Minimum Income Guarantee: report - a roadmap to dignity for all

Creating a Fairer Scotland: 2031-36

Scotland in 2031

Our vision for Scotland in 2031 is that it will have met its child poverty targets and is now working towards eradicating poverty across the population. The UK Government and Scottish Government should be working together, along with local and national levels of government, towards a shared goal of a Minimum Income Guarantee. The social infrastructure in Scotland should have improved, the perception of social security shifted, and stigma lessened. The learning we have built from the near-term steps, pilots and improved ability to undertake data analysis (including intersectional analysis) should further inform progress and ensure we are achieving the right outcomes for people. This learning should inform these next steps.

In the first part of the Roadmap we demonstrated that Scotland can take steps now towards a Minimum Income Guarantee, beginning by building the guarantee to financial security and rebuilding the safety net in Scotland. Now we can make progress towards introducing an interim, time-limited social security payment, subject to the advice of the newly established Minimum Income Guarantee Commission. This would boost support for at least a finite period, ensuring we can reduce the number of households that experience poverty due to a change in circumstances such as illness or losing their job. Instead, they should be supported through this time and given the financial certainty to make the decisions required for their future, whether that be focusing on their health or retraining for a new career. This will be achieved through a social security payment that ensures they are not in relative poverty for a time-limited period, with disabled people and unpaid carers receiving the payment indefinitely.

Fair work is more widely accessible, not only because employers and employees are working together to set out what conditions are needed for them to thrive but also because services have been made more accessible and affordable which opens career and learning opportunities. Household budgets should feel less strained with action taken to reduce essential costs and improve services. Ultimately, this will lead to the foundations of a just and compassionate Scotland. This next section of the report will outline the steps that we believe should now be taken forward on the Roadmap.

Step 8: Ensuring success through cooperation

Reviewing the necessary powers

Many of the steps in this section require cooperation between the UK and Scottish governments, including further flexibilities or powers for the Scottish Government. This is necessary to realising the full potential of a Minimum Income Guarantee. Our next steps require some targeted changes and potentially powers around working age social security, employability, worker rights, alongside the tax and borrowing powers necessary to fund and manage the financial risk of the spending required.

To deliver on the full potential of a Minimum Income Guarantee, we need to ensure the existing devolution framework works in a better way than now, and that clear actions around cooperation, inter agency processes, flexibility and further powers need to be identified.

Recommendation 22: By 2027, the UK and Scottish Government should work together to establish a new Cooperation Commission, to consider how cooperation, flexibilities and/or further powers could deliver against agreed shared outcomes in Scotland. This would include understanding and agreeing what is necessary to deliver a Minimum Income Guarantee. Reporting in time for the next UK Parliament elections (which must be called by 2029), the Commission would outline a new framework for cooperation between the UK and Scottish governments to deliver for Scotland to be implemented from 2031 at the latest.^[206]

Setting and uprating the Minimum Income Guarantee

We are aware that we will need to have clear responsibilities and accountability for delivering against this Roadmap, building on lessons learned. This includes setting and uprating the Minimum Income Guarantee payment and advising on the balance of action necessary across work, services, costs and social security. This should be based on independent advice, bringing together the views of the public, experts and those with lived experience of financial insecurity. This option was viewed favourably by the Experts by Experience Panel who were asked their preferred option for how the Minimum Income Guarantee should be maintained over time.

The Expert Group considered the requirement for a Minimum Income Guarantee Commission similar to the design of the Low Pay Commission^[207] which advises the UK Government on setting the National Living Wage and National Minimum Wage. While keen on this design, and the strong track record of the Low Pay Commission, we are also conscious of the large number of commissions and working groups already in place in Scotland. We presented this idea to Poverty Alliance members who considered this the best mechanism for accountability. There was agreement that there should be a structure that can hold those responsible for implementing a Minimum Income Guarantee to account and drive progress. However, there were mixed views about the most suitable route, whether a commission would undermine the democratic process and potentially unhelpfully add to the growing number of commissions already in place.208 Our view is that a separate body is required at least to the point of a Minimum Income Guarantee being fully in place. From this point, the Scottish Government should consider whether a separate body is still required to offer independent advice.

