Dr. Nicola McEwen, University of Edinburgh

Writing at The Guardian, Nicola McEwen reflects on whether welfare in an independent Scotland would be more fair.

At its height, the welfare state was a symbol of nationhood and solidarity that helped Scots to feel at home in Britain. Nowadays, much of the core welfare state functions have been devolved to the Scottish Parliament. The one that remains at Westminster – social security – is taking a battering.

UK welfare reform has helped to make welfare and ‘fairness’ a central feature of the independence referendum. For the Scottish Government, independence would mean having the power to create a more equal society. But how distinctive would an independent Scottish welfare state be?

Not very, if we look to last year’s report by the Expert Working Group on Welfare. It recommended Scottish/rUK co-operation to deliver pensions and benefits for a transitional period to avoid any disruption in benefit pay-outs. The report also pointed to the complex arrangements for delivering pensions and benefits: most – though not all – benefits paid to Scots are processed in Scotland, but these DWP offices also process payments for claimants in the north of England, Yorkshire and London. Sharing service delivery would limit the scope for the two governments’ policies to diverge.

The independence White Paper hinted at more radical change. It included a commitment to immediately scrap the bedroom tax and halt the roll-out of universal credit and PIPs, pending the design and implementation of a new system of social protection. The expert group will set out its welfare vision this spring. Expect it to look more Nordic than British.

Change, however, won’t come easy. Independence would not be a ‘year zero’. Scotland would inherit existing institutions and services. These come with vested interests and modes of operation that can stymie change. Shifting resources from one group to another is always difficult politically, especially since rUK would remain Scotland’s main point of reference. The pressure would be for all Scottish public services and benefits to be at least on a par with those in England, if not more generous.

Scottish policy choices would also be constrained by the demographic and economic pressures that have made social protection the highest proportion of government expenditure across Europe. It’s far from clear that the Scottish government would have the fiscal resources and policy freedom to match its welfare ambition.

Richard Parry, University of Edinburgh

Richard Parry addresses the evolution of Scottish welfare policy, noting that ‘it is clear that UK welfare reform policy has had the unintended effect of knocking social protection like a curling stone into the house of Scottish-driven policy debate’

At the heart of the devolution settlement of 1997 was the distinction between policies devolved to the Scottish Parliament and Government and those reserved to the UK level, which include income transfers between the citizen and the state.  This constrains the devolved system, but also gives a convenient excuse for not taking a position on contested  issues. Above all, there is no need to finance entitlement-based pensions and benefits whose cost might pre-empt on other public services.

Even before the referendum campaign, the fencing-off of pensions and benefits, hitherto neither defined by separate Scottish legislation nor even a distinct Scottish delivery system, was breaking down. The UK Welfare Reform Act 2012 imposed controversial policies interfacing with devolved areas – in housing, the spare room subsidy or bedroom tax (phrases that define the difference between the designers and recipients of policy); in social care, the Personal Independence Payments that replace Disability Living Allowance; and, in the overall system, Universal Credit, the kind of reckless, over-ambitious big idea about which the Scottish devolved system has been cautious.

Any earlier SNP thoughts that this might be handled passively as part of benefit simplification were swept aside by the insistence of anti-poverty groups that the Scottish Government use its powers to resist the Act. No Legislative Consent Order was proposed; a separate Scottish Act granted the order-making powers consequential on the UK Act; and a Welfare Reform Committee of the Scottish Parliament has been set up. There was keen interest in the manoeuverings of the Northern Ireland Executive to resist the bedroom tax and exploit the long-standing devolution of social security to Northern Ireland within  a parity of approach with the UK. Funding now passed in the Scottish Budget for 2014-15 will use devolved money to mitigate the effects of the bedroom tax rules.

Scotland’s Future makes it clear that an independent Scotland would call a halt to the concept of Universal Credit and the incorporation of Housing Benefit within it. Just as in health, the approach would seek to perpetuate traditional UK welfare state concepts better than England.  Ironically, the SNP’s promise to perpetuate the ‘triple lock’ on pension increases was subsequently endorsed by UK party leaders. Although the present 1% UK cap on annual increases in working-age benefits and (from 2014) child benefit and housing benefit will run out in 2016, the SNP would again take a jump in favour of generosity by promising to ‘ensure that benefits and tax credits increase in line with inflation’ (p159).  David Phillips’s work for the Institute for Fiscal Studies suggests that any generalized case that benefit payments are a drain on the UK at the moment, or on the finances of an independent Scotland,  is decreasingly true.

Beyond a ‘preserve and defend’ strategy, the Scottish Government has started to articulate its own vision of welfare through its response to the Expert Working Group on Welfare it set up.  This response reflects the lack of a Scottish tradition of debate and philosophy on social protection similar to that in health, education and housing. The debate will take time to crystallise; a second Expert Group has been at work and there is interest in the definition of distinctive themes of Scottish welfare system, more joined-up, inclusive and vaguely ‘Nordic’ in character.

