also often the shock absorbers of poverty, as they tend to have the main responsibility for the purchase and preparation of food for their children and families and for the management of budgets in poor households (WBG, 2022). It is thus unsurprising to learn about the difficulties encountered by women as they navigate the challenges of the current cost-of-living crisis. Last year’s SWBG and Poverty Alliance research into the experiences of low-income women in Scotland found that these women were taking increasingly challenging decisions to manage the impact of rising costs. These decisions included going without food, reducing or cutting off energy use, taking on more debt, working increasing hours despite impacting on health and becoming increasingly isolated from friends, family and services. Our Women’s Survey 2023 echoed those findings, exposing the implications of higher costs in Scotland and some of the mechanisms that women are currently using to cope with these. Some of the key findings showed us how:

- 23% of women respondents are taking on more debt. This figure rises to 40% for single parents.
- 41% of women stated that they are using their savings to make ends meet.
- The areas with the greatest impact of increased costs for women were energy and food costs with 46.3% of our respondents telling us they are struggling with energy costs and 37.1% with food costs.  For disabled women, these figures are even higher, with 56% and 51% respectively.

An intersectional gendered analysis of these figures makes it obvious that women, especially disabled women and single parents, are at the losing end of the current economic crisis. The Scottish Government must prioritise spending on policies designed to protect women from the effects of inflationary pressures. These must include:

- Widen eligibility for cost-of-living support, also considering the additional costs that disabled people experience
- Mitigate the young parent penalty and the two-child limit through additional payments as part of the Scottish Child Payment.
- Ensure adequate funding for the Scottish Welfare Fund.

Shrinking local budgets also have implications for women’s equality.  Analysis by Audit Scotland has highlighted that revenue funding for local government has not kept pace with other parts of Scottish Government revenue spending. COSLA analysis indicates that there has been a £69.6million cash increase once all national level government commitments are covered. With high inflation rates, increased costs of energy and fuel, increasing demand on some services and higher than anticipated pay rises in 2022/23, this level of cash increase means most local authorities are still struggling to cover costs and sought to make savings within the 2023/24 budget. Local authorities play a key role as service providers of which women depend most, such as Early Learning and Childcare provision, social care services and others. For example, research carried out in North Lanarkshire showed that cuts to environmental services were ‘felt most by women living in poorer neighbourhoods’. Women ended up making most of the requests for environmental services contributing to their invisible ‘third shift’, instead of the council scheduling routinely services as had previously been the case (Audit Scotland, 2023). Local government is also a source of women's paid employment. According to figures from the Women’s Budget Group (2020), 78% of council employees are women. In light of this evidence, Scottish Government should review their approach to local budgets to reach a fair settlement that allows for the continuation of key services for women and guarantees fair pay for local government workers.

In addition to protecting women from the effects of the cost-of-living crisis (particularly those in the groups referenced further above), we would like to see the Scottish Government prioritising investment in care. Scotland’s social care sector is in a critical state and needs urgent investment: services are understaffed (Scottish Social Services Council, 2022) with recruitment and staff retention difficult at current pay levels; (Fair Work Convention, 2019) people are unable to receive the care packages they need; and wider unmet needs are likely to be extensive, resulting in additional caring pressures being pushed towards unpaid carers. Investing in care as critical social infrastructure is central to securing Scotland’s goals of a wellbeing economy, and key to delivering women’s equality and Net Zero targets.

As previously stated, our care cost modelling research found that an increase in social care funding of £3.3bn is vital to realise the ambitions of a transformative scenario which would see:

- Increasing access to free care to those with critical needs and moderate needs.
- Increasing qualifications and pay to Nordic levels, with care workers paid an average of £15.21 per hour.

This scenario assumes that higher take-ups would relieve informal care needs further and eliminate unmet needs.

Most importantly, however, our care cost modelling research draws attention to the potential that investing in care has for revenue generation. For example, it calculates that additional direct and indirect tax revenue would yield an estimated additional £1.5bn annually (or 46% of the estimated additional investment required in the transformative scenario).

In addition to this, investment in care would yield important social benefits in the long-term, especially in the context of an ageing population in Scotland. Demographic spending pressure will increase according to the latest projections of the Scottish Fiscal Commission. Prioritising investment in care would prepare Scotland for the challenges ahead while delivering on Scotland’s Net Zero and Gender Equality targets.

The SWBG would therefore like to see social care funding reach a total £6.8bn to make this transformative scenario a reality.

Regarding funding sources, the way in which revenue is generated also has implications for gender equality. As highlighted in previous consultations, the Government has an obligation under Article 2(1) of the International Convention on Economic, Social and Cultural Rights, in ensuring first, that it has generated the “maximum of its available resources” to fund the realisation of rights through its policy agenda. It is important that the government’s obligation to deliver on Maximum Available Resources is highlighted and reinforced through the budget scrutiny process of all Parliamentary Committees. The RSR indicates that decisions on taxation will be taken at the point that each budget is delivered, which therefore does not give a clear indication as to what the government’s taxation plans are. From this point of view maintaining the current tax policies until 2026-27 does not appear to seek generation of maximum available resources. In Scotland, as across the UK, the unequal taxation of income from wealth and income from work represents a tax break for wealthy men. In order to reach a progressive taxation beyond income tax the Scottish Government could include consideration of land value taxation, revaluation of property to support local tax reform, wealth taxes, pollution taxes and other carbon taxes (including use of powers on Air Departure Tax) and the revenue of the Crown Estates. It will also be vitally important that Scottish Government commitments to a progressive income tax regime are held strong, including by considering the introduction of a new tax band, ensuring those that can afford to contribute more do so to support the financing of our public services.

