22nd September 2026
Two new reports published in Scotland have put the spotlight on a question that is becoming increasingly important as government budgets come under pressure. Who actually benefits from the money spent on tackling poverty and reducing the cost of living?
A new analysis by the Fraser of Allander Institute (FAI), prepared for the Poverty and Inequality Commission, examines the distributional impact of Scotland's Cost of Living Guarantee. Alongside it, the Poverty and Inequality Commission has published a report looking at the wider question of universal and targeted approaches to tackling poverty.
Taken together, they provide a useful examination of one of the central issues facing Scottish Government spending.
Scotland's Cost of Living Guarantee includes a mixture of universal and more targeted measures. These include free prescriptions, free eye tests, free bus travel, free undergraduate tuition and free school meals, alongside funded childcare, the Scottish income tax system and Pension Age Winter Heating Payment.
The FAI found that there is surprisingly little independent analysis showing exactly where the benefits of these policies go.
There is reasonably good evidence for some measures, particularly income tax, funded childcare and Pension Age Winter Heating Payment. But for five other parts of the Cost of Living Guarantee, the evidence on their distributional effects has been described as partial or non-existent. The FAI set out to fill some of those gaps.
The results are more complicated than a simple division between policies that help the poor and policies that do not.
Free school meals, free bus travel and funded childcare generally provide greater benefits to lower-income households than higher-income households. Some of this is because the policies contain elements of targeting, but there is another important factor. Families with children are more likely to have lower incomes than households without children.
That creates an interesting complication. The very poorest households are also less likely to have children, meaning that some policies aimed at supporting families can provide greater benefits to households that are relatively poor without necessarily reaching the very poorest households to the greatest extent.
Free prescriptions and free eye tests are different. Because they are not means-tested and are not restricted to particular income groups, the FAI found that their benefits tend to be distributed relatively evenly across household incomes.
There are also significant differences between types of household.
Households with three or more children generally receive greater benefits in cash terms from the measures examined, although there are exceptions for free undergraduate tuition and free prescriptions. Lone-parent households tend to receive greater benefits when the value of support is measured as a percentage of their income.
Households with children under one generally benefit less than other households with children, although funded childcare is a partial exception. The researchers were unable to provide reliable analysis for two of the Scottish Government's child-poverty priority groups, young mothers and minority ethnic families, because the available sample sizes were too small.
Universal or targeted?
This leads directly into the second report from the Poverty and Inequality Commission.
The Commission argues that universal and targeted benefits should not simply be treated as opposing alternatives. They can serve different purposes.
Universal services have some obvious advantages. They can reach people who might otherwise fail to claim support, avoid the stigma sometimes associated with means-tested benefits and be simpler to administer.
They can also help people whose circumstances change. Someone may be just above a means-tested threshold today but find themselves struggling tomorrow.
The disadvantage is cost. Providing a benefit or service to everybody inevitably means that some of the money goes to households who are not experiencing poverty. At a time when public spending is under considerable pressure, that becomes an important consideration.
Targeted support works differently. In principle, more of the available money can be directed towards people with the greatest financial need.
But targeting brings its own problems. It can make systems more complicated, increase administration and result in people who are entitled to help failing to receive it.
The Poverty and Inequality Commission therefore says the question should be considered case by case, looking at the purpose of a particular policy, who benefits, its overall cost and how effectively it achieves its objective.
This is an important distinction because "universal" does not automatically mean that everyone benefits equally in practical terms.
A free service may be worth considerably more to a low-income household than to a wealthy household. At the same time, a universal service can consume considerable public money that might otherwise have been used for more concentrated assistance.
The FAI research demonstrates another complication. The way the figures are presented can change the picture.
If the benefit is expressed in pounds, a policy may provide similar benefits to households across the income distribution. But if it is expressed as a percentage of household income, the same payment can appear considerably more significant to a poorer household.
The FAI therefore warns against relying on a single measure to decide whether a policy is progressive or regressive. Distributional analysis can show where public money goes, but it cannot by itself determine whether that distribution is desirable. That becomes a political and policy question.
The Scottish dilemma
This matters because Scotland is entering a period when choices about public spending are becoming harder.
The Scottish Government has built a distinctive collection of universal services alongside targeted benefits. The argument for this approach is partly that public services such as free prescriptions, free tuition and free travel form part of a wider social contract.
But the financial question does not disappear simply because a service is popular.
The Scottish Parliament's own scrutiny of the 2026-27 budget has highlighted the same tension. Evidence to the Social Justice and Social Security Committee identified the advantages of universal benefits, including take-up, reduced stigma and administrative simplicity, while also identifying their greater cost and the possibility that resources are spread among people who do not need financial help.
Targeted benefits, meanwhile, can concentrate resources on people with the greatest needs but can be more complicated and can miss some people who need support.
The Commission's approach is therefore not simply to choose one side. It refers to proportionate universalism, where universal and targeted approaches can sit along a spectrum rather than being treated as an either-or choice.
That may become increasingly important as Scotland considers how to maintain services while controlling expenditure.
There is also a wider point here for taxpayers. The debate about poverty is often presented in terms of how much money is being spent. The new analysis suggests that an equally important question is where that money ends up and what it achieves.
A universal policy can be valuable even when it does not disproportionately benefit the poorest households. A targeted policy can concentrate resources more effectively but may be harder to administer and may exclude people just outside an eligibility threshold.
Neither approach is cost-free.
The Fraser of Allander Institute concludes that Scotland needs much more distributional analysis of government spending. At present, much of this work is carried out within government itself, making independent scrutiny more difficult.
That may be one of the most important messages from these two reports.
The argument over poverty policy is unlikely to be settled simply by saying that Scotland should have more universal benefits or more targeted ones. The harder question is whether each individual policy is reaching the people it is intended to help, at a cost that can be sustained, and whether it is actually achieving its purpose.
As Scottish budgets become tighter, those questions are likely to become much more important.
Fraser of Allender - 21 September 2026
Who benefits from the Cost of Living Guarantee?
Poverty and Inequality Commission
Universal and Targeted Approaches to Tackling Poverty: Key Messages from the Poverty and Inequality Commission