All policy is incremental, and it will be difficult to make a rapid impact in terms of substance; the bedroom tax is a warning of the dangers of making any recipients instantly worse off.  But whatever the referendum result, it is clear that UK welfare reform policy has had the unintended effect of knocking social protection like a curling stone into the house of Scottish-driven policy debate.

Join a panel of welfare experts, organisations and MSPs to discuss the issues of the welfare system, examining what could happen in the event of a yes or a no vote in 2014.

• Mary Kinninmonth, Citizens Advice Bureau
• John Dickie – Child Action Poverty Group
• Michael McMahon MSP
• Shona Robison MSP
• Nicola McEwen, University of Edinburgh
• Susan Dalgety, Chair

Tickets are available online, or at the Central Library reception.

http://5mqwelfaredebate.eventbrite.co.uk

The Academy of Government, in Association with the Fabian Society, is hosting a Scottish Fabian Seminar.

Speakers include:

• Sheila Gilmore, MP
• Dave Moxham, Chair, STUC
• Dr Ingela Nauman, Senior Lecturer, Social Policy

When it comes to welfare & the constitutional debate a great number of questions are yet to be answered. How can we address poverty & deprivation in a modern & progressive Scotland, ensuring the rights of working people are adequately protected in the tumultuous economic climate? Could the post referendum landscape see us doing things differently? Do our attitudes to welfare as a society in Scotland really differ from those south of the border?

Dr. Nicola McEwen, Academy of Government

Nicola McEwen addresses the implications of independence on welfare provisions and reforms, and notes that shared service agreements recommended in the post-independence transition period might limit the degree of differentiation between the system of Scotland and the rest of the UK. 

Welfare reform has been a key focus of the campaign for Scottish independence. YES campaigners see the UK government’s welfare reforms – symbolised by the bedroom tax – as symbolic of all that is wrong with the Union, and an opportunity to mobilise support for independence.

And yet, the report of the independent Expert Working Group on Welfare raises questions about how different a Scottish welfare system under independence might be, at least in the early years. The report recommended that the Scottish and UK governments work together, in the spirit of the Edinburgh agreement, to deliver pensions and benefits on a shared arrangement basis for a transitional period.

The rationale underpinning the recommendation is sound. The bodies delivering public pensions and benefits are all under the control of the UK government, but they are scattered across the UK. Most – though not all – benefits applied for by Scots are processed in Scotland. But offices in Scotland also provide this service to claimants in England. The Child Maintenance Service, based in Falkirk, processes applications for the north-east of England. Scottish-based DWP centres deliver working age benefits for applicants in Yorkshire, the North West of England and London. There are clear advantages – in terms of continuity of service to those dependent on welfare benefits and job security for those who deliver them – to shared service agreements even after independence.

But this would surely come at a price. Put simply, the greater the interdependencies and continuities, the less scope there is for doing things differently. Social security may be delivered across the UK, but the system itself is deeply integrated. Corporate functions and IT systems are managed centrally. Service delivery is dependent upon an integrated payment and accounting system run by the UK Department for Works and Pensions. This core engine at the heart of the system calculates benefit entitlements based upon a UK policy framework.

Such a system can accommodate relatively minor modifications, as in Northern Ireland. Social security is devolved in Northern Ireland, but it conforms closely to the system designed for the rest of the UK. This is linked to the pre-occupation with maintaining parity in entitlements, and retaining the Treasury subvention that comes with it. But the UK government’s welfare reforms have provoked debate about how far Northern Ireland can go its own way. Intergovernmental agreement will permit special arrangements around the delivery of payments – for example, to split payments within a household, provide bi-monthly payments, or payments direct to landlords. Even these minor changes require the design of a separate IT system for Northern Ireland to intercept with the core system once entitlements are calculated.

The Expert Working Group suggested that shared arrangements should be capable of accommodating any preliminary policy changes a Scottish government might want to introduce. But beyond tweaking the template, as in Northern Ireland, it is not at all clear how this might be achieved. How, for example, would the removal of the under-occupancy penalty on housing benefit – the bedroom tax – affect the maintenance of an integrated system of processing and delivery? In practical terms, it would be extremely difficult to share the administration and delivery of services in the context of markedly different entitlements north and south of the border.

Shared arrangements for delivering benefits might be sensible in the short term, but independence ought to provide an opportunity to do things differently. The challenge facing the Scottish government is to present a vision of a new welfare system for Scotland’s future.

