AN independent Scotland must have a welfare system that is specially designed for this country, which moves on from the mistakes of the current UK system, and which works for all of its citizens.
Those are the principal conclusions of a new report which is part of the Common Weal think tank’s White Paper Project preparing for the second independence referendum.
Entitled Social Security For All Of Us – An Independent Scotland as a Modern Welfare State, the report has been written by Dr Craig Dalzell, head of research for Common Weal.
It suggests the possibility of a Universal Basic Income, a Job Guarantee Scheme, and Negative Income Tax among other recommendations for consideration, but, most pressingly of all, the report states that the “mistakes of the UK’s welfare system cannot be allowed to be replicated in an independent Scotland”.
The report says: “Independence offers Scotland the opportunity to break with the legacy of the UK’s benefit system and institute an entirely new system fit for the modern world.
“Even if minimal changes are intended, it will still be a basic necessity that an independent Scotland review and replace the welfare infrastructure. This means a natural opportunity is presented to design the system so that it is able to implement an entirely new approach.”
Two major new schemes are suggested – a Universal Basic Income (UBI) and a Job Guarantee Scheme (JGS).
The report contains an analysis of the current UK-wide and devolved welfare systems and suggests it will take three years for a transition to a new welfare system which could start as soon as Scotland is fully independent.
It states: “As of the time of writing, only two per cent of Scotland’s annual social security expenditure is devolved to the Scottish Government. This is set to rise to 17 per cent under the terms of the Scotland Act 2016.
“The challenge of splitting a unified welfare system is not entirely comp-arable to the challenge of creating an entirely new one.
“It is anticipated that a transition period of around three years would be required between an independence referendum and formal independence, which would allow the time required to design and implement a Scottish welfare system in time for it to be fully operational at the point of independence.”
The move to a Universal Basic Income is the chief recommendation of the report, but it recognises the associated difficulties: “While the advantages of UBI are tempting and the policy is now being considered at the highest levels of government (including the United Nations) it is still noted that replacing a complex, means-tested system with a simpler, universal one remains challenging.
“Adequate provision must be made to account for any and all cases where the withdrawal of multiple benefits and replacement with UBI leads to a person or household being worse off.”
The report also suggests a Job Guarantee Scheme to sit alongside UBI: “Where many welfare schemes promise, at their core, some form of guaranteed income, an alternative proposal is that of a guaranteed job for any who wish it.
“Under a Job Guarantee Scheme (JGS) the government becomes the employer-of-last-resort and, in effect, replaces welfare schemes such as Jobseeker’s Allowance with an automatic job offer.
The report adds: “It is, however, noted that while a JGS would aim to provide a job for everyone who wishes one, not everyone would necessarily want a job. Those in full-time employment who care for others or who have a disability which precludes them from working would not be part of the JGS. Additionally, a JGS would have to be designed to take account of structural unemployment where the skills of those who wish to work do not match the requirements of the jobs available. This point is particularly important at a time when retraining times for degree-level jobs may take several years.
“A well-designed JGS must also not be allowed to exploit workers in a manner similar to the UK’s Workfare scheme where people were induced to work low skill jobs at below market wages rates under penalty of losing other benefits.”
Negative Income Tax is also considered possible: “A negative income tax provides an automatic tax credit which is proportional to the shortfall between a recipient’s income and a determined ‘threshold’.
“A model is presented whereby this negative income tax offers a credit to anyone earning below the UK Living Wage of £16,500 per year and is tapered such that someone with zero income would receive a tax credit equivalent to the current UK Jobseeker’s Allowance of £3795 per year.” The report concludes: “What’s clear is that ... the mistakes of the UK’s welfare system cannot be allowed to be replicated in an independent Scotland.
“By eliminating the punishment and sanction ideology prevalent in the UK system and investing in a more universal system Scotland can use the opportunity presented by independence to build a social security system which works for all of us.”
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THE KEY POLICIES FROM THE REPORT
Towards a new system
This sentence says it all: “The fact of independence may offer Scotland the opportunity to break with the inertia inherent in simply updating an ongoing system to begin to consider and employ more radical approaches to delivering social security.”
Universal Basic Income
Also known as Citizens’ Income or Unconditional Basic Income, its main attractions are “the redistributive power it holds and its power to reduce or eliminate poverty by providing every citizen with basic means to maintain a decent living regardless of circumstances”.
Job Guarantee Scheme
Though ruled out as a sole replacement for the welfare system as it would necessarily penalise those who are unable to work, a Job Guarantee Scheme would see the government “act as an employer-of-last-resort and the costs of employment would be offset by the displacement of current unemployment benefits and by the increased economic activity induced by the workers spending their salaries”.
Negative Income Tax
It’s an admittedly controversial policy described in the report thus: “The negative income tax operates by deciding some threshold for income below which people receive a tax credit determined by the degree to which their earnings fall below the threshold.”
Nordic Model
In the ratings of how countries are performing economically and in terms of personal happiness, our Nordic cousins do well. They spend more on social expenditure and pay more tax. As the report states: “The countries which approach the higher rankings are the ones which employ the so-called Nordic Model which specifically emphasises income equality and equal opportunities through wide-ranging, universally delivered, government-led policy.”
Who gets benefits?
A tricky question in the current Brexit climate. The report pulls no punches: “While some may find it tempting to restrict the social security to Scottish citizens, this would be to neglect the 16.6 per cent of the population of Scotland who were not born in Scotland (many of whom will be UK and/or EU citizens) ... a Scottish welfare system should seek to ensure that social security can be extended to all residents subject to a minimum term of residency – although this should be kept as short as possible.”
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