Building a New Scotland: Social security in an independent Scotland

Summary

This is a summary of the Scottish Government’s proposals for social security in an independent Scotland. The full paper:

• explains why the UK approach to social security needs urgent reform and identifies the early changes this Scottish Government would prioritise with independence
• sets out the Scottish Government’s vision for how social security could be fairer, more dignified and more respectful over the long term, and how a new approach could help deliver a stronger economy with independence

Note that proposals on pensions will be made available in a later paper in the ‘Building a New Scotland’ series.

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The report that follows provides more details on these proposals, an analysis of the evidence that informs them, as well as references to sources.

Social security in the UK

A strong social security system is fundamental to a fair and equal society. It should protect us all through life’s ups and downs, when we’re starting a family, looking for work or beginning our retirement. It should support us when we are caring for family members or friends, if we are unable to work or if we have extra costs because we’re ill or disabled. It should reduce the harm caused by poverty and provide an income that allows people to live well and thrive, not just survive.

A strong social security system is key to a fairer and more equal country, but also for a more dynamic and productive economy. Ultimately, social security is an investment in a just and prosperous society.

However, over many years now, the UK approach to social security has provided inadequate levels of financial support. Benefit freezes, caps and limits, work conditionality and sanctions have all eroded the value of social security and the effectiveness of the safety net.

The first publication in the ‘Building a New Scotland’ series showed that the UK had higher poverty rates and lower out of work benefits than independent European countries that are comparable to Scotland. This, and the policies outlined above, suggest that the Westminster social security system offers inadequate financial protection for those who need either short-term or longer-term support.

Indeed, in November of this year, the UN’s Special Rapporteur on extreme poverty accused the UK Government of breaking international law with ‘grossly insufficient’ benefit levels saying:

‘If you look at the price of housing, electricity, the very high levels of inflation for food items over the past couple of years, I believe that the £85 a week for adults is too low to protect people from poverty, and that is in violation of article nine of the international covenant on economic, social [and cultural] rights’.

The human cost of UK Government social security policy decisions – the impact on the physical and mental wellbeing of people living in poverty – is not acceptable. This is why the Scottish Government is investing £127 million this year to mitigate the worst impacts of UK Government social security policies. This should not be necessary in a country as wealthy as the UK.

An inadequate social security system can trap people in poverty, bringing additional costs to society and to government. By contrast, a strong social security system, integrated within a wellbeing economy, has the potential to dismantle structural inequalities and reduce the harms caused by poverty. It can create conditions in which everyone can thrive, while recognising that paid work is not right for everyone nor is it the only way to contribute to and be part of a cohesive, diverse and fair society.

Social security in Scotland

Devolution has already shown how governments making different choices can deliver a fairer system and more positive outcomes.

The Scotland Act 2016 devolved limited social security powers to the Scottish Parliament. This has led to a distinct Scottish social security system, with its own approach.

Fourteen Scottish social security benefits are now in place, seven of which are new and only available in Scotland. When all benefits have been introduced and people’s awards have safely and securely transferred from the Department for Work and Pensions (DWP), it is expected that Social Security Scotland – our new social security agency – will be supporting around two million adults and children, with around £5.3 billion in benefit spending this financial year. This shows how Scotland can efficiently deliver real change.

This Scottish Government has already been ambitious with its approach to benefits.

For example, five new payments are now available for low-income families that can be worth around £10,000 by the time a child reaches six and over £20,000 by the time a child reaches sixteen. Professor Danny Dorling of the University of Oxford stated that the Scottish Child Payment is responsible for ‘the biggest fall in child poverty, anywhere in Europe, for at least 40 years’.

Just as importantly, the Scottish system has been built around a set of principles that puts dignity, fairness and respect at its heart. This is, in part, because the Scottish system is being developed with the people who understand social security best – those who have applied for benefits themselves and the organisations that support them.

However, despite the positive progress that has been made with devolution, the UK Government still holds the majority of social security powers including low-income, working-age, and pension-age benefits. With full powers, Scotland would be able to do so much more.

Social security with independence

The Scottish Government is committed to protecting social security. Improving the adequacy and fairness of social security would be a key priority if the country becomes independent.

With independence, negotiations would begin for the transfer of all reserved social security responsibilities. This would ensure that people continue to receive the payments they are entitled to, on time and in full.

