Minimum Income Guarantee Expert Group: interim report

Executive summary

Background

Scotland and the UK have faced several repeated crises over the last 15 years through the crash of 2007/08 and resultant austerity, the COVID-19 pandemic and the current cost of living emergency. In many ways this period of time has exposed the insufficiency of the existing UK-wide social contract and need for a radically improved safety net – one that provides security to everyone that help will be there if you need it, plugging the gaps and holes in the current system, and one that provides greater levels of support than now, establishing a system based on need and rights rather than arbitrary levels and rules set by politicians.

A Minimum Income Guarantee is a simple but transformational idea – it is an assurance that no one will fall below a set income level that would allow everyone to live a decent life. This would be delivered through reform to services, changes to the world of work, and improvements to social security, including a targeted payment for anyone that falls beneath the Minimum Income Guarantee level.

A Minimum Income Guarantee would fundamentally change the social contract in Scotland, freeing people and families from the huge financial risks currently inherent in things like job loss, illness, growing a family, disability and relationship breakdown. It could also represent a key component in tackling poverty and inequality and helping to deliver fair work, inclusive growth and a wellbeing economy.

This interim report from the Minimum Income Guarantee Expert Group outlines its work so far, the key foundation principles of a Minimum Income Guarantee, high-level findings in relation to design and delivery and remaining questions for year two of the Expert Group’s work that will form the basis of a full report in 2024. The report also outlines initial actions necessary to pave the way for successful implementation of a Minimum Income Guarantee following the Expert Group’s full report, and initial actions that can begin to build the foundations for a Minimum Income Guarantee in Scotland.

The Minimum Income Guarantee Steering Group was established with cross-party support as part of a commitment to begin work on a Minimum Income Guarantee within the Scottish Government’s 2021-22 Programme for Government. The Steering Group is made up of a cross-party Strategy Group and an Expert Group with representation from academia, trade unions, poverty and equality organisations. The Expert Group has also commissioned an Experts by Experience panel to help to shape the work. This report is the interim report from the Expert Group.

Defining a Minimum Income Guarantee

A Minimum Income Guarantee would ensure everyone in Scotland could secure a minimum acceptable standard of living, ensuring we all have enough money for housing, food and essentials to allow us all to live a decent, dignified, healthy and financially secure life. The Expert Group agreed key principles to help to guide the work to date.

A Minimum Income Guarantee is:

• a guaranteed level of income beneath which no individual living in Scotland would fall;
• a minimum income set to ensure an acceptable standard of living that promotes dignity and a decent quality of life;
• designed to recognise our distinct needs which vary by person and family;
• clearly focused on tackling poverty, inequality and financial insecurity;
• a suite of interventions – including to reform collective services, the world of work and social security;
• accessible to all of us with a clear focus on reducing inequalities.

To succeed a Minimum Income Guarantee will need to be:

• co-designed by those with lived experience of financial insecurity and the current benefit system;
• supported by a broad coalition including the general public, stakeholders and within MSPs;
• co-ordinated, across government and beyond;
• implementable – through first steps taken under existing powers, with further steps and powers outlined as necessary.

Findings

One early overall finding from the Expert Group is that a Minimum Income Guarantee does not need to wait. Scotland does not need full powers or further powers to make progress, even if further powers around social security, work, tax, borrowing and equalities, may well be necessary in the future to realise the full potential of a Minimum Income Guarantee.

The Minimum Income Guarantee level, in its full form, should be set somewhere between the relative poverty line and the Minimum Income Standard,^[1] based on need. This would be significantly higher than current levels of UK Government benefit payments.

Uprating of the Minimum Income Guarantee level should take into account real changes to the cost of living in a timely manner. This would move away from arbitrary levels of payments set by politicians. A Minimum Income Guarantee needs to be responsive to real and immediate need.

The Minimum Income Guarantee level will be achieved through paid work for most households but this will not be the case for everyone, and for some groups this will be more challenging due to structural inequalities in participation and barriers within the labour market. To realise a Minimum Income Guarantee, reform to the world of work is required to increase minimum levels of pay and achieve equal pay for women and marginalised groups; address the undervaluation of low and unpaid care work; reduce barriers and participation gaps; broaden pay rates; guarantee hours worked and career progression; and to ensure work is equitable, flexible and accessible to all. This will mean greater numbers of people reach a Minimum Income Guarantee level without the need for a Minimum Income Guarantee payment.

A Minimum Income Guarantee payment will need to reduce as people and households see increases in their income. However, this must be reduced gradually to avoid cliff-edges in support.

Exploring the role and impact on employers of a Minimum Income Guarantee and what is needed to reform work will remain a focus in year two.

