The prospects for a CI scheme in Scotland after the 2014 Referendum on Independence

This report is a personal view, and as a ‘Yes’ campaigner, I admit that it is not impartial. The Edinburgh Agreement of 2012 agreed the wording on the ballot paper as “Should Scotland be an independent country?” with a binary option. The possibility of a third option for ‘Devo Max’ (all powers devolved except for foreign policy, defence and the currency) was rejected by Westminster. This may have been because they assumed that with a choice of three options, the ‘Devo Max’ would be the most popular, and Westminster would have to give away some powers, whereas, with a straight choice between ‘Yes’ and ‘No’, it was assumed that the Nos would have a comfortable win, and they would not have to give anything away.

The Referendum pre-occupied Scotland for the two years leading up the actual event. It has been an exciting, galvanising time, when Scots began to discuss what sort of society they would like to be part of and help to create for themselves and future generations. Brits have often been accused of apathy where politics is concerned, but this is not true. When people think that they can make a real difference, then they get involved. It has politicised large parts of the Scottish population, as evidenced in the 85% turn out for the vote, which is the highest on record for any election in the UK.

Almost immediately after the referendum, the membership of the SNP trebled, reaching over 100,000, making it the third largest political party in the UK. The memberships of the Scottish Green Party and the Scottish Socialists have more or less doubled. If the promises by the three main Westminster parties are not kept, there is likely to be further unrest in Scotland. Gordon Brown promised a swift timetable that is intended to bring about devolved powers for Scotland by, or soon after, the General Election in May 2015. Ultimately, devolution will depend on the votes of MPs in the UK Parliament. Some people have been recalling the unfulfilled promises made to ‘No’ voters at the time of the Referendum on Scottish devolution in March 1979. Others have noted David Cameron’s intention to tie Scottish devolution to English devolution, but he has since assured Scots that theirs will not be delayed.

Immediately after the referendum, the Prime Minister set up the Smith Commission, under the Chairmanship of Lord Robert Smith of Kelvin, Chancellor of Strathclyde University, to negotiate the devolution of powers between the five parties that have seats in the Scottish Parliament and the main parties in Westminster. Each of these Scottish parties made a submission to the Smith commission and appointed two representatives to work with Lord Smith. Submissions were also invited from voluntary organisations and civic institutions, which amounted to 407, and an astonishing 18,381 from the general public.

In the end, the Great Divide is not between ‘No’ and ‘Yes’ in Scotland, nor even between Scots and the rest of the UK. The Great Divide is between the rich and poor in our wealthy society, caused by increasing inequality and the spreading incidence of poverty. Scotland still has a chance to create something genuinely better. Even if Alec Salmond and Nicola Sturgeon have agreed to accept the outcome of this referendum, 85% of the population have been politicised, and they will not just go away quietly and wait until Westminster tells them when they will be allowed to think about further autonomy, or even independence, again. It is not over yet. Scots of all hues want real change, and to help to create Scotland’s society. Party politics will also have to change, if the political parties want to harness the same level of enthusiasm and interest across the UK.

I personally was disappointed at the outcome of the Referendum, because I considered independence as the most decisive way to bring about the fairer, healthier, greener, happier, more democratic and prosperous society that many people living in Scotland would like to create for themselves and future generations. I accept that independence is not on the agenda, but note that 45% of the population voted for it, and that many of the 55% who voted ‘No’ to independence still want significant change while remaining within the Union. This is part of the perception of a democratic deficit, in that the people of Scotland are prevented from solving their problems, by the imposition of rules that can make the problems worse, by remote Westminster governments. My own preference now is for full devolution of all powers, except for the reservation of foreign policy, defence and monetary policy re the Sterling currency.

My own area of competence is in educating policy-makers and the general public as to the advantages of the reform of the current Social Security system, by replacing it with a Citizen’s Income (CI) or Basic Income (BI). Since a successful seminar and round table discussion on this topic was held in a committee room at the Scottish Parliament in January of this year, hosted by my MSP, Jim Eadie, interest in this topic has been growing in Scotland.

The current Social Security system is in disarray. It is complex, unwieldy, unjust, inefficient and not fit for purpose. It is a Gordian Knot that cannot be unravelled or reformed. It needs to be cut through and replaced by a radical alternative, designed for today’s society. It was argued in my submission to the Smith Commission that the new radical alternative should be a CI. It represents a new relationship between citizens and social security, and indeed a new relationship between the state and its citizens.

It is estimated that 20% of the Scottish population lives in poverty, including 1 in 4 children, the majority of them living in homes where one or both parents are in work. Food banks are now a familiar feature of our cities. The level of inequality in Scotland has been growing since 1979, is the fourth highest in the western world and is reaching levels last experienced in the UK in the nineteenth century. Inequality is a symptom of a sick society. A CI, coupled with a restructured personal Income Tax system, could help to redistribute income from wealthier sections of society to the poorest, (thus preventing poverty, rather than attempting to ‘cure’ it after the event), from men to women, and geographically, regenerating depressed local and rural economies. It could help to restore incentives to work-for-pay, and labour market efficiency.

The Scottish mace has four, well-chosen values engraved on it: wisdom, justice, compassion and integrity. I would like Scotland to have powers devolved which would enable it to give full rein to those values. I think that the first objective of any government should be to provide the conditions that enable all of its citizens to meet their needs and to flourish. This should inform all of its other policy objectives.

