The group was asked to look at the medium and long-term options for reform of the social security system in an independent Scotland. Our report “Rethinking Welfare” outlines a Scottish benefits system for those of working age. We also provide a route map of how to get there.
I am indebted to my fellow group members for their expertise and insight, and for the healthy challenge that each brought to our discussions. I know that I and they greatly valued the independence of the group and the space that that provided for our deliberations. I would like to emphasise our independence, as it was a central condition of all of us joining the group. I valued having members from the academic and business sectors and the third sector. We were also fortunate to have members from around the United Kingdom and, indeed, from Europe.
In order to support our work, we developed a detailed and targeted process to help to build our knowledge and to establish a firm, evidence-based foundation for our recommendations. We received direct written evidence, convened stakeholder sessions, commissioned research and held meetings with benefit recipients, wider civil society and academics, among others. We have drawn extensively on the available demographic and statistical information on Scotland and its performance in relation to other parts of the UK and other nations in Europe.
I offer my very sincere thanks to all those from within the benefits system who shared their stories. Many of those were deeply personal, and while some were difficult to hear and others were uplifting, all were shared with us openly and honestly. Our report is greatly strengthened by that direct experience.
We did not formally meet the civil servants who deliver the current welfare system. It was a surprise to me to hear that over 10,000 civil servants deliver the system in Scotland, not just to Scotland but to significant parts of the UK. They are a great asset now, but they will be critical in the future should Scotland vote for independence. Nothing in our report should be seen as a criticism of those delivering the policies that we find so unfit for purpose.
We learned in evidence from New Zealand how there such delivery civil servants are much more highly valued than they are here. Here, policy civil servants have the status and influence. However, the best and most effective change process comes from combining experience around both delivery and policy. That is an important lesson for the future.
Our conclusion is that Scotland has a benefits system, developed over time, that is now too complex and too remote; it can be impersonal and can work against citizens’ needs for support. The system is increasingly losing the trust of those involved. An independent Scotland would need to start quickly to rebuild trust and confidence in a system that many feel is broken.
The key issue of trust is wide ranging: it includes the trust of those who receive benefit payments in a system that supports them and, importantly, the trust of society as a whole in the fairness and effectiveness of the system. A lack of trust erodes society’s continued support for those in receipt of social security and undermines the self-esteem and confidence of those in receipt of support from the benefits system.
We divided our work into strategic analysis, strategic choice and an implementation framework. Our strategic analysis is that Scotland has a very strong economic foundation. Across a range of economic indicators, Scotland is wealthy and productive; and its performance relative to the UK as a whole—its nations and regions—is strong. However, Scotland’s assets go further than just its people. There is a clear sense of the value of public services, communities and voluntary efforts in Scotland.
An example of the positive side of our analysis is that Scotland has a skilled population. In recent years, there has been a steady decrease in the percentage of working-age adults with low or no educational qualifications. Scotland compares well internationally in terms of educational levels achieved and performs best of all the nations of the UK, with the fewest people with low skills and the highest number with high skills. There is a warning, though: as the number of working-age people in Scotland with low skills has fallen significantly, the risks associated with being poorly qualified have grown significantly.
On the negative side, we found current employment rates among older workers to be significantly lower than the best in Europe. The employment rate for men aged 55 to 65 in Scotland is very low compared with the best in Organisation for Economic Co-operation and Development countries and the equivalent figures for older women are worse. So, although Scotland is somewhat more equal than the UK as a whole, it is still more unequal that many other OECD countries.
It is increasingly recognised that inequality is not just a moral issue but a severe drag on economic performance. We in the group firmly believe that paid employment is the best route out of poverty for anyone who can realistically be expected to work. However, the reality is that for too many people today a job no longer guarantees that. Changes resulting from the hollowing out of the labour market, the prevalence of low-paid jobs and the increasing casualisation of employment militate against the availability of secure, sufficiently remunerated work for many people.
11:00
The committee knows very well that approximately 40 per cent of people live in households with at least one member in work and that poverty is not evenly spread across the population. For example, households with disabled people and people from minority ethnic groups are more likely to live in poverty. Over half the children in poverty are living in households where at least one person is working.
We discussed the issue of work at great length. To raise benefits to address poverty was not a credible proposition for us. For example, to ensure that a couple with two children had an income, leaving aside housing and childcare costs, that met the Joseph Rowntree Foundation minimum income standard would mean that they would need a £10,000-a-year rise. Of all the hundreds of thousands of sentences that I read for our report, the best sentence—in my view—came from a Spartacus network report called “Beyond the Barriers”. Spartacus is a network of sick and disabled activists who develop evidence-based policy. They wrote in the report:
“Work for those who can. Security for those who can’t. Support for all.”
However, it has to be good work, which depends on demand from employers for skills and the ability of employers to pay good wages, and it needs a business environment that encourages investment and productivity.
We found that unpaid care contributes significantly to the economy by providing support that would otherwise be provided by the state. However, caring for children or someone with a long-term illness or disability has a significant impact on the ability of households to work and the extent to which they need help from the welfare system.
