Common Weal outlines a new social security system for an independent Scotland

New policy paper proposes a Universal Basic Income, a Job Guarantee Scheme, a Negative Income Tax and moves towards the ‘Nordic Model’.

COMMON WEAL today published a policy paper detailing new proposals for Scotland’s social security system in an independant Scotland.

The paper is written by Common Weal’s head of research Dr Craig Dalzell and released as part of the think tank’s White Paper Project, the mandate of which is to lay the groundwork for any future Scottish independence referendum.

The paper – entitled ‘Social Security for All of Us - an Independent Scotland as a Modern Welfare State’ - suggests several radical breaks with the British state orthodoxy on welfare.

It also addresses long-standing unionist criticisms of prior pro-independence arguments relating to social security.

“Mistakes of the UK’s welfare system cannot be allowed to be replicated in Scotland” ‘Social Security for All of Us – an Independent Scotland as a Modern Welfare State’

Even in the wake of recent new powers for the Scottish Parliament, matters of social security remain largely reserved to Westminster, with only seventeen per cent of Scotland’s annual social security expenditure devolved under the terms of the Scotland Act 2016.

Stating that the “mistakes of the UK’s welfare system cannot be allowed to be replicated in Scotland”, the paper further argues that independence would provide Scotland with an opportunity to fashion a new system fitted for the modern world, which better addresses the needs of the Scottish people in general and the vulnerable in particular.

“Scotland should be able to build something better which works for all of us. Independence offers us an opportunity to do this.” Dr Craig Dalzell, Common Weal head of research

Writing in today’s edition of the National newspaper, Dr Dalzell writes: “People who receive social security payments are being increasingly marginalised as “scroungers” or worse. All this in the name of the austerity we’re told we need to endure in order to pay for the failure of banks more than a decade ago.

“Scotland needn’t accept this. Scotland should be able to build something better which works for all of us. Independence offers us an opportunity to do this.”

Below, CommonSpace offers a summary of some of the paper’s key policy proposals.

Universal Basic Income

The idea of a Universal Basic Income (UBI), also known as a Citizens Income or Unconditional Basic Income, has been much discussed in recent years, and has received nominal endorsements from across the political spectrum, from socialists who see it as a first step towards a more egalitarian economic system, to libertarians who believe it would eliminate much of the bureaucracy and individual benefits necessary under most existing welfare states.

‘Social Security for All of Us’ argues that while variations on UBI have been supported in the past by both elements of the Left and the Right, “it must be acknowledged that the rationale behind such support is often mutually exclusive.”

The Common Weal paper pays particular attention to the lessons of MINCOME, a pilot study put into action in Manitoba, Canada between 1974 and 1975, which resulted in demonstrable and significant reductions in overall poverty, as well as reductions in illness and hospitalisations and an increase in mental health and wellbeing.

“The gross cost of granting such a UBI to all Scottish residents would be approximately £24,547 million per year but approximately £16,600 million of this cost would be met by the displacement of relevant existing benefits leaving £7,780 million to be found from additional sources.” ‘Social Security for All of Us – an Independent Scotland as a Modern Welfare State’

As an example of the various models of UBI an independent Scotland could conceivably employ, Common Weal presents a “revenue neutral” UBI scheme in which three age-based tiers are created: for children (£3,484.50 per year), working age adults (£3,801.20 per year) and pensioners (£8,091.20 per year).

Dalzell writes in the paper: “The gross cost of granting such a UBI to all Scottish residents would be approximately £24,547 million per year but approximately £16,600 million of this cost would be met by the displacement of relevant existing benefits leaving £7,780 million to be found from additional sources.

“To meet this amount, a change to income tax and National Insurance Contributions which takes into account the automatic increase in income for everyone results in a society in which income is more equally redistributed compared to present but also one in which a majority of Scottish households are better off.”

Writing in the National, Dalzell argues that under the proposed UBI scheme, “some four-fifths of households would be better off under this system.”