The UK Social Security system comprises a National Insurance (NI) and a means-tested, safety-net, Social Assistance (SA) system, set up during the reforming administration of the Attlee Government just after World War II, designed for a society and an economy that was very different from today’s. It is not just the low level of benefits (which are below the EU’s official poverty benchmark of 0.6 of median equivalised household income), but there are structural faults in the NI and SA systems. National Insurance was designed for a full-employment economy, where men could expect to earn enough to keep a wife and at least one child at home, comfortably, divorce rates were much lower, and there were fewer lone parents and fewer people over pension retirement age. The labour market has suffered from globalisation, and automation, which is forecast to continue in the longer term. The majority of new jobs are insecure, part-time and low-waged, and too many are on zero-hours contracts. There is widespread poverty, and in addition to bank debt, and public debt, the misery of private debt is growing. As intimated above, there is much wrong with our society that is not inevitable.

A CI scheme can be defined as a program of tax-exempt, cash transfer payments that are universal, based on the individual, unconditional, non-selective, and are not means-tested, nor do they rely on prior contributions. It would provide an automatic, regular payment to every citizen, which could vary according to age. A Full CI would be high enough to meet the material needs for a dignified, if modest, standard of living, enabling participation in society. A Partial CI would need topping up from other income, usually earnings. The responsible parent for a dependent child, (the parent with care), would receive a Child CI for each dependent child, as now.

A CI’s universality would remove the stigma and low take-up of targeted benefits, which has led to a divided society, and thus it will help to create a more united and inclusive society. With universality, the incidence of poverty will be reduced, since no-one will be excluded.

A CI is based on the individual, which means each person is valued for his/her own sake, rather than for their wealth, or contribution to society via paid work, caring responsibilities or voluntary service.

A CI’s unconditionality means that entitlement does not depend on any preconditions, such as willingness-to-work tests, being involved in voluntary service, or behaving according to traditional gender roles.

A CI’s non-selectivity refers to the fact that the levels of CI do not vary between individuals. However, many proposed CI schemes allow for age-related variations, but CIs would not vary by race, creed, gender, sexual orientation, marital status, cohabitation or other household living arrangements, past work record or current work status.

Each of the above two features contributes to simpler administration and compliance systems which would be cheaper to run, and would reduce administration and compliance errors and costs. Therefore it should be more transparent and accountable. In addition, it would reduce the current time-consuming personal effort required to apply for benefits. It gives choices to individuals, eg. to parents and other couples the choice of living together, or not.

A CI would not be means-tested, and would therefore restore incentives to work-for-pay, and labour market efficiency, by reducing the current high marginal deductions from potential earnings (income tax, National Insurance contributions and aggregated benefit withdrawals), facing unemployed and low-paid workers.

A CI of any size would

  • help to reduce the incidence and depth of out-of-work financial poverty;
  • contribute to financial security.
  • provide a springboard for part-time work, reducing the incidence of in-work poverty.
  • increase industrial democracy, giving employees a better platform from which to negotiate for reasonable pay and working conditions.

A CI can redistribute income to some extent, but by itself it will not markedly reduce the current high inequalities of income experienced in Scotland. For this objective to be achieved, the CI scheme would have to be financed by a restructured income tax system. This could reduce inequalities between rich and poor, men and women, and geographically, – regenerating deprived areas. Redistribution could give a boost to the national economy, making it less vulnerable to the vicissitudes of the global economy. It could have led to an increase in demand for goods and services and thence to an increased demand for labour and the creation of good quality, better-paid jobs.

Tax and benefit systems represent a microcosm of their society, revealing the values and attitudes of the powers that be towards its citizens. The tax and benefit systems in modern democracies provide the underpinning of both society and the economy in practical terms, as opposed to the rights and responsibilities enshrined in a constitution.

In order to enable Scots to determine their own society and to grow their economy, it is essential that full fiscal powers should be devolved to the Scottish Parliament, and this is even more imperative, if Scots wish to venture down the CI route. This means the devolution of all tax-raising powers, all NI and other benefit systems, public expenditure and some borrowing powers

If Westminster really respects the wishes of the people in Scotland, then it must not just enable them to create the type of society that they want for themselves, (even if, or especially if, it is not the one that Westminster thinks that they should have), but Westminster should let go of the reins and trust Scots to grow up and live their own lives. If that were to happen, and Scotland were to establish a CI, then the rest of the UK would see the advantages that Scots were experiencing and might follow suit. Everyone would then benefit from devo max.

Now we know the result of the negotiations within the Smith Commission, which published its report on 27 November. Inevitably, many of us had hopes for a recommendation that some serious powers would be devolved, but we should have learned from previous experience. While some marginal powers have been devolved, the most important powers remain reserved to Westminster. The state pension (para. 42) and Universal Credit (including its conditionality and sanctions) remain reserved, with devolved powers to vary details at the margins (paras. 43-48). The devolvement of benefits for carers and people with disabilities is welcome (para. 49). Although the devolution of income tax was much vaunted, in practice these are limited to ‘the power to set the rates of Income Tax and the thresholds at which these are paid for the non-savings and non-dividend income of Scottish taxpayers, (para 76). All other aspects of Income tax will remain reserved to the UK Parliament, including ‘… the personal allowance, … the ability to introduce and amend tax reliefs …’ (para 77). At first glance, it is apparent that the prospects for the introduction of a CI scheme in Scotland are remote. A more detailed examination would be necessary to examine whether a simple version could be introduced within the powers that have been devolved. It looks as though Westminster remains firmly in control of Scotland’s immediate future. However, this is not the time to give up on our aspirations for a CI scheme, and we can continue to lay the ground for it. All is not lost. The General Election in May 2015 is extremely unpredictable, and likely to result in a hung parliament. The role of the smaller parties could be very interesting. Watch this space.


Anne Miller is Chair of the Citizen’s Income Trust and the only trustee residing in Scotland. Before retirement, she was a Lecturer in Economics at Heriot-Watt University. CIT does not take any stance as to the devolution of powers to Scotland, and therefore this Viewpoint is a personal submission.