We believe the Commission should also have a role in considering lessons learned throughout the Roadmap, in particular, from the pilot in the earlier steps. On this basis advice should be provided on how to deliver an interim Minimum Income Guarantee (including whether to continue with the idea of a time-limit (see Step 9), if so, for how long and at what level of payment). The Commission should be able to recommend changes to this Roadmap in response to learning identified, particularly around design and delivery. There will be a key role in identifying risks, monitoring and ongoing evaluation.

Recommendation 23: A Minimum Income Guarantee Commission should be established by 2031 to guide implementation of a Minimum Income Guarantee through to 2036 and beyond. The Commission should be based on the design of the Low Pay Commission, but should include diverse, intersectional lived experience, alongside other forms of expertise. In establishing the Minimum Income Guarantee Commission, consideration should be given to whether its responsibilities could be handed to an existing body.

Step 9: Interim, time-limited Minimum Income Guarantee

Step 9 is a key milestone on our Roadmap. It is the point we can say the social security element of a Minimum Income Guarantee has been established on an interim basis. This step involves the implementation, subject to the advice of the Minimum Income Guarantee Commission, of an interim, time-limited social security payment, set at the relative poverty line. This payment will provide a temporary financial boost in support for people for a finite period. After that they would revert to significantly improved, status quo support. This interim measure will ultimately be followed by the implementation of a full Minimum Income Guarantee, ensuring everyone can achieve a dignified standard of living for an unlimited period. Progress towards a full Minimum Income Guarantee could be achieved either by increasing the level of income floor closer to the Minimum Income Standard, and/or by increasing its time-limit until there is no time limit.

We have recommended a time-limited payment as an interim step as we believe it allows the payment level to be set at a higher rate, more quickly, than would otherwise be possible. It allows us to build public trust in this new form of social contract, based on a universal guarantee of financial security. It enables us to show that it can work well, benefitting everyone and underpinning a stronger and fairer economy. This recommendation has been discussed by the Expert Group in detail, some had concerns that would need to be addressed before implementation. We discussed some of the risks and how these could potentially be mitigated.

A time-limited Minimum Income Guarantee would ensure those who are in low-paid employment, lose their job or hours at work, or who want to retrain, have the security of a higher income for up to 12 months to change careers or find more suitable employment. We hope that this will enable people over time to earn more and support the economic growth that we will need to make the Minimum Income Guarantee a success.

We know that some people are unable to work for health and caring reasons. Those who are caring for a disabled person or someone with a long-term health condition or are themself a disabled person should not be subject to the time limit from the start. They will instead receive the payment indefinitely while their earnings are below the relative poverty line.

Many people take time off paid employment to care for a child, often through maternity/paternity leave. Anyone who needs this should be eligible for the payment for a period of at least 12 months, in addition to the broader 12 month time-limit. Further work would be required to understand the interaction between the Minimum Income Guarantee and maternity/paternity pay to ensure that all parents are better off because of this policy.

We recognise that paid work will usually be the primary means through which most people achieve the Minimum Income Guarantee and so payments should support wages. We support a tapered Minimum Income Guarantee that is gently withdrawn as earnings increase, rather than a flat one that would create an unsustainable cliff-edge in support, more on this is available in our level modelling paper.^[209]

As stated above, for modelling purposes we have made a working assumption that a Minimum Income Guarantee would be household assessed. Recommendation 7 outlines that the Scottish Government should further consider the issue of individual and household assessment. However, regardless of how it is assessed, we agreed that the Minimum Income Guarantee in Scotland, including this interim payment, should be paid to individuals as default, rather than one single household payment paid to one person. This is to mitigate the risk of financial abuse and encourage independent incomes as far as possible. The allocation of the payments should be based on the assessment of and learning from the Universal Credit split payments arrangements, once implemented. This should include consideration of paying a greater proportion to the primary carer and to tapering the payment of the higher earner first. We know that financial independence is crucial for women, who are twice as dependent on social security as men due to lower earnings, unpaid care responsibilities, violence against women and other systemic inequalities.^[210]

Design features of a time-limited payment

It would provide a temporary boost in support, as an interim step towards the social security element of a Minimum Income Guarantee.