This government proposes to make comprehensive changes to key aspects of the social security system that are currently reserved. While a full social security system would take time to put in place, the early years of independence offer an opportunity to make immediate improvements. This government would prioritise ten key actions to reform Universal Credit, and improve carer and disability benefits with an aim to increase the financial value of benefits. These would include:

1. removing the two-child limit, and scrapping its ‘rape clause’, to increase family incomes and lift some families out of poverty. The evidence shows that the two-child limit has had very little impact on family size but has increased the number of children in larger families who are living in poverty.

2. removing the benefit cap that limits the amount of benefits that a household can receive each year – again, this primarily affects families with children. We are already investing in mitigating the benefit cap, but independence would give Scotland the full powers to lift the benefit cap.

3. scrapping the bedroom tax that reduces benefits for those considered to have ‘too many bedrooms’ in their home. The Scottish Government has used its own resources to make sure, as far as possible, that no household in Scotland is affected by the bedroom tax. Independence would allow the bedroom tax to be removed from social security legislation.

4. replacing Universal Credit ‘budgeting loans’ with grants to help individuals and families in the first weeks of claiming the new benefit. This would ease the five-week wait and mean that Universal Credit was paid at its full rate, without the deductions and the debt that people face just now.

5. ending the current benefit sanctions regime to make sure that people are supported into sustainable employment and better long-term outcomes, creating a fairer, more dignified and respectful approach to social security.

6. ending the young parent penalty in Universal Credit would ensure that parents under 25 receive the same amount of financial support for their family as those over 25. Rent and food cost the same no matter your age.

7. doing more to make sure people apply for their full entitlements. The Scottish Government is already committed to promoting take-up of Scottish benefits and supporting households to maximise their incomes. Independence would allow more to be done, including changing the role of work coaches to make sure people get the advice they need to access their full entitlements.

8. strengthening and investing in more support with the costs of moving into work, including the likes of up-front childcare costs, travel and clothing. We would also transform the delivery of existing support, including through Job Centre Plus work coaches and Access to Work, to ensure that services are responsive and meet the needs of those who rely on them.

9. going further, faster to improve support for unpaid carers, with a more holistic approach via a tax and social security system that works better for all carers.

10. stopping the roll-out of and rolling back changes to the delivery of existing health and reserved disability benefits introduced as a result of the UK Government’s Health and Disability White Paper.

Early steps like these could start to reduce some of the pressures that the poorest households are facing now and make it easier for some people to move into or stay in paid work and improve the support available to unpaid carers and disabled people. More details of these changes are available in the main paper.

The estimated additional spending that would be required to deliver the reforms of Universal Credit, above, is over £250 million in 2023-24. This is not insignificant in itself but needs to be seen in the context of the £24.7 billion being spent on social security in Scotland by UK and Scottish governments in 2023-24. In addition, reductions in poverty and destitution could be expected to reduce other costs to the state over the long term, for example those caused by health inequalities; this links to the Scottish Government’s underlying approach to the wellbeing economy and a joined-up approach to government, focusing on outcomes to make people healthier, happier and wealthier.

In the longer term, independence would offer the opportunity to move to a new social security system. This new system would have the principles set out in the Social Security (Scotland) Act 2018 at its core. It would be a system in which access to social security is a human right, a system committed to respecting the dignity of individuals and reducing poverty levels in Scotland. A system which provides an integrated system of support for disabled people and carers, without the limitations of delivering within a reserved tax and social security system.

Such a system could introduce a Minimum Income Guarantee. This is a guarantee of financial security throughout life’s ups and downs – a right to a decent income, set at a level to ensure a dignified quality of life, with people having enough money not just to get by and pay for the essentials, but to thrive. The Scottish Government has already begun work on this, with the support of an Expert Group, looking at how a Minimum Income Guarantee could be delivered. The Expert Group is expected to publish a final report in 2024 with recommendations for early actions and longer-term ambitions, including how the level of a Minimum Income Guarantee should be set – based on need and cost of living – and the legislative and delivery requirements.

Over time, there would also be potential for future governments to build on this further should they wish, towards a Universal Basic Income. A Universal Basic Income would provide a basic level of income to all, without condition and regardless of other income and resources. It has the potential to deliver financial security for all and reduce inequalities.

These are choices for future governments of an independent Scotland. Whichever route is chosen, the people of Scotland should continue to shape the system, building on the fundamental values enshrined in the constitution of an independent Scotland.

Conclusions

The Scottish Government believes that, in an independent Scotland, a new social security system could deliver much better outcomes for all of us. It could help tackle poverty and inequality whilst always treating all of us, whatever our circumstances, with dignity, fairness and respect. Independence would offer a new opportunity to set a path to a fairer, happier and more prosperous Scotland.