SCOTLAND’S economy is missing out on up to £2.4billion a year because of the lasting impact on poverty on people’s prospects, a new report says today.

The failure of successive Scottish and UK governments to tackle the problem was causing “significant harm to individuals, public services and the economy,” it said.

People over the age of 30 who experienced poverty during their childhood have around 25 per cent lower income, and eight times the unemployment rate, than those who didn’t.

This, the report's authors said, meant that between £1.6 and £2.4bn per year, up to 1.5% of Scottish GDP, was “lost due to historic child poverty in Scotland”.

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The paper, which was produced by IPPR Scotland thinktank and the charities Save the Children and the Joseph Rowntree Foundation, also estimated the poorest Scottish households faced a  £2.7bn “financial insecurity gap”, the difference between “where they are and where they need to be”.

This was equivalent to 350,000 households being “short-changed” by an average of £7000 a year by Scottish and UK government policies that failed to deliver an acceptable standard of living through social security, fair work and tackling inequality.

The report said there was a “moral imperative” to tackle poverty and “overwhelming evidence of the scale of harm caused by and resulting from governments’ failure to act”. 

This included people in the most deprived areas dying prematurely at a rate four times higher than those in the richest areas, and a persistent educational attainment gap between pupils from the most and least deprived communities. 

The report also attempted to estimate the impact of poverty on public services. 

Around a fifth, or £2.3bn, of Scottish health board budgets is directed at responding to the impacts of poverty, while around a quarter of a billion pounds is spent each year on dealing with the consequences of poverty in schools.

However, the report’s authors warned that these could be "significant underestimates."

The analysis also pointed to successful policies, such as the 600 hours of free childcare provision in Scotland, which had lifted an estimated 10,000 adults and children out of poverty by boosting parents’ earnings and reducing childcare bills.

The recent expansion to 1,140 hours would mean even more children will benefit, it said.

The lower cost of social housing rent in Scotland relative to private rentals also kept at least 50,000 people out of poverty, saving the UK government around £250m in benefit costs.

Maximising take-up of Universal Credit for those eligible would give people another £1.9bn.

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Philip Whyte, IPPR Scotland director and report co-author, said: “Every child should have a warm, happy home with food on the table and dreams they can pursue – but that’s not the reality for many. Instead, we face a growing backlog of harm, while billions of pounds are lost to the economy each year.

“Despite decades of rhetoric around preventative investment, we still see a vicious cycle of avoidable cost forcing reactive spending but it doesn’t have to be that way.

“We can grasp the opportunity to invest seriously in the things we know work to secure lasting change, and that can be cost effective and good for the economy.

“While we have political consensus to tackle poverty in Scotland, both governments need to go further, faster to the full extent of their powers.

"The prize is great, and the cost of inaction is too high – we quite literally can’t afford not to.”

Claire Telfer, head of Scotland for Save the Children, urged the UK and Scottish Governments to “recalibrate” what they spend to prevent poverty.

She said: “Today’s report shows clearly that beyond the compelling moral case to tackle 

child poverty there lies an economic case for doing more."

Scottish Labour social justice spokesperson Paul O’Kane said “This damning report lays bare the damage Scotland’s shameful poverty levels are doing to our communities and our economy. 

“Rising levels of poverty have caused misery at an individual level and left us all poorer.

“Both of our governments have failed to tackle the scourge of poverty, with the Tories piling pressure on people with their destructive policies and the SNP refusing to use the powers they have to tackle poverty at its root.

“We need to drive up wages and grow our economy across the UK, while taking urgent action here to make housing, childcare and transport in Scotland affordable.”

Scottish Liberal Democrat leader Alex Cole-Hamilton said: “In my time as a youth worker, I saw the stubborn and devastating toll that poverty takes on households, families and communities.  

“Today’s report shows that both our governments are spending billions on cleaning up the symptoms, rather than tackling the root causes and preventing people from being plunged into poverty in the first place.  

“The time for talking shops and ministerial platitudes is at an end. We need decisive and transformational action now.

“Scottish Liberal Democrats would make publicly funded childcare far more flexible for those outside of the labour market, identify and get help to all those who have suffered adverse childhood experiences and kickstart a national insulation programme to ensure everyone has a warm and secure home to call their own.”

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A Scottish Government spokesperson said: “The First Minister has convened an anti-poverty summit earlier this month to inform Scotland’s drive to tackle poverty and inequality.

“Tackling poverty and protecting people from harm is the Scottish Government’s priority.

“That is why both last year and this, we have allocated almost £3 billion to support policies which tackle poverty and protect people during the ongoing cost of living crisis.”

“Most of the key policy levers needed to address the cost-of-living crisis still lie with the UK Government. We continue to urge them to use all the levers at their disposal to tackle this emergency on the scale required.”

A UK Government spokesperson said: “We have helped nearly two million people out of absolute poverty since 2010 and have launched a £94bn support package worth around £3,300 per household to help those most in need.

“This is on top of an unprecedented increase to the National Living Wage, raising benefits by 10.1%, and holding down energy bills.

“Our priority is working with the Scottish Government on the issues that matter to people across Scotland, including growing our economy and helping people with the cost of living.

"This is why we have given an extra £82m to help people in Scotland with essential costs."