• Income threshold for eligibility for payment, set at the relative poverty line, for a time-limit of 12 months in every 60 months, after which someone would revert to the strengthened safety net in line with our early steps e.g. Universal Credit, which, by this stage on the Roadmap should amount to at least the Essentials Guarantee, no longer include the two-child limit, and be accompanied by an increased Scottish Child Payment.
• No time-limit for disabled people or unpaid carers, and an extended time-limit for parents to care for children (at least an additional 12 months).
• Three simple-to-understand payment levels – an Adult, Further Adult and Child Payment, ensuring everyone reaches the relative poverty line based on their household composition. These would replace Universal Credit payments and where possible combine with other means-tested entitlements for simplicity. All existing premiums would be protected ensuring we can meet a ‘no one loses out’ principle as the new system is introduced.
• The payment would gently taper as earnings increase, supporting employment. There would be no work allowance with a taper applying from the first £1 of household earnings. A tapered payment would be subject to the 12-month time-limit.
• Paid to individuals, with higher levels of payment going to the primary carer and/or lower earner in a household.

The Minimum Income Guarantee level, ensured through a social security payment, would therefore be the following for a selection of typical households in 2024/25 prices (rounded to the nearest £500):

• Single Adult - £11,500 per year
• Couple - £20,000 per year
• Couple with one child - £28,000 per year
• Single parent with two children - £28,000 per year^[211]

This is based upon a household receiving their full entitlement; some will receive a lesser payment amount if they have additional sources of income e.g. through employment to bring them to the relative poverty line.

Key risks and monitoring requirements

As an Expert Group, we have explored the risks associated with a time-limited approach and have concerns about these, particularly how they are managed at this stage in the Roadmap. We believe that learning from a Minimum Income Guarantee pilot (see Recommendation 20) and the advice of the Minimum Income Guarantee Commission (see Recommendation 23) will be vital for the design and delivery of this step, including whether to go ahead as recommended. If learning and advice indicates any of the design elements of a time-limited payment should change, then that should be done prior to the implementation of this step. The alternative to an interim time-limited Minimum Income Guarantee would be to go ahead with a Minimum Income Guarantee for all, albeit set at a level beneath the relative poverty line or to have a Minimum Income Guarantee for certain groups only.

We have explored concerns about how transitions from a higher temporary payment back to the status quo (currently Universal Credit) would be managed and experienced. Strong advice and advocacy services will be an essential component, ensuring people can effectively plan their finances and benefit from this increase to their household income. The learning from the Minimum Income Guarantee pilot should inform this.

We want to see an interim Minimum Income Guarantee in place in just over ten years – by 2036. This relies on Scotland cooperating with the UK Government (see Recommendation 22), significant flexibility or devolution of working age social security, and in particular significant control of the Universal Credit system alongside this step.

The level of financial security that people fall back on, and the process for doing so securely, after this time-limited support, will be important. We expect this to be a vastly improved version of Universal Credit and have recommended an Essentials Guarantee in our early steps alongside, for families with children, a substantially increased Scottish Child Payment. We see it as vital that this is implemented to guarantee financial security and will directly impact people’s experiences of this time-limited support.

Another area of concern is how those who are exempt from the time-limit, disabled people and unpaid carers, are identified. We know that current definitions are not fit for purpose and would not want to see people who should be entitled losing their social security entitlement. We have called for definitions to be addressed prior to, and through, the implementation of the pilot in our early steps. We would expect this learning to be incorporated into the Roadmap in general, and the interim Minimum Income Guarantee in particular. The proposed Minimum Income Guarantee Commission should monitor progress on definitions and clear eligibility before agreeing to implement the interim time-limited Minimum Income Guarantee.

