Report: more than half a million Scots, including 100,000 children, live in severe poverty

Social Justice Secretary Alex Neil said it was a "disgrace" that so many people were affected.

With the report, which covers the 2012-13 year, citing welfare reforms as a "key factor" in the rise, Mr Neil claimed it was an "unfortunate and inevitable result of the UK Government's failed austerity agenda and welfare cuts that are slashing incomes for some of our poorest households".

People are classed as being in severe poverty if their household income is less than 50% of the UK average - or less than £11,500 in 2012-13.

Meanwhile, extreme poverty is when this is 40% or less of the UK median annual household income - or less than £9,200 in 2012-13

A total of 510,000 individuals - or 10% of the population - were living in severe poverty in 2012-13, the report showed, including 330,000 working-age adults, 100,000 children and 80,000 pensioners.

But when housing costs were factored in, the number facing severe poverty increased to 710,000.

This includes 500,000 who are in extreme poverty after paying their rent or mortgage. A total of 370,000 working-age adults, 90,000 children and 40,000 pensioners were all affected by this.

The report said that the problem of poverty had "deepened in recent years", saying while relative poverty had fallen over the decade from 2002-03, "a greater proportion of households in poverty are now in severe or extreme low income".

It added: "Those in poverty in 2012-13 are more likely to be in extreme low income than in 2002-03.

"This is especially the case after housing costs: in 2012-13, 50% of all people in poverty lived in extreme low income after housing costs, compared with 36% in 2002-03."

Changes in employment were one reason given for the rise in severe and extreme poverty, with the report stating: "There have been decreases in real earned income, a rise in insecure employment (including zero hour contracts) and increases in the numbers in low pay.

"The combination of these factors is likely to increase the numbers living in severe and extreme poverty, and reduce the chances of those in low-paid work to lift their families out of poverty."

Inflation has seen costs rise faster then wages, with this "adding to the pressures being experienced by low-income families".

The research also said that "welfare reform is another key factor", adding: "For low-income working families reliant on benefits and tax credits, cuts combined with changes in eligibility have seen household income decrease in 2012-13."

It warned that more welfare changes are to come, stating: "The majority of the decrease in welfare expenditure is expected to be in the two years to 2015-16.

"Continuous, cumulative real-terms cuts in benefit levels are expected, affecting both working households and households not in employment."

The report concluded: "In short, poverty is changing; work is no longer a guarantee of a life free of poverty; people in poverty face increasing costs; and those in receipt of benefits and tax credits - which of course includes many in work - are finding their incomes squeezed."

Mr Neil said: "With employment increasing and unemployment down, Scotland is outperforming the rest of the UK, yet the statistics show that a job is no longer any guarantee against severe or extreme poverty.

"That's why we opposed cutting in-work tax credits and why the Scottish Government and its agencies are paying the living wage, encouraging other employers to follow suit.

"We have put tackling poverty and inequality at the heart of government, through policies like the council-tax freeze, free prescriptions and expanding childcare provision while we are mitigating the worst of the welfare cuts by replacing income lost through the bedroom tax or council tax benefits cuts.

"That action is making a real difference and we will continue to make the argument for a fairer welfare system."

Campaigners called for more to be done to tackle poverty.

John Dickie, director of the Child Poverty Action Group in Scotland, said: "It is a huge concern that even when progress was being made on child poverty an increasing proportion of children in poverty were living in severe poverty.

"Worse still it is those families with the lowest incomes that are most vulnerable to the cuts in benefits and tax credits that are forecast to lead to massive increases in child poverty in the next few years."

He added: "There is absolutely nothing inevitable about these levels of poverty.

"They are the result of political and economic decisions to tolerate low pay and insecurity at work, and to cut the child benefits and tax credits that families both in and out of work rely on.

"We need to see politicians and employers at every level make different decisions, prioritise support for families and make work pay.

"The UK Government must restore the value of child and family benefits as a matter of urgency and take a far more assertive approach to increasing the national minimum wage.

"Here in Scotland we need to promote decent pay, act to keep housing costs down and use all the powers at the disposal of local and national government to boost support for families and cut the costs they face."

Alison Watson, deputy director of housing charity Shelter Scotland, said: "People across Scotland are being battered by a perfect storm of welfare reforms, stagnant wages, high utility bills, higher living costs and job insecurity. For many, the safety and security of home is under threat like never before.

"The high cost of housing is driving many more households into severe or extreme poverty, compounding their hardship.

"It's time to put housing at the very heart of the political agenda in Scotland to ensure that everyone has access to a safe, secure and affordable home.

"We need to build at least 10,000 new homes for social rent and look to reform the growing private rented sector if we are to meaningfully tackle Scotland's housing crisis and begin to address one of the core reasons behind widespread poverty which is bringing misery to thousands of families and individuals across the country."