Dr Nicola McEwen is Director of Public Policy at the Academy of Government, University of Edinburgh, and ESRC Senior Scotland Fellow. Her ESRC fellowship explores the opportunities and constraints of shared services and cross-border intergovernmental arrangements under independence. This piece was originally published in the 12 June 2013 edition of The Scotsman.      

Dr. Nicola McEwen, Academy of Government

Dr Nicola McEwen, ESRC Senior Scotland Fellow, reflects on the welfare turn in the independence debate. She raises doubts about the prospects that the bedroom tax can play as important a role as the poll tax in the campaign for greater Scottish self government.

The issue of welfare reform has taken centre stage in the campaign for Scottish independence. YES campaigners clearly regard it is a symbol of all that is wrong with the Union, and an opportunity to mobilise support for independence.

The UK government’s welfare reforms span a wide range of social security measures which streamline the tax and benefit system, restrict benefit entitlement and cut the real terms value of many benefits. But the so-called ‘bedroom tax’ has assumed a symbolic significance in the debate. From 1 April, it imposes a financial penalty for under-occupancy on housing benefit claimants living in the social rented sector, by withdrawing 14% of housing benefit for one extra bedroom and 25% for two or more. In her speech to the SNP’s spring conference, the Deputy First Minister, Nicola Sturgeon, described it as ‘one of the worst policies introduced in Scotland since the poll tax.’

The welfare turn in the independence debate today is certainly reminiscent of the symbolic role played by the poll tax in the campaign for a Scottish Parliament in the late 1980s and 1990s. Introduced to Scotland by Mrs Thatcher’s government in 1989 – a year earlier than in England and Wales – the community charge, as it was officially named, was a replacement for domestic property rates. The tax rate was set by local authorities and was intended to make them directly accountable to taxpayers for the services and infrastructures they provided. But as a flat rate tax levied on individuals, it had profoundly regressive implications, sparked mass non-payment campaigns, and was replaced by the council tax in 1993. Yet, even years after it was abolished, the poll tax still featured in the 1997 devolution referendum, and was used effectively by Scotland Forward, the official YES YES campaign, as a symbol to reinforce the need for Scottish self government.

Can the bedroom tax – and welfare reform more generally – be the game-changer that might shift opinion towards a YES vote in the 2014 referendum? YES campaigners clearly think so, and miss few opportunities to highlight the inequities of UK welfare reform in contrast to the promise of a fairer, more socially just, Scotland after independence.

They may be right. Welfare state institutions and services have been utilised as tools in nationalist politics before, with some success – a phenomenon I described in my research as welfare state nationalism. Welfare retrenchment weakens the ties that bind citizens to the state, and can reduce the feelings of risk associated with constitutional change and independence.

In the Québec referendum in 1995, which saw the YES side defeated by the narrowest of margins, pro-independence campaigners contrasted the welfare retrenchment and deficit-reduction policies of the then Canadian federal government with their projet de société – a vision of a more socially progressive, independent Quebec. In Scotland, too, the defence of a social democratic welfare state – and the feeling that it was under attack during the years of Conservative rule – was not just a key feature of the campaign for a Scottish Parliament. Surveys taken after the devolution referendum revealed that the YES majority was in part a result of high expectations that the parliament would deliver better public services and a fairer society.

There is no doubt that the welfare reforms of the current government are creating deep unease within large sections of civil society, especially those bodies who work most closely with the communities and citizens most affected by the changes. Public opposition, too, was evident in the weekend protest marches. But, whether this unease can shift opinion towards independence is more questionable, for several reasons.

First, the experience of devolution may have diminished confidence that constitutional change alone can transform society. At the time of the referendum in 1997, expectations of what devolution could deliver were very high, but successive Scottish Social Attitudes Surveys since then reveal a less rosy picture. While few believe that things are worse, most Scots appear to believe that the parliament has made little difference to the quality of health, education and the economy, for example.

Second, in the devolution campaign, there was a broad consensus among those on the social democratic left that social democracy and self-government went hand in hand. This was reinforced by the feeling of injustice created by the early introduction of the poll tax in Scotland. There is no distinctively Scottish dimension to the welfare reforms of today. Nor is there a social democratic consensus for constitutional change; those defending a social democratic welfare state today span the YES and NO campaigns. The UK General Election will be less than eight months after the referendum, and we might expect the Labour Party to have stepped up its critique of UK welfare reforms. Their main focus will be a change of government at Westminster, not a change in the constitutional status of Scotland.

Third, Scottish policy choices in an independent Scotland might be underpinned by a distinctive set of values and priorities, but they would still be constrained  by many of the pressures that have contributed to rising social security costs across many countries. Within the EU, social protection accounts for the highest proportion of government expenditure, followed by health and general public services. These costs are fuelled by an ageing population, economic pressures, and higher expectations and costs of providing public services, often coupled with a reluctance to pay higher taxes that might contribute towards meeting these pressures. It is reasonable to assume that any party elected to govern an independent Scotland would want to contain the extent to which social welfare services consume available budgets.