Prior to, and during, implementation the barriers people still face to escape poverty permanently should continue to be scrutinised and this learning should result in the swift implementation of policies to tackle this. For example, adequate service provision must ensure households, in particular women, are able to sustainably enter the labour market through the provision of suitable childcare and transport. Services must be continuously improved as part of a Minimum Income Guarantee to achieve the goals we have set out in this Roadmap. The learning from the earlier stages of the Roadmap, including pilots, should inform this. In particular, the learning from piloting alternative approaches to sanctions earlier in this Roadmap should inform our approach to ensuring continued labour market participation, with a greater focus on employability support. Work also has a role to play here and embedding of fair work will be vital for success. There should also be data collected on successes and lessons-learned, i.e. those who because of the time-limited payment manage to gain financial security longer-term and the challenges some experience, the lessons from this should be built upon.

This gives a broad sense of the risks and monitoring we foresee prior to and during this stage of the Roadmap. Detailed impact assessments, monitoring of outcomes from the recommended pilot, and the expertise of the Minimum Income Guarantee Commission will all be essential for success.

The impact on different population groups

We focused on certain groups over the course of our work to make sure that a Minimum Income Guarantee would benefit them and to avoid unintended consequences. In particular, we considered 16- and 17-year-olds, people with care experience and young people leaving care, students, pensioners, refugees, people seeking asylum and people with no recourse to public funds. We concluded that a Minimum Income Guarantee could benefit all these groups. However, it would require the appropriate powers, interaction with a variety of other policies already in place, as well as ensure that no-one lost their current entitlement to other forms of support as the result of the way it is implemented. The appropriate impact assessments would need to be carried out to better understand how the time-limited payment would impact these groups and ensure any unintended consequences are appropriately mitigated.

How much would this interim step towards the social security element of a Minimum Income Guarantee cost?

Scottish Government analysis modelled the costs and impacts of a full indefinite Minimum Income Guarantee, as envisioned by the Expert Group, set at the relative poverty line. Assuming full take-up of benefits and no behavioural effects, it estimated that this would cost a net £8.1 billion per year. Overall relative poverty would reduce by 6 percentage points, and 11 percentage points among unpaid carers; while relative child poverty would reduce by 10 percentage points, and 14 percentage points among the priority families. With full take-up of current benefit entitlements, as well as the Minimum Income Guarantee payment, this is starting from a modelled baseline of 14% of people and 13% of children in relative poverty – meaning child poverty in particular would be reduced to very low levels. This demonstrates the transformative potential of this policy for households and is why we believe it should be implemented as part of our Roadmap.

If modelling assumed all workers receive at least the real Living Wage per hour, the costs reduced to £7.7 billion per year.

Introducing a time-limit to the Minimum Income Guarantee also reduced costs down from £8.1 billion, with a 12-month period costing £5.9 billion per year, and a 6-month period £5.1 billion per year.

The modelling was undertaken for 2024/25, with the current social security system and current shape of the labour market in Scotland as a baseline. Further investment in social security from the UK or Scottish governments would therefore reduce the additional costs required to implement a Minimum Income Guarantee as would improvements in levels of fair work. Full details of the modelling can be found in our Minimum Income Guarantee: medium-term social security evidence paper.^[212]

It is important to note that these costs are purely illustrative and do not fully reflect the policy design of the time-limited Minimum Income Guarantee we propose. For example, further work will be required on how the payment should be assessed and how the time-limit will be applied for those caring for children. Likewise, this is a costing for implementation now, but with further investment in Scotland and across the UK, and a strengthened economy, this cost could be reduced substantially.

Recommendation 24: By 2036, the Scottish Government should introduce an initial interim, time-limited Minimum Income Guarantee payment set at the equivalent of the relative poverty line, subject to the advice of the Minimum Income Guarantee Commission. This would offer a temporary boost in support for some. Some groups would not be subject to the time-limit e.g. disabled people and unpaid carers.