Supporting individuals as they move from one phase of their lives to another—from unemployment to employment—is key for a modern social security system for Scotland. Such a system should recognise that society is changing, with caring and employment responsibilities shared among the family, and recognise the changing role of women and their contribution to the economy and society. Currently, inequalities in employment, rates of poverty, income inequalities and the costs of caring suggest that what Scotland currently has fails to offer adequate support.
Scotland is in a very positive position regarding the affordability of its social security system. The choice facing a future independent Scottish Government is how best to use its financial and human resources to obtain the best results for its people. We examined social security models from around the world, and fuller descriptions are in our report. The best known, perhaps, is the Nordic model, which is based on the idea of universalism; the liberal model provides safety-net levels of means-tested benefits for encouraging working; and the continental model is a contributory system that is generous to those in work or who have recently become unemployed but has little support for others.
We concluded that there is no ideal model type for Scotland to follow or, indeed, import wholesale. We must find our own approach in Scotland. We are very keen on policy learning from other jurisdictions, but our conclusion was that wholesale policy transfer from another jurisdiction is vanishingly rare and not appropriate in this circumstance.
Our strategic choice was that Scotland would have to rethink welfare. The approach in Scotland would have to be one that suits the needs of the people of Scotland, builds on explicit and agreed values, and commands sustained and widespread public support. We propose that the purpose for an independent Scottish social security system must be to provide a safety net through which individuals cannot fall; it must also provide an insurance against life events and maximise the life chances of every individual. In other words, it must provide a springboard as well as a safety net.
We looked at principles for a welfare system. The principles represent the tests against which a new policy or changes to existing or inherited policies should be proofed. They are grouped under three overarching headings: the system should be fair, personal and simple. It is clear to us that those three important policy objectives or principles are held in serious tension. Our conclusion was that it is a real challenge to deliver all three in equal measure. So, our report has chosen to emphasise fairness and personalisation in the short term, with a focus on simplicity in the longer term.
We have outlined our purpose and principles in the report. Who, then, are the partners to develop them further? We identified three. First, there are individuals with their families and communities. They need support from each other and from the state. Secondly, there are employers, who need individuals who are prepared for work. Employers also need the state to provide the economic background and the investment in infrastructure that enables their businesses to grow. Lastly, there is the state, which needs employers to create good jobs to minimise in-work benefits and maximise tax returns. Those partners are the critical cogs in the system. To assist them, they must have a wide range of civil society organisations to provide the oil to help them to work most effectively together. Those civil society organisations include trade unions, business associations, user groups, campaign groups, think tanks and academics.
On the implementation framework, we recommend that a national convention on social security be established at the beginning of 2015. The convention would be made up of those partners, along with their civil society support and would establish a social security partnership for Scotland—a new social contract. We drafted an outline contract in our report. An independent Scotland will inherit a patchwork of policies and approaches that have been built up over the past 70 or so years. We are confident that it is possible to establish something that better suits the needs of a small independent country. We heard evidence of a widespread will to build a new system that is fit for purpose and progressive.
We are in no doubt that this endeavour will take an enormous shared effort. It is clear that there is no easy solution. It will require our political representatives, people from across civil society, the business community and others to enter into a willing partnership with future Scottish Governments to create a social security system that we can trust and share in. We have set out a route map for that.
We have made nearly 40 recommendations. I will not go through them one by one but, among other things, we recommend the re-establishment of the link between benefit levels and the cost of living; the introduction of a new social security allowance for Scotland; the abolition of the bedroom tax, sanctions and the work capability assessment; an increase in the carers allowance to the same level as jobseekers allowance; and raising the national minimum wage to equal the living wage.
In the medium term, we must plan how we support those in our society who most need the support rather than react in an ad hoc manner. We were impressed with the evidence that a serious and sustained focus on pensioner benefits over the past two decades has significantly addressed pensioner poverty. A couple of weeks ago, I was at an event in Kirkcaldy at which Gordon Brown was in conversation with Sir Tom Devine. Tom asked Gordon what he was most proud of in his political career. Without hesitation, the reply was the reduction in pensioner poverty from over 30 per cent to less than 10 per cent. We recommend a similar sustained focus on benefits for people who are sick or disabled and who are unlikely to find a route to wellbeing through work.
Our final recommendations are for the longer term and relate to the search for simplicity. We set out two of the most coherent future propositions—a contribution-based system and a universal income-based system. At present, we could support neither, because of cost. The evidence to us was that the costs of introducing such systems are high, with basic income tax rates creeping towards 50 per cent. We consider the restoration of trust to be a prerequisite before any such level of taxation would have even a remote possibility of serious consideration by a credible political party.
Finally, I point out that our recommendations are not just for an independent Scotland. An editorial in The Herald on 5 June said:
“Whether independent or not, Scotland needs a welfare system that treats benefit claimants and those struggling to make ends meet with dignity and this report has some useful ideas for how that might be better achieved.”