Of course, change can be achieved in ways that don’t necessarily involve more spending, and there are interesting debates within civil society about the opportunities self government would create, for example, in giving greater opportunities for preventative spending as recommended by the Christie Commission.

But change will not be easy, and nor would an independent Scotland begin with a ‘clean sheet of paper’, as suggested by Blair Jenkins, Yes Scotland Chief Executive, in a recent article in Scotland on Sunday. Institutions and practices have a way of becoming embedded, often generating powerful interests in favour of continuity over change. The rest of the UK – and England in particular – will remain a reference point for Scotland with or without independence. A desire for welfare services and benefits to be at least as good as those south of the border could also militate against change.

Finally, the SNP government’s vision of independence sees it developing alongside a continued common labour market and common travel area, allowing for the free movement of people and services. These commonalities would have implications for a range of policies, including social security provision, pensions, employment and labour market regulation. An independent Scotland might not have the bedroom tax, but there would be other continuities in the welfare system. There is a likelihood, too, that the independence proposals will include some shared arrangements with the UK government over the delivery – if not the design – of some benefits.

The greater the interdependencies and continuities, the less scope there may be for doing things differently, even with political independence. The degree to which such continuities are envisaged in the arena of social security and welfare awaits further details, but this could pose a further constraint on the likelihood that UK welfare reform may be the game-changer in the referendum campaign that advocates of independence hope it will be.

Dr Nicola McEwen is Director of Public Policy at the Academy of Government, and ESRC Senior Scotland Fellow. She is undertaking a research fellowship, entitled ‘Between autonomy and interdependence: Scottish independence and intergovernmental co-ordination’, as part of the ESRC Future of the UK and Scotland programme.

Dr. David Bell, University of Stirling

This post by the University of Stirling’s Dr. David Bell looks at the future costs of State Pensions in Scotland. Dr. Bell argues that given today’s revelations about the Scottish Government’s leaked paper, this is perhaps a useful time to look at some of the facts. This was originally posted at Dr. Bell’s The Scottish Economy and Constitutional Change blog.

The figure below shows projected numbers of pensioners in the constituent countries of the UK looking forward to 2060 indexed on 2010=100  (Source: ONS). Growth in pensioner numbers is slower in Scotland than in England, partly reflecting an assumption that Scots will continue to have lower life expectancy.  Nevertheless, the number of Scots pensioners will increase by 80 per cent between 2010 and 2060, with most of the increase concentrated in the 2010-2035 period.

Figure: Indexed Number of Pensioners: Scotland, England, Wales and Northern Ireland 2010-2060

If Scotland acquires new fiscal responsibilities, including control over welfare benefits, there will be a need to raise revenues to meet the increased costs of state pensions. These will have to be derived from the economic activity of the working age population. Retirement ages are set to increase gradually during the next two decades. Nevertheless, meeting the costs of welfare entitlements for older people will require a return to consistent patterns of economic growth if substantial increases in the tax burden are to be avoided.

To illustrate this, the next figure shows a projection of the costs of older people’s benefits in Scotland measured as a share of GDP over the period 2010 to 2060. This is based on the OBR forecast of the future costs of older people’s benefits [1] in the UK as a whole.  The projection for Scotland is based on the assumption that costs will largely be determined by Scotland’s share of UK pensioners.  If economic performance in Scotland follows that assumed by the OBR for the UK as a whole, and, in particular, worker productivity grows at 2.2 per cent per annum for the period to 2060, then the share of older people’s benefits in GDP would be broadly as shown in Figure 8.

The projection shows pensioner benefits falling as a share of GDP until 2020 and then rising. The reason for the dip during this decade is mainly due to the increase in retirement ages, particularly for women. Thereafter costs trend upward with increasing numbers of pensioners, though they dip after 2040 due to a further projected increase in the retirement age. Another key assumption that affects disability benefits (and also health spending though this is not included in these projections) is that of healthy life expectancy (expected years of disability free life). The OBR assumption is that healthy life expectancy will grow in line with life expectancy at age 65. This assumption is therefore implicit in the projections for Scotland, although, given the earlier discussion of its higher incidence of disability, significant improvement in healthy life expectancy poses a particular challenge for Scotland.

While state pensions dominate benefit payments for older people, other benefits such as AA, DLA and WFP also contribute to the total cost. Their relative contribution is expected to decline over time due to their value being uprated in line with CPI, rather than with the “triple-guarantee [2]” which will apply to state pensions.