Step 10: Ensuring everyone has a level of income that promotes dignity

We know that some groups face additional barriers to employment, access to key services or additional costs in their everyday lives. Our interim report contained a set of principles including that a Minimum Income Guarantee should ensure a guaranteed level of income that promotes dignity and a decent quality of life, while recognising distinct needs which vary by person and family. Central to this is a focus on tackling poverty and inequalities.

We believe that some households who are at a greater risk of poverty and inequality, due to reduced earning potential largely caused by structural barriers, failure to make reasonable adjustment, and increased costs, such as disabled people, unpaid carers and those living in rural and island communities should see this recognised. This would see them receive a higher level of social security payment under a Minimum Income Guarantee. The amount of the premium would require further work to quantify it for all groups.

Intersectional analysis is likely to be highly relevant here as we know a lot of unpaid carers may themselves be disabled. Carers and disabled people who live in rural and island communities will face even greater barriers to employment and additional costs than those in urban areas. We suggest that further work is done to ensure that low-income households are not asked to cover these costs in a way that reduces their standard of living compared to others.

A premium payment for disabled people

There are around five million disabled people in work in the UK,^[213] but the wage gap between disabled people and those without disabilities is 12.7%.214 Disabled people face disproportionate barriers to employment and education. Additional barriers exist for those who are members of two or more protected characteristic groups, for example, race and disability, or sex and disability.215

Some disabled people will be unable to work and will have a reduced ability to save. This can also impact on their ability to have the same opportunities to participate in society as others. Addressing this is essential as everyone should be able to have enough money, support and resources to live a dignified life; fully participate in society; and realise their human rights.

A premium payment for unpaid carers

Carers are often unable to take up or maintain employment and education alongside their caring responsibilities. They might have to reduce hours, impacting on household income, pensions, career progression and future employment prospects. Young carers report not taking up higher and further education opportunities because they are worried that they will not be able to complete them alongside caring.^[216] This may impact their future earning potential. As carers are disproportionately female, this is a big contributor to the gender pay gap.

A premium payment for rural and island communities

Many rural and island communities across Scotland already experience higher costs of living compared with urban areas and are often reliant on electricity or alternative heat fuel sources such as heating oil or biomass. It is estimated that the additional costs to meet a minimum acceptable living standard in remote areas of Scotland required an uplift to the Minimum Income Standard of between 14% and 32% depending on household type and location.^[217] The Minimum Income Standard should also form the basis of further work to address any reduced earnings for rural and island communities through a premium in the Minimum Income Guarantee.

Recommendation 25: The Scottish Government should implement a means-tested Minimum Income Guarantee premium for unpaid carers, disabled people and those in rural and island communities. Prior to that it must quantify the reduced earnings potential experienced by many disabled people and unpaid carers by 2031. It must also update the work already undertaken to understand the costs faced by disabled people and those in rural and island communities, and the impact this has on their overall income.

Step 11: Futureproofing skills and employment

Once further powers allow, the Scottish Government should take a refreshed approach to education, skills, retraining and employability. The focus should shift to futureproofing the workforce and supporting people to reach their potential, whether that means they are thinking about a new career, returning to education or taking a break from employment to focus on volunteering or taking care of loved ones.

It is also important to recognise that the nature of work is changing, with low-paid, low-quality, precarious and short working hours becoming more prevalent. There are opportunities to reshape the economy to meet our current and future needs, including diversifying ownership of firms; enhancing the role of public, workers’ and social ownership; and considering how economic democracy could be enhanced.^[218] This is a vitally important task if wages are to provide most workers with the Minimum Income Guarantee, as this creates the means of ‘predistribution’ and inclusive growth through fairer wages and reduced economic extraction from our economy by low-paying firms.

Technological advances and the greening of the economy will bring profound changes to the labour market and economy. Similarly, demographic change will see Scotland’s population age significantly over the coming decades.^[219] To ensure we can make the most of the policy change a Minimum Income Guarantee could bring, we need to ensure that there is a balanced approach to drive sustainable, strategic business models. The role of technological change, including automation and artificial intelligence, could bring significant disruption to the economy, including massive changes to the world of work.220 Such societal shifts can bring about uncertainty, but it could also offer unprecedented opportunities if harnessed in the right way. A Minimum Income Guarantee will provide that safety net when uncertainty strikes but it should also have aims around workforce planning, upskilling and retraining built in at its core to support people, communities and the economy through upheaval across the labour market. It would also help mitigate the impacts for affected workers in the transition to a low carbon economy.221 The links between education, skills and employability need to be strengthened as an initial step towards more efficient and future proofed workforce planning.

