Why guaranteed £28,000 income would be a disaster for Scotland
If the state pays people a minimum income, regardless of whether they work or not, the consequences for their mental health would be as serious as the effect on the economy and government finances
What’s not to like about the idea that the government should pay everyone a guaranteed minimum income? That is the latest proposal from an expert group set up by the Scottish Government.
It is by no means a new concept. The notion of a minimum income paid to everyone by government without conditions has been around for at least decades. Although generally an idea put forward by those on the political left, even those on the right have sometimes flirted with the notion, labelling it as “negative income tax”.
The essential argument is that, rather than having a complex welfare system to help those who are out of work or for various reasons unable to work, there should be a universal benefit paid to all set at a level which would avoid abject poverty. Individuals who worked would then be able to top up this income, although they would of course pay tax on any additional earnings, and it is likely there would be some level of clawback once earnings reached a certain amount.
Unconditional payments
For those who did not work, even if they made an active choice not to, they would still be entitled to these unconditional government payments. Proponents argue that this would create a much simpler welfare system and therefore save large sums on administration that could then be used to fund this more generous system.
The SNP government was interested enough in this notion to establish an expert group to consider the arguments, which reported just last week. A combination of charities, campaigners and academics have put forward a set of detailed recommendations for how such a scheme might work if established in Scotland.
This expert group proposes a minimum income guarantee set at £11,500 per year for a single adult, £20,000 for a couple, and £28,000 for a couple with a child, or a single parent with two children. These sums would be paid to all, but for those who were earning there would be a gentle taper with people on the highest incomes receiving nothing.
The group suggests that there could be a 12-month time limit on this payment, after which claimants would return to the existing system of welfare payments. They recommend a pilot of the policy being run in the next parliamentary session, with a view to a full scheme being established by 2036.
‘Transformative’
The group’s chair, Russell Gunson of the Robertson Trust, says: “A minimum income guarantee could be transformative, putting in place a universal guarantee that’s there for everyone in Scotland. Given the levels of poverty and inequality we see, we must act urgently. The first steps we set out over the next five years are affordable in the current context, and doable within existing powers.”
It all sounds superficially attractive in terms of providing a welfare safety net for families, and reducing poverty. But more careful consideration reveals the serious flaws in what is being proposed here.
Firstly, there is the obvious issue of affordability. The Scottish Government’s own analysis shows that this policy would cost a staggering £8.1 billion annually, although that total would reduce to a mere £5.9bn were the payments to be tapered for those who are earning. In the context of an overall Scottish Government budget in the region now of £60bn, that represents a massive additional sum.
Unrealistic to increase tax burder
The expert group suggests this cost could be met by income and council tax hikes on the better off. But, as I have often argued in this column before, already we see that higher taxes in Scotland are proving counterproductive, raising much less money than predicted due to both behavioural change on the part of taxpayers, and the slower economic growth that Scotland enjoys compared to the UK average.
Hiking taxes of above-average earners yet further would undoubtedly exacerbate the current situation, leading to even lower tax revenues than currently are being generated. It is completely unrealistic to expect that extending the tax burden even higher, beyond today’s record levels, will be anything other than self-defeating.
This is a policy proposal which is simply unaffordable. But that is not the only reason why it is such a bad idea.
Lockdown harmed mental health
Work is good for us as human beings. It is through work that we find purpose in life, where, as sociable beings, we engage with others, and where we form and maintain relationships. There is an unlimited number of social studies that demonstrate how being in work is good for people’s wellbeing.
Anything, therefore, which encourages individuals not to work, simply to exist on government handouts, is bad not just for the wider economy, but for individuals themselves. Worklessness drives loneliness, depression and anxiety.
If ever evidence of this was required, we only need to look at the consequences of the Covid lockdowns this country experienced. The government furlough schemes, necessary as they were to maintain family incomes, effectively paid individuals to stay at home and not work for extended periods. Our society still lives with the consequences of that today, with levels of poor mental health having spiralled since Covid.
Incentivising work
Creating a scheme that will pay people to stay at home and do nothing, rather than work, is simply going to contribute to a society where people feel purposeless and disconnected from those around them. What our benefit system should be doing is quite the opposite, and incentivising work to a greater extent, particularly for the growing number of those of working age who are currently either out of work or under-employed.
It tells its own story that no government anywhere in the world has successfully implemented the sort of scheme that has been proposed here. Both the eye-watering costs, and the likely negative societal outcomes, mean that such plans should never escape the bounds of academic research.
Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife
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