Figure: Projected Costs of Older People’s Benefits as a Share of GDP Scotland: 2010-2060

Figure: Share of Old Age Pensions in GDP if Annual Productivity Growth Reduced by 0.5 per cent

Another critical assumption on the OBR projection is that of consistent productivity growth of 2.2 per cent per annum. A fall in this growth rate would place increased pressure on the public finances. For example, a reduction of 0.5 per cent per annum substantially increases the share of GDP devoted to older people’s benefits (see Figure 9). The lower (dashed) line replicates the central OBR assumption of 2.2 per cent productivity growth, while the upper (continuous) line assumes 1.7 per cent growth. This increases the share of GDP going to older people’s benefits by almost 1 per cent by 2035.

Robin McAlpine, Jimmy Reid Foundation

As part of our series on social welfare and the independence referendum, Robin McApline, Director of the Jimmy Reid Foundation, welcomes that the referendum is focusing attention on prevailing levels of poverty and inequality in Scotland and the UK, and urges both sides to put social justice at the heart of their campaign.

Nothing allows daylight to flood in quite like opening the curtains. Time spent in an enclosed space with your eyes focussed on a point away from the outside world affects your vision. Things seem duller, perspective and dimensionality are lost.

And so it is that the independence debate has refocused minds on the question of social democracy and what it means. This is not to grant one side or another in the debate credit with changing the perspective alone; but by starting to think about the possibility of a social order which isn’t only informed by the British (and US) social model has forced everyone to clarify their vision.

Why is this so? Because Britain is a surprisingly parochial country when it comes to sources of inspiration and measures against which to assess ourselves. For a long time Britain (often as a direct result of campaigns by the right-wing media) has tried hard to obscure Europe from us. The story became always about ‘what’s wrong with Europe’ and why we wouldn’t want to be like them. Straight bananas and all that.

At the same time, this story has been curated almost literally to disorientate us – orientate originally meaning to look east. Instead, we have had a strange distorting medium between us and things to the north and to the east. The US has far too often become our chosen frame of reference. This is partly linguistic, partly cultural, but mainly political.

For generations Britain saw itself as a bridge between Europe and the US, which always reminds me of the line in Shakespeare in Love where the character playing the nurse describes Romeo and Juliet by beginning “so, there’ this nurse…”. In the second half of the 20^th century Britain was an important US asset in Europe, but the intellectual traffic was one way. We learned much about America’s obsessions (small government, laissez faire, individualism) but evidence that they learned much about Europe’s is much more limited.

The outcome of this has been that Britain has remained stubbornly unwilling to learn political lessons from anywhere to its east or north. Scandinavia has always been dismissed sniffily as a ‘peculiar and specific’ social model. It is rejected as a social model for tenuous reasons, primarily relating to a US assumption that low tax is always the preferred choice – and this against the evidence.

The European social model is one we think belongs separately to Britain. It is as if we are an island broken off from a continent, an island in which political evolution took a different course from the mainland, producing a unique and self-contained social order. This isn’t true; it was very much part of a continent that was struggling its way into a post-war settlement that could do nothing other than build something better among the ruins. We just don’t see it that way. We imagine Britain to be self-contained.

To my eyes, this mindset seemed to reach its turning point in Danny Boyle’s Olympics opener. That we took so much pleasure in hundreds of underpaid nurses dancing for free for corporate sponsors while the pernicious deregulation of the NHS in England was ploughing its way through Parliament seemed to me to present a major disjuncture. This wasn’t a birthday party; we weren’t celebrating something in rude health. It wasn’t a funeral; we weren’t mourning the loss of a loved one. It was like we were dancing round the room dragging a corpse with us. We were celebrating the ideal of the NHS at the very point where its founding principles were being discarded.

I would not suggest this is yet a widely-shared view in Scotland, but I think we’re getting there. Both sides of the referendum campaign are now starting to present their vision in terms of social democracy. Scottish Labour is rediscovering vocabulary like ‘redistribution’ which seemed totally absent in the Blair years.

And so, perhaps no single piece of information has more fired the development of the independence campaign than this – Britain is the fourth most unequal country in the world and it is getting worse. As the horizons of the debate are stretched, unwillingly, from our island up to the north and out to the east, light is cast on our social democracy. And it is not a sympathetic light.

Almost three out of four people in Scotland get by on less than £24,000 a year. That’s the average salary. Two out of five people get at least 40 per cent of their income from benefits and welfare. More remarkably, four out of five Scots get at least 15 per cent of their income from benefits and welfare. Poverty has never been properly tackled and is now getting worse.

There is no doubt that this is a less comfortable light for the No campaign. In no sense can you compare Britain to comparators like Germany or France and conclude that our social democracy is a triumph. When Scotland looks to the Nordic countries, many of our socioeconomic statistics look positively medieval. One of the reasons the No campaign is so uncomfortable with allowing conversations to drift towards what Scotland could be like if it was independent is that it is hard to see how we could be much worse in social democratic terms. There are only four ways we could end up worse: become Turkey, Russia, the US or a third world country. In that context, pointing to a 60-year-old NHS to prove that Britain can still take pride as a country of equality rings hollow.