Close monitoring will be required to understand the impact increased social security has on people’s ability to follow their passions and take risks such as changing careers or returning to education. To support the ambitions of the interim time-limited Minimum Income Guarantee payment, there should be a refreshed employability service available by its introduction for those that may wish to retrain, return to education or develop skills.

Recommendation 26: The Scottish Government should take strategic action by 2032 to futureproof the workforce with clear aims around supporting a just transition, shaping technological change, and responding to an ageing population. This should look across employability, education and skills and be underpinned by the principles of a Minimum Income Guarantee.

Step 12: Reducing household costs and unlocking opportunities

The first steps in our Roadmap set out action that should be taken to improve existing services, specifically so that there is equitable access and availability of high-quality, affordable services that meet a wide range of needs. Part of providing a safety net through effective services is considering the infrastructure and workforce needs, linking closely with our asks on fair work. These next steps will propose an expansion to essential services, building on the foundations set up during the first steps. As services improve and grow, there should be close monitoring and evaluation of their impact which should inform future expansion and a longer-term move to greater universalism.

Childcare

As outlined earlier, childcare costs typically make up one of the greatest proportions of household costs that families with children face. It also disproportionately impacts women, lone parents and larger families.

Providing access to high-quality, inclusive, affordable and flexible childcare will be key to the success of a Minimum Income Guarantee. This investment could help to counteract any potential for second earners to leave the labour market as social security support increases – a potential outcome highlighted by economic modelling we commissioned.^[222] Increasing access to the labour market could in turn result in a Minimum Income Guarantee payment that is more affordable, as more households reach the income floor through fair, sustained, paid work that would ease the burden on the social security system.

Recommendation 27: The Scottish Government should expand the current childcare offer of 1,140 hours to 1,900 hours (50 hours per week in term time or 36 hours per week year-round) for 3- and 4-year-olds and introduce a new offer that provides 1,300 hours per year (24 hours per week across the year) for 1- and 2-year-olds by 2032 at the latest. This could prioritise low-income households in the first instance and/or could be increased incrementally alongside wider reform to work and social security as part of the Roadmap towards a Minimum Income Guarantee.

Transport

Affordable and accessible travel is essential. In Step 5, we proposed improvements that would see our transport system become more accessible, safer, more efficient and suitable for the needs of communities across Scotland. Creating this foundation is key, however we would hope to see an expansion of free and affordable travel over time.

The current concessionary travel schemes provide free bus travel for young Scots (5–21 years old), disabled people and those over sixty. The scheme provides free travel on registered local and long-distance bus services throughout Scotland, at any time of day for any number of journeys. At this point, the Scottish Government should look to expansion and more ambitious action to make travel more affordable and to provide more sustainable travel options to support the transition to net-zero.

Scottish Government and Transport Scotland analysts have provided an illustrative cost of the Scottish Government providing free bus travel for all households beneath 75% of the Minimum Income Standard. These estimates show a possible range of costs between £56 million and £188 million, with the range in potential costs arising due to the varying public transport usage behaviours of different household types. These cost estimates reflect additional expenditure to the existing concessionary travel scheme.

This would provide Minimum Income Guarantee recipients with a minimum standard of transport (free bus travel). This minimum standard of transport does not, however, reflect the current pattern of travel usage as estimated by the Minimum Income Standard, which will include some car usage and rail travel. Some Minimum Income Guarantee households, e.g. with disabled adults or children, may consider car ownership a necessity and a minimum standard of travel based on a free bus service only will be insufficient in these cases. Around 70% of those households with an income below 75% of the Minimum Income Standard have a disabled person in them.^[223]

Recommendation 28: By 2036, the Scottish Government should expand the concessionary travel scheme to include low-income households, encompassing all households below the Minimum Income Guarantee level.