The Scottish Government can make use of devolved tax levers to raise revenue to fund key policies. Following on from current commitments to a progressive income tax regime, the Scottish Government could explore the introduction of new tax bands. For example, research from STUC (STUC, December 2022) showed that the creation of an additional income tax band for income between £75,000 and £125,140 set at 44% would raise approximately an extra £200m per year. However, achieving a progressive taxation system requires looking at taxation beyond income ensuring that those that can afford to contribute more to support the financing of our public services. Furthermore, in Scotland, as across the UK, the unequal taxation of income from wealth and income from work represents a tax break for wealthy men, which has implications for gender equality. Therefore, the Scottish Government could consider land value taxation, revaluation of property to support local tax reform, wealth taxes, consumption taxes such as a ‘frequent flyer levy’, pollution taxes and other carbon taxes (including use of powers on Air Departure Tax) and the revenue of the Crown Estates.

Improvements to balancing short and long-term financial planning can be made by applying Intersectional Gender Budgeting. By considering the lived realities of women and men in their diversity, that is, recognising how other characteristics such as age, socioeconomic situation, disability, race, ethnicity, religion and rural or urban location can also affect women and men, the Scottish Government can ensure that decisions made in financially challenging scenarios do not entrench inequalities.

The Scottish Government can also make improvements by linking decisions on spend to the National Performance Framework and equality outcomes, clearly stating what results it hopes to achieve, and evaluating the impacts of such decisions against said National Outcomes and gender equality targets.

Likewise, the Scottish Government could address siloed approaches to policy areas, including the National Performance Framework. For example, by jointly evaluating the National Outcomes on Economy and Fair Work and Business, the Scottish Government could look at the intersections between these and the National Outcome on Poverty. Furthermore, there is a wealth of evidence linking poverty and gender inequality due to occupational segregation, low pay and the gender pay gap affecting mostly women. Key to improving financial planning is exposing the links between different policy problems so more appropriate and comprehensive policy responses can be designed and implemented.

The Scottish Government will need to find the necessary funds to match the level of investment required to transform the energy and care sectors, while funding the implementation of policies aimed at delivering the National Outcomes, within a particularly challenging economic environment, that is, with spending pressures from an ageing population and rising costs.

As stated, the Scottish Government can make use of devolved tax levers to raise revenue to fund key policies. Following on from current commitments to a progressive income tax regime, the Scottish Government could explore the introduction of new tax bands. For example, research from STUC (STUC, December 2022) showed that the creation of an additional income tax band for income between £75,000 and £125,140 set at 44% would raise approximately an extra £200m per year. However, achieving a progressive taxation system requires looking at taxation beyond income, ensuring that those that can afford to contribute more to support the financing of our public services. Therefore, the Scottish Government could consider land value taxation, revaluation of property to support local tax reform, wealth taxes, consumption taxes such as a ‘frequent flyer levy’, pollution taxes and other carbon taxes (including use of powers on Air Departure Tax) and the revenue of the Crown Estates.

As per our previous responses, there are several ways in which the Scottish Government can improve transparency in relation to budgetary decisions.

The Resource Spending Review made the commitment to greater transparency in future budget processes through steps such as publication of all Equality Impact Assessments (EQIAs) from the 2023-24 budget processes onwards. This is an important step and must be complimented by ensuring that the process of completing EQIAs includes ongoing monitoring and review to ensure policies have the impact intended. There is a concern that EQIAs can often be retrofitted to the policy process rather than being an integral part of the decision-making process. The Committee has an important role to play in ensuring the Government meets its commitments to transparency and holding Government to account in the forthcoming budget cycle. In this regard, the Committee should:

- Ask the Scottish Government for evidence as to how EQIAs influenced the different revenue allocations in the Budget.
- Ensure that EQIAs include a plan to monitor progress towards intended outcomes,
- Follow up any monitoring reviews planned by the Government and provide feedback.

The Scottish Government has committed to draw on expertise from groups including the Equalities Budget Advisory Group (EBAG) to support consideration on processes going forward. EBAG set out clear recommendations in July 2021 on how to build capacity, knowledge, resource and time to effectively build greater equality analysis into the budget process (EBAG, 2021). A response from Scottish Government is expected soon. Within this process ensuring efforts are made to hear from those who are marginalised and often excluded from such processes is vital. For example, ensuring that disabled women, women from ethnic minority communities, women on low incomes and carers are heard in the public conversation is particularly important from a gendered point of view. Organisations such as the Glasgow Disability Alliance have highlighted the importance of disabled women’s voices and the role of disabled people’s organisations in the formation of policy (Glasgow Disability Alliance, 2022).

Alongside this, how information is presented is crucial. Producing a Citizen’s Budget document annually to provide budget information in a clear, accessible way that links to everyday life would be an important step forward for the Scottish Government and make it a leader within the UK in transparency of budget information. Recent work by the SPiCE unit offers good examples of trying to make budget information more accessible, which range from the detail as to how decisions are made to the format of Budget Documentation. Tracking budget spend once the budget has been delivered is an important step which at present there is a serious lack of public information on. This makes scrutiny and evaluation of budget spend difficult for external organisations or individuals. Transparency could be improved by monitoring spend, particularly by publishing monthly reports showing progress in implementing the budget (OECD, 2002), and how this spend impacts on progress towards Government’s goals, including National Outcomes.

SPiCE also highlights the challenges in making comparisons to previous budgets, which consequently interferes with any potential monitoring of changes in revenue allocations. The complexity of spend in some areas through multiple public bodies contributes to the difficulty in accessing clear information. As part of wider budget scrutiny measures the Committee should look at budget review processes and tracking the impact of spend against national outcomes.