In a debate between The Daily Mail and The Daily Telegraph, Britain’s problems relate to too much social democracy. That has been the UK perspective. Look outwards and things seem different.

Does this mean that only supporters of independence can have any case to make on social democracy? No, it certainly does not. The No campaign and its supporters could build a strong case for how Britain as a larger nation has more scope for internal redistribution, which in turn could lift a larger number of people out of poverty than we could do in Scotland alone. What it can’t seriously argue is that this is happening – or has happened at any time in my lifetime. Since I learned to talk, social mobility and socioeconomic equality have been redistributed in the wrong direction.

Does this mean that independence supporters have social democracy in the bag? Definitely not. As some people have put it, to fight an independence campaign, to win, and to then discover that the only outcome is to become the fifth most unequal country in the world would be truly awful.

Here’s the thing though; the No campaign has made no suggestion so far on how to achieve a more socially-democratic Britain. It has resorted to implying that what we have is as good as it gets. And while there is much to poke holes in so far, the Yes campaign has at least taken the issue of equality seriously.

If one outcome of the independence debate is that, in the glare of daylight, Scotland is forced to stand naked in front of the mirror, it will have done us a service. The best moment in US TV series The Newsroom was its first moment. Asked by an audience member to succinctly explain why America is ‘the greatest country in the world’, the lead character responds dryly that it isn’t.

Whatever becomes of Better Together, it will have done Scotland no favours if it continues to pretend that Britain is the best social democracy we are permitted. With the curtains open, it really is time to own up to just what a state the State has become.

Robin McApline is Director of the Jimmy Reid Foundation

Professor Ailsa McKay, Glasgow Caledonian University

In the second of our series on welfare and the independence referendum, Professor Ailsa McKay of Glasgow Caledonian University argues that the constitutional debate provides a valuable opportunity to redesign our welfare system and redefine the values of the ‘good society’, and proposes a Scottish Citizens Basic Income to promote opportunities for all.

The debate over Scotland’s constitutional future has opened up opportunities for creative thinking on welfare. A universal and unconditional minimum income guarantee, a Citizens Basic Income (CBI), would provide the opportunity for all of Scotland’s people to flourish. A CBI would replace all existing income maintenance benefits, including all reliefs set against income tax liability, and the amount paid would be tax-free. The proposal would involve full-scale integration of the tax and benefit system thereby reducing administration costs and eroding any disincentives to work that can arise from the interaction of separate tax and benefit structures. A CBI would ensure that the financial gains from paid work were always positive and would provide a more secure base for individuals to opt in and out of the labour market, thus promoting greater flexibility with respect to individual life choices. Furthermore, the universal aspect of the proposal prevents against discrimination, providing the foundations for a more equitable system of state welfare provision.

A significant stumbling block in considering a CBI proposal is the perceived prohibitive cost of a system for social security that involves granting everyone a minimum income guarantee and although a significant issue, a focus on cost at this stage prematurely stifles debate.  Actual costs will depend upon a range of factors including perhaps most crucially the level of grant. However, questions of affordability are primarily issues related to implementation and will be influenced by how we define and treat social security benefits v’s tax reliefs within our national accounting frameworks. Tax reliefs are in effect a benefit but presentationally are not regarded as such and, in a system that prioritises labour market participation, they will be favoured over more traditional forms of social security benefits. Engaging in debates on cost thus involves closer examination of practical process issues relating to how we view tax reliefs in the context of income maintenance policy and how we need to transform our dominant fiscal institutions to better reflect transparency in what we actually want our system to do.

A CBI promotes individual autonomy and allows for the development of social and economic relationships, negotiated outwith the confines of traditional market oriented transactions. Therefore in a broad philosophical context a CBI provides the basis for creating space to rethink our notions of work, income and citizenship rights within modern capitalist economies. Furthermore, in the narrower context of thinking about social security policy, a CBI presents as a new and fresh way of approaching state supported income maintenance policy in terms of justifying principles, design, and delivery mechanisms.

Adopting a CBI would not simply imply tinkering with existing systems in response to identified inadequacies or inefficiencies. The concept itself involves the acceptance of a whole new way of thinking about social security policy in terms of the functions it can, should and does perform. If understood in these terms, a CBI is more representative of a radical idea than a welfare reform proposal. However, the tendency is to view a CBI within the confines of rather narrow and limiting debates on the future of social security policy. That is, policy should be designed and delivered in ways that support, indeed prioritise active labour market participation.