Step 13: Financing the next steps of the Minimum Income Guarantee

As outlined in the financing the first steps section, we commissioned WPI Economics to look at how Scotland could raise the revenue required to fund the Minimum Income Guarantee.^[224] For this part of the Roadmap, we are assuming that further flexibilities or powers are in place in Scotland to allow progress on implementing a Minimum Income Guarantee. This will need to include tax and borrowing powers to help fund increased investment and manage the financial risk of a larger spend on social security, which could fluctuate with the economic conditions.

The analysis looks at how other countries with higher spending on social security fund it. The UK as a whole, and Scotland within it, see tax levels that are currently beneath the average of the G7 nations, and are projected to stay comfortably beneath the average of the EU14.^[225] It highlights that there is not an observable link between higher tax levels and lower growth. Indeed, some of the highest tax raising European countries have a stronger economic performance than the UK and other lower tax countries. Where countries have chosen to spend greater sums on social security, they have done this in a number of ways, including broader VAT systems (with fewer or without the reduced and zero-rate bands seen in the UK); higher social insurance contributions from employees and employers; and higher contribution through income tax from low-to middle-earners. While some of these tax changes in isolation are regressive in nature, when combined with significant spending focused on lower-income households, they can be significantly progressive as a package.

Looking more closely at some of the structures of the UK tax system, the inefficiency of the mechanisms used to protect lower-income households from higher costs is apparent. For example, zero rate and discounted VAT bands on ‘essential items’ reduce the costs of food, energy, books, children’s clothes (and many other items) for everyone, in a blanket and less-targeted way. Likewise, other aspects of the tax system, such as the personal allowance within income tax, aims to protect lower earners from increased costs. A Minimum Income Guarantee, including through the changes to social security we propose, would be a much more effective way of attempting to do the same thing, much better able to take account of household composition, income and circumstances such as ill health and disability.

This stage of our Roadmap is over ten years away. We sincerely hope that our economic performance and labour market has improved significantly over this time, bringing down the costs of introducing our next steps towards a Minimum Income Guarantee, and freeing up tax revenue to do so. Equally, over the next ten years we believe the UK and Scottish governments must invest in social security, fair work, services and the costs of essentials, including in the ways we have outlined in our Roadmap (such as a UK-wide Essentials Guarantee and further increases in the Scottish Child Payment). This would have impacts on the amount required to implement a Minimum Income Guarantee. One example is that increasing investment in social security over the next ten years would reduce the additional investment necessary to introduce the interim time-limited Minimum Income Guarantee we propose, currently costed at £5.9 billion^[226] per year. Under these next steps there are other areas which we have fully costed as part of this work such as transport and some we have not, such as childcare. Similarly to the early steps, this section is intended to provide an illustrative example of how these types of changes might be paid for. We acknowledge that certain areas will require further development. What is costed here is not reflective of our priorities and what should be funded. It will also be subject to change depending on the respective decision-making of the UK and Scottish governments. Instead, it is designed to illustrate that these types of changes are possible.

However, even without considering these potential factors, there are a number of ways the Scottish Government could raise revenue on this scale, with additional flexibilities or powers. The Expert Group believes that the Scottish Government should undertake further work to consider how other countries have funded significant increases in spending on their social contract. This should include analysis on broadening the tax base through reform of tax allowances within the existing system. Consideration should be given to how effective these tax allowances are in their aims; how effectively they ensure the lowest-income households can access essentials (versus enhancing their income through social security); and the distributional effects of reforming some of these tax allowances in combination with implementing a Minimum Income Guarantee.

Recommendation 29: With further powers or flexibilities on tax, the Scottish Government should consider tax reform to fund a Minimum Income Guarantee. In doing so, it should consider how existing powers can be used to their maximum. It should consider how further powers could be used, learning from other countries which have funded greater investment in social security as progressive and preventative spending.