The ‘Nordic Model’

A desire to emulate the so-called ‘Nordic Model’ of social security has been a consistent theme of pro-independence discourse since before the 2014 independence referendum. Right-wing and unionist opponents of the case for independence have often criticised this idea, based on the difficulty of emulating Nordic welfare policies while maintaining UK levels of taxation.

“If Scotland were able to increase tax revenue from the current 34% of GDP to the Nordic average of 43% of GDP, this would represent an additional £13.7 billion per year in revenue.” ‘Social Security for All of Us – an Independent Scotland as a Modern Welfare State’

The policy paper addresses such concerns plainly: “If Scotland were to increase health and social care spending to the equivalent percentage of GDP of that spent in Finland then it would represent an additional £8.2 billion worth of spending per year. The Nordic countries also raise a comparatively high level of tax revenue as a percentage of GDP. If Scotland were able to increase tax revenue from the current 34% of GDP to the Nordic average of 43% of GDP, this would represent an additional £13.7 billion per year in revenue.”

Job Guarantee Scheme

Under the proposed Job Guarantee Scheme, the government would become an “employer of last resort” for all Scottish citizens, and thus effectively replace benefits such as the Jobseekers Allowance with an automatic offer of employment.

“The benefit of this scheme is a reduction in long term frictional unemployment and the ability for the government to specifically target employment sectors or deprived geographic areas,” writes Dalzell in the policy paper. “It would have the effect of providing a floor for wages and job conditions in the private sector (as those who were unhappy with their conditions or were receiving lower pay could quit their job in favour of one from the JGS).”

However, the policy paper rules out the Job Guarantee Scheme replacing the welfare system entirely, as it would unfairly penalise those who are, for whatever reason, unable to work.

Negative Income Tax

Another policy that has, in various forms, received endorsements from across the political spectrum – even from the famously right-wing monetarist economist Milton Friedman – the proposal for a Negative Income Tax, which the National describes as “admittedly controversial”, would provide an automatic tax credit proportional to the shortfall become an individual’s income and a pre-set threshold.

The specific model outlined in the policy paper’s executive summary would offer “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 £3,795 per year.”

However, the paper acknowledges, should it be applied under a poorly designed version of the system proposed, that “the negative income tax maintains a strong link between the concept of earnings and work as well as reinforces the idea of someone being either a net “contributor” or a net “recipient” of the welfare system which may prove undesirable depending on political outlook.”

Social Security for Immigrants and Asylum Seekers

In a combative take on the political environment engendered by Brexit and policies towards immigrants and asylum seekers under recent UK governments, the report argues that, in creating a new system, the Scottish government, particularly in the event of independence, should seek to undo the “hostile environment” it claims the current UK government has actively attempted to create towards asylum seekers.

“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).” ‘Social Security for All of Us – an Independent Scotland as a Modern Welfare State’

“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),” the paper says.

“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.”

Picture courtesy of Common Weal

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Comments

MauriceBishop

Wed, 08/16/2017 - 18:44

"If Scotland were able to increase tax revenue from the current 34% of GDP to the Nordic average of 43% of GDP, this would represent an additional £13.7 billion per year in revenue."

Possibly. Or possibly not. A proper economic model would incorporate assumptions that some currently-taxable activities or entities might decrease in scale or leave the jurisdiction if the tax burden changes.

Also, post-independence Scotland will have to:
1) create a replacement for Sterling
2) finance the existing services that are currently funded through the Barnett formula
3) pay for all the new apparatus of state that will have to be built. As a reminder, Nicola Sturgeon wrote that the transfer of just one portion of the new powers to Scotland from DWP would create set up costs "between £400m-£660m".

So how much is left over for welfare spending after accounting for all the billions that have to spent just to get us back to where we were before independence?

DaveS

Thu, 08/17/2017 - 11:54

Aye Maurice, Scotland, uniquely, can't afford to become independent...

Remind me again of the size of Norway's oil fund.

MauriceBishop

Thu, 08/17/2017 - 15:14

@DaveS

It is the separatists who argue that Scotland is unique. I argue that the basic principles of economics apply everywhere, because at its core, economics is a study of human behaviour.

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