In trying to move the debate beyond such confining parameters it seems appropriate to try and locate a CBI within the context of a focus on crisis, cuts and citizenship. That is, perhaps we need to consider the CBI proposal in the context of the great recession as an opportunity to reshape our thinking on what makes a good society and who do we value in that society. Crucially, in doing so we need to develop a better understanding of how the structures and processes associated with our economic systems can better serve the needs of all citizens across all of our communities.

New Ideas or More of the same?

With respect to state welfare arrangements, the current economic environment has served to refocus attention on the affordability and effectiveness of income maintenance policy. At a UK level this has been particularly apparent with wide ranging reforms to the benefit system aimed at cutting costs to the public purse, restricting eligibility and promoting active labour market participation. Across the political spectrum the ‘something for nothing’ mantra is dominating debates on the future of welfare with a resulting focus on reform strategies that protect against ‘benefit scroungers’ or free-riders. Reductions in overall spending are an added bonus associated with measures that act in pushing people back in to the labour market and out of welfare dependency. However, questions remain as to how effective the labour market is, and will continue to be, in providing sustainable and meaningful employment opportunities for all. Furthermore, given the contemporary character of poverty and social exclusion is it reasonable to assume that the labour market will continue to function as the main source of economic and social welfare? Individual income, either in terms of amount or source, is not necessarily an accurate indication of an individual’s welfare status or standard of living. Thus, any anti poverty strategy that has as a primary focus the promotion of labour market participation may only be addressing part of the problem. Perhaps more importantly is it desirable to expect it to do so? Some individuals may indeed derive great pleasure from paid work, but any policy that has at its core an assumed notion that work is a ‘good thing’ does not allow for freedom of expression for all in terms of individual preferences, particularly women.

A CBI has potential to address gender-based inequalities at a number of levels, but particularly to highlight the gender bias inherent within current state welfare arrangements and modern labour market structures. A CBI explicitly incorporates the notion that income should be derived from rights of citizenship. This would provide the basis for evaluating and accounting for the very different social experiences of men and women in a market based economy and promote real freedom for all. However, this potential will never be fully realised as long as reform debates remain constrained by traditional notions regarding the relationship between work and pay, and an implied notion that paid work remains the main source of economic welfare.

Arguing along these lines should not be considered indicative of an opposition to paid work per se. However, for many individuals, the experience of formal employment is not necessarily liberating nor welfare enhancing. Individual preferences are better served by a policy that allows for freedom of choice as opposed to one that limits choice in favour of a particular form of labour market participation.

A CBI for Scotland?

Would a CBI work in Scotland – providing the basis for state welfare provision in accordance with an overarching purpose to provide ‘opportunities for all to flourish through sustainable economic growth’? In considering that question a number of further questions immediately come to mind: what makes a good society, what do we value and what could a CBI do? For instance, how do we go about reconceptualising what we consider to be ‘work’; how do we deal with the free–rider problem when we consider the third party effects resulting from the energy and effort some individuals expend in building local communities and/or staying at home to care for others; how do we deal with the vulnerability of certain groups and the institutions they rely on as a source of economic and social welfare and how do we manage the social costs associated with increasingly unequal societies?

Considering the relationship between social and economic policy in the new Scotland those questions should and could come to the forefront of debate. Perhaps its time to consider a different set of values as the defining feature of our ‘good society’ and maybe a CBI provides us at this moment in time in Scotland with just the platform for doing so.

Ailsa McKay is Professor of Economics at Glasgow Caledonian University. This article was also published in the Scotsman on 20 February and is derived from a paper presented to the David Hume Institute/Academy of Government seminar ‘Delivering Social Security: Options in Scotland’s Constitutional Debate.’ A full version of the paper is available at: http://www.davidhumeinstitute.com/research.html

Prof. David Bell, University of Stirling

In the first of our series of analyses of the welfare state and the debate over Scotland’s constitutional future, Professor David Bell of the University of Stirling argues that transferring control of welfare to the Scottish Parliament would force all parties, given the tight constraints on the welfare budgets, to make difficult policy choices.

In a Scotland with powers to influence the welfare budget, there may be a collective agreement to provide more generous social welfare. But there will be some really difficult decisions to make about how to control access to benefits and what levels to set them at. There are clear demand pressures on the welfare budget that will cause it to rise as a share of GDP even at current levels of support and under most realistic assumptions on the growth rate of the Scottish economy. The challenge to all parties, irrespective of their position on constitutional change, is to explain how social justice can be delivered within a social protection budget whose growth will be more tightly constrained than at any time since the establishment of the welfare state in 1948.

The 2012 Scotland Act gives the Scottish Parliament significantly increased tax powers. But it does not change any of the powers affecting social protection – the welfare system. All of the alternatives to the Scotland Act currently on the table argue that the Scottish Government, in addition to further tax powers, should have more control over social protection spending. Devo-Plus, Devo-Max and full independence involve the Scottish Government having partial or full control over unemployment and disability benefits, state pensions etc.

