Scots economy ‘to lose £1.6bn’ through welfare cuts

Welfare cuts will take more than £1.6bn a year out of the Scottish economy and hit the poorest parts hardest, according to independent research.

This is equivalent to about £480 a year for every adult of working age – and is highest in Glasgow at £650 a year.

The biggest financial losses are from reforms to incapacity benefits at about £500m a year.

The UK government said the cuts were necessary to make the welfare reform bill sustainable.

Glasgow was found to be affected most, followed by Inverclyde, Dundee and West Dunbartonshire.

The least affected council areas were Shetland, Aberdeenshire and Aberdeen.

The report from Sheffield Hallam University concludes: “The financial losses arising from the reforms will hit the most deprived parts of Scotland hardest.

“Glasgow in particular, but also a number of other older industrial areas, will feel the impact most.

“The loss of benefit income, which is often large, will have knock-on consequences for local spending and thus for local employment, which will in turn add a further twist to the downward spiral.”

The report added: “A key effect of welfare reform will therefore be to widen the gaps in prosperity between the best and worst local economies across Scotland.”

The report says that, although on a par with the British average, the scale of financial loss in Scotland would have been greater if the Scottish government had chosen to pass on the cut to council tax benefit.

‘Deeply contentious’

Professor Steve Fothergill, one of the researchers, said: “Welfare reform is a deeply contentious issue and in documenting the impacts, our report does not attempt to comment on the merits of the reforms.

“However, it is important that the impact on different places is fully exposed because this is a key dimension that is too often overlooked.

“The impact on different places is also one of the yardsticks by which the reforms should be judged.”

The findings were described as “dramatic” by Labour MSP Michael McMahon, convener of Holyrood’s welfare reform committee which commissioned the work.

“Our committee wanted a detailed picture of what would happen on the ground when these reforms were fully implemented,” he said.

“It is obvious to all that the impact is dramatic – and more so in the areas that can least afford it.”

A spokesman for the Scottish government said: “Sheffield Hallam have used the same publicly available data as the Scottish government analysis and reach broadly the same conclusions on the scale of the cuts.

“It is completely unacceptable that hard working people and vulnerable groups will bear the brunt of the UK government’s welfare cuts.”

The UK government said the changes should be taken alongside other measures such as the increasing of the tax threshold.

A spokesman said that overall the measures were necessary and beneficial for the Scottish economy in the long term.

Professor Fothergill is due to appear before the committee when it meets on Tuesday next week.