The current UK-wide system, and Universal Credit in particular, is flawed. The costs associated with transitioning onto/off Universal Credit, the five-week wait for new applications, the benefit cap, two-child limit, sanctions and conditionality are all elements of the existing system that cannot be replicated with a Minimum Income Guarantee.

In its full form a Minimum Income Guarantee would include a payment that would top-up the income of households whose income from paid work and other sources falls below the Minimum Income Guarantee level. The Minimum Income Guarantee payment would be designed to replace many of the existing UK-wide income-assessed social security payments in Scotland, such as Universal Credit. In doing so it will be desirable to retain a diversity of payments so that people and families do not see a reliance on one single payment at one single point.

Initial actions

Ultimately any Minimum Income Guarantee will be made up of a number of complementary parts, from solutions that reduce costs for households to cash and practical support. The Expert Group has outlined a series of initial actions necessary to pave the way and build the foundations necessary for successful implementation of a Minimum Income Guarantee following the full report in 2024.

1. The Scottish Government should prepare to implement the findings from the Expert Group’s full report by considering what legislative powers the Scottish Parliament may require to deliver or create new benefits which are not currently legislated for. It is our early view that even a pilot or initial roll-out of Minimum Income Guarantee will likely require legislation.

2. The Scottish Government should change the legislative basis for Scottish Child Payment so it’s not tied to a UK Government qualifying benefit. This will provide more flexibility to taper the award, provide additional support for some groups, and support households to avoid cliff edges in income as they transition into higher incomes. This could be important in forming a basis for initial work to roll-out a Minimum Income Guarantee.

3. A Minimum Income Guarantee cannot be delivered in a system that sees punitive conditions and sanctions. The Scottish Government should pledge to abolish the punitive conditions and sanctions regime in rolling out a Minimum Income Guarantee – as powers allow – and seek to ensure that the Minimum Income Guarantee is not lost or undermined by benefit or wider public sector debt recovery.

4. A Minimum Income Guarantee cannot be delivered in a system that sees significant holes in the safety net, for example, through caps, waits, freezes and limits, that impact different groups disproportionately (often deliberately and systematically). The Scottish Government has introduced some measures to repair these holes in Scotland, through (for example) mitigation of the ‘bedroom tax’ and the benefit cap. The Scottish Government should pledge to abolish the rest of these features of the existing UK-wide system when powers and finances allow and should monitor the success and take-up of existing efforts to do so.

As well as these earlier steps, the Scottish Government should also lay down crucial foundations for a broader Minimum Income Guarantee infrastructure in the future.

5. Increased support and encouraging uptake of entitlements for childcare will be crucial as part of the initial roll-out of a Minimum Income Guarantee. The Scottish Government should consider how additional support for childcare costs could be provided through existing powers to low-income families with children. Support for childcare costs should be provided through a clear entitlement rather than on a discretionary basis.

6. The Scottish Government should ensure the council tax reduction and water rates discount for households on the lowest incomes are reviewed with a view to taking significantly greater numbers of low-income families out of paying these charges. The review should be undertaken in time for consideration for the 2024/25 Scottish Government draft budget. It will be important to consider how we can decrease costs facing people and households underneath the level of a Minimum Income Guarantee.

any Minimum Income Guarantee will be made up of a number of complementary parts, from solutions that reduce costs for households to cash and practical support

7. The Scottish Government should undertake a review of the means-tests used for existing income-assessed payments and discounts delivered at the Scotland and local level with a view to aligning means-tests and moving closer to automation. This should aim to ensure greater numbers of low-income families receive this support and to enable automation and greater take-up. This should include review of means-tests used for Scottish Child Payment, Best Start Grant, Council Tax Reduction, Water discount, Free School Meals, School Clothing Grant and others. Beginning to knit the existing Scotland- and local-level social security systems more closely together will be an important step towards a Minimum Income Guarantee.

8. The Scottish Government should accelerate the review of adequacy of disability assistance to address the issues of additional costs facing disabled people. This is an area where the Minimum Income Guarantee Expert Group will also plan additional work in year two.

9. To promote the living wage the Scottish Government should extend its commitment to setting conditions that ensure public sector contractors pay the real living wage to their staff to all public authorities and through procurement, and widen the scope of this commitment to include a requirement to provide ‘living hours’ – a guarantee for workers of a set number of hours each week.

The Expert Group has a number of remaining questions which will form the basis of work in year two and the full report planned for 2024. The full report will outline in detail what a Minimum Income Guarantee could look like in Scotland, how much it could cost and how it could be paid for and delivered. The Expert Group will also look to consider how a Minimum Income Guarantee could be rolled-out and implemented over time.