But there is very little meat on the bones of these proposals thus far. There seems to be agreement in principle that enhanced powers and therefore more accountability for welfare spending in Scotland is a “good thing”, but not much clarity about the principles that might direct this development and how these might represent “Scottish values”. Further there has not been much engagement with the really challenging issues that face welfare spending in the future, which will arise irrespective of the constitutional settlement.

There are arguments that Scotland has a more social democratic tradition than England and would be likely to adopt a more generous attitude to provision of welfare benefits. There is some evidence to support this notion. Comparisons of the 2010 Scottish and British Social Attitudes surveys show that Scots take a slightly more generous attitude to welfare – they are more likely to view the current level of unemployment benefits as causing hardship and are less likely to think that large numbers of people falsely claim benefits. Nevertheless, these differences are not large: more Scots believe that benefits are too high than believe they are too low. And more Scots agree than disagree with the proposition that there are large numbers of people making false benefit claims.

When it comes to preferences about where any extra welfare spending should be directed, the Social Attitudes Survey shows that more than half of Scots agree that pensioners should be the main beneficiaries. The next most common response is the disabled; children and the unemployed are lower on the priority list. These responses pose real difficulties for politicians irrespective of the future constitutional settlement because most of the recent growth in welfare spending has been on pensioners and the disabled.

In 2010-11, the Scottish Government controlled only £4.9bn of a total social protection budget for Scotland of £20.7bn, which amounts to about 17 per cent of Scottish GDP excluding oil and 14 per cent if oil is included. Most of the Scottish Government spending, which is known as “personal social services”, is delivered by Scottish local authorities in the form of support for the frail elderly, the disabled, children, the homeless etc. But by far the largest part of the social protection budget, £15.6bn, is distributed as cash benefits by the Department for Work and Pensions. The DWP is particularly unpopular at present because of its simultaneous application of cuts and reorganisation to the benefits system. But opposition politicians at both the Scottish and UK levels have been noticeably reluctant to articulate a clearly costed alternative future for the welfare state. Instead the most vocal opposition to DWP has come from the voluntary sector and the trades unions.

Spending per head on benefits in Scotland is greater than in the UK as a whole. In 2010-11 spending per head in Scotland was £3972 compared with £3658 for the UK as a whole, a difference of 8.6 per cent. Does this margin reflect a greater Scottish instinct for social democracy? The answer is no. DWP determines common levels of welfare support for the whole of the UK. Differences in spending per head reflect differences in demand for welfare between Scotland and the rest of the UK, not in the conditions of supply. Scotland has higher spending because it has a higher proportion of pensioners and relatively more disabled people. The majority of social welfare spending is directed towards these groups as is shown in Figure 1.

Figure 1: Social Protection Expenditure by Type Scotland 2010-11, Source: DWP

State pensions in Scotland cost more than £7bn. Spending on personal social services tend to be directed towards the old and the disabled. Incapacity and disability benefits cost £3bn. Together these three types of spending account for two-thirds of cash benefits paid by the DWP in Scotland. Scots may agree increasing benefits to older people and to the disabled may be socially just, but there is no avoiding the conclusion that it is expensive. Increasing benefits to the unemployed would be significantly less expensive simply because they are fewer in number.

The Coalition Government has decided to “triple-lock” state pensions, implying that the amount they increase each year will be the maximum of earnings growth, prices growth or 2.5 per cent. This restores the linkage of state pensions to earnings which was lost during the 1980s and will add to their overall cost. There is further potential for cost increases as increasing numbers of baby-boomers pass retirement age. The Coalition Government has moderated this growth, at least in the short-run by increasing the retirement age, a policy that is arguably not fair in parts of Scotland where life expectancy is particularly short. The number of disabled may increase depending on the future incidence of diseases such as obesity and dementia.

In a Scotland with powers to influence the welfare budget, there may be a collective agreement to provide more generous social welfare. But there will be some really difficult decisions to make about how to control access to benefits and what levels to set them at. There are clear demand pressures on the welfare budget that will cause it to rise as a share of GDP even at current levels of support and under most realistic assumptions on the growth rate of the Scottish economy. The challenge to all parties, irrespective of their position on constitutional change, is to explain how social justice can be delivered within a social protection budget whose growth will be more tightly constrained than at any time since the establishment of the welfare state in 1948.

David Bell is Professor of Economics and ESRC Senior Research Fellow on the Future of Scotland and the UK, University of Stirling. This article was also published in the Scotsman on 19 February, and is derived from a paper presented to the David Hume Institute/Academy of Government seminar ‘Delivering Social Security: Options in Scotland’s Constitutional Debate.’ A full version of the paper is available at: http://www.davidhumeinstitute.com/research.html