Full analysis would be required of any tax and spending package proposed by the Scottish Government, including its impact on poverty and inequality, and on the cost of a Minimum Income Guarantee. This is particularly the case for the larger-scale tax changes envisaged here because of the impact these could have on prices and household’s disposable incomes.

Tax rises of the scale required to fund a Minimum Income Guarantee would still keep Scotland close to, though just above, the current average tax levels seen in the EU14, and far below levels seen in some of the higher tax countries in Europe.^[227] By undertaking work in advance of implementation, we can learn the lessons of how other countries pay for a stronger social contract and safety net, and how they reap the economic benefits of doing so. By providing security for all we can unlock opportunities for all to the benefit of all of us and our economy.

Our people in 2031-36

The infographics provide an indication of how household income and benefits in kind may change through the gradual introduction of a Minimum Income Guarantee. They are intended for illustrative use only. Note that the additional costs for disabled people, unpaid carers and rural and island communities have not been sufficiently quantified so are not reflected in the graphics. The infographics are on a before-housing-cost basis, meaning housing costs have not been subtracted out.

Samira now has the financial security that she needs to retrain and find more sustainable, full-time employment. The time-limited Minimum Income Guarantee has given Samira the 12 months’ financial security she needs to retrain as a graphic designer, allowing her to have financial security while attending college part-time. Samira’s income has allowed her to provide stability for her children and they are now able to look to the future with optimism. Samira’s oldest child (now 19) has moved out and is attending university in Stirling, hoping to become an ecologist. The Minimum Income Guarantee has provided a top up to their student bursary allowing them to focus on their studies instead of worrying about finances. Samira’s second youngest is planning on beginning an engineering apprenticeship which is more inviting now that the wages are equal to other workers earning the real Living Wage.

Ellie and Lucy were able to keep up with their bills and repayments when Ellie lost her job as her time-limited Minimum Income Guarantee payment kicked in. Ellie used 6 months of her 12-month entitlement, choosing to keep the rest in case anything else happens in the future. The part-time work that Ellie has found has increased their household income, through the taper rate introduced as part of the time-limited Minimum Income Guarantee – meaning it always pays to work. This part-time work has meant the couple are able to continue to afford their rental flat in central Edinburgh, staying near employment, friends and family. Lucy has been able to prioritise her mental health and has joined a theatre group in the city to make some new friends and try a new hobby. Ellie has been able to focus on her longer-term career goals and is also undertaking an internship at a marketing firm, a career she hopes to pursue in the near future.

Filip has been able to seek support to retrain and now works as a community recycling officer, the move towards green jobs has opened opportunities to work in a sector he feels passionate about. During the process he was presented with tailored support that recognised his skills, this was made easier by having access to translated training materials as his first language is Serbian. He is really pleased to have a role that is flexible, allowing him to work from home and in his local community. Filip was also able to access the time-limited Minimum Income Guarantee during the time he was retraining (eight months) as he was made redundant as a labourer. This was a lifeline as he was able to continue paying his rent and bills. He can now put more towards his retirement and is feeling less worried about his future.

Mike and Janice are able to apply for the interim Minimum Income Guarantee and are not subject to the time-limit. Mike receives a premium for being a carer and Janice is receiving a premium due to her complex health needs, the premium helps to counter their reduced earnings potential during this period. They can put money into their savings which had been depleted over a number of years when the safety net was inadequate. A weight feels lifted off their shoulders as they are now able to afford to make some home improvements that will help Janice get around her own house. Mike has been able to volunteer in the community and is helping others who need it most, this has also boosted his wellbeing as he is able to socialise more. Janice is developing her digital skills so that she can work from home, she feels optimistic about her future. Both have benefitted from the extension of the concessionary travel scheme to those eligible for a Minimum Income Guarantee payment, it has encouraged them to use public transport more.

Realising our Collective Ambition: beyond 2036

Delivering a full Minimum Income Guarantee

Creating a social contract built on dignified work, investment in people’s needs and public services, reduction of costs and a guaranteed safety net through social security.