The UK’s social insurance and welfare system has grown over the past century to deal with a wide range of economic and social needs. It is complex both to understand and to operate. There is widespread agreement that it should be reformed but little consensus as to the way forward.
This report focuses on how the current system of work-related benefits could be reformed.
Our conclusion is that the benefits system should protect the unemployed and under-employed but at the same time must reduce – and ideally remove – any disincentives to take work, particularly part-time work. The manifest failing of the present system is the cash penalty many face when they take a job, the so-called ‘welfare trap’.
Reform Scotland believes that a radical reform is required and that a Basic Income Guarantee is the best way forward. This would give every working-age person a basic income from the state of £5,200 per year, and every child £2,600. The income would be a right of citizenship and would be the same regardless of income or gender.
It would be non-means tested and would not increase or decrease as someone’s income changes, thereby removing the need for the associated bureaucracy.
It would replace a number of means-tested work related benefits, as well as child benefit, and be a new way of providing a social safety net.
It would be free of tax, but would replace personal allowances and tax credits.
It would not be a disincentive to work, since it only pays enough income to cover the basics of life.
Crucially, however, a Basic Income would ensure that every additional hour worked would result in additional net income. In other words, it ensures work pays and there is a very real financial benefit for working more.
No policy is unaffordable; it is simply a question of choosing priorities and arranging budgets in order to pay for those priorities and the report sets out one way that this policy could be paid for.
We have a welfare to work system that is broken beyond repair. We think this is the time to consider a radical new approach and to start looking at a Basic Income Guarantee.