Minimum Income Guarantee Steering Group: background on minimum income guarantee and basic incomes - August 2021 meeting paper

A Minimum Income Guarantee (MIG) is generally understood to refer to an assurance that everyone will receive a minimum level of income that enables them to live a dignified life, and this can be met through employment, provision of services, tax relief, and social security benefits. It relies upon the establishment of a Minimum Income Standard to determine the income threshold that people should not fall below. 

It is similar to, but distinct from a Universal Basic Income (UBI), with two key differences, firstly that a UBI is for everyone irrespective of income and individual needs e.g. disability, while a MIG is means tested and targeted to those on low incomes, and secondly, that a MIG recognises that there is a role for business to help raise incomes, not just the welfare state.

The Social Renewal Advisory Board called upon the Scottish Government to “commit to a MIG for all as a long term aim”. In its response to the report, the previous Scottish Government administration said it would “hold workshops with key stakeholders to examine existing research on MIGs, the key issues involved, and potential opportunities and challenges”.

During the 2021 national elections in Scotland a number of parties included references to the development of a Scottish MIG.

• the SNP manifesto contained a commitment to start work in the current Parliament to provide a Minimum Income Guarantee for all. It was also specified that this work would incorporate the idea of Universal Basic Services, which by ensuring people have access to the provision of basic services – such as childcare of the NHS for example contributes to ensuring a minimum standard of living. The manifesto noted that delivering a MIG cannot be done overnight, but that step by step changes through the existing social security system could be made to ensure that everyone in Scotland has enough money to live a dignified life
• the Scottish Labour manifesto pledged that they would seek to secure a Minimum Income Standard that no one would fall below. The manifesto specified that this would recognise the additional costs that groups such as lone parents and disabled people face
• the Scottish Green Party manifesto committed to examine the feasibility of a Scottish Minimum Income, which would establish a minimum income standard and use social security top-up powers to increase the incomes of anyone living below this

The SNP also committed to completing two MIG related actions within the first 100 days of forming a Government: the establishment of a Minimum Income Steering Group to progress the design and delivery of a MIG and inviting views of stakeholders and organisations with an interest in MIG on how it should be delivered in Scotland.

Existing research on minimum income guarantees

Research undertaken by the Scottish Government’s Communities and Analysis Division showed that at present relatively little work has been done on MIG in terms of proposals or actual schemes in operation. However, some contemporary schemes and publications which have some relevance to considerations of MIG are outlined below .

In March 2021 the IPPR published a report, containing a proposal for realising a MIG for Scotland by 2030. The IPPR model for a MIG noted that delivering this version of a MIG would require further powers, specifically relating to social security and taxation, to be devolved to the Scottish Parliament and that it would incur significant additional costs. The IPPR paper also included a number of recommendations for step changes on the way to a MIG, including funding a feasibility study into the powers that would be required to deliver a MIG, establishing an independent body to establish a Minimum Income Threshold (MIS) and deliver increases in social security and local payments to move low-income families above the MIS. It also recommends that the Scottish Government take a number of other measures in order to deliver a MIG, including speeding up the rollout of the Scottish Child Payment, encourage Living Hours and Real Living Wages, and lifting No Recourse To Public Funds restrictions where possible.

In March 2021, the Joseph Rowntree Foundation published a report showing that a MIG is favoured by the Scottish public over other forms of welfare provision, such as Universal Basic Income.

In March 2020 The New Economics Foundation published a paper calling for a MIG safety net in response to the COVID-19 crisis and accompanying global recession. It proposed that MIG be built on the current social security system, specifically:

• a payment of £221 per week for every working age adult who is not covered by the Job Retention Scheme or the Self-Employed Income Support Scheme
• processed by the DWP and would not interact with the benefit cap

Previous Scottish Government work on basic incomes

During the previous parliamentary term, the Scottish Government supported research on the feasibility of piloting a UBI (and sometimes known as a Citizens’ Basic Income) in Scotland. Four local authorities (Glasgow, Edinburgh, Fife and North Ayrshire) made a successful collective bid and were awarded £250,000 over two financial years (2018/19 and 2019/20). An independent Steering Group, comprising the four local authorities, and supported by NHS Health Scotland and the Scottish Government, was set up to oversee the project.

The final feasibility report, published in June 2020, set out details of the ethical, legislative, financial and practical challenges for the implementation of a UBI pilot in Scotland. It included macro-economic modelling, by the Fraser of Allander Institute, which estimated the fiscal and economic impacts of a nationally rolled out UBI scheme, and took cognisance of evaluations from basic income pilots in other parts of the world, such as Finland and Canada. The report was supported by close engagement, facilitated by Scottish Government officials, with the Department for Work and Pensions (DWP) and Her Majesty’s Revenue and Customs (HMRC) to understand better the legislative, tax and technical changes that would be required to implement a UBI In Scotland.

The key conclusion of the report is that while it is desirable, in terms of potential reductions in poverty, to pilot a UBI in Scotland, it is not feasible within the current devolution settlement to do so in a way which adequately tests out the principles of UBI from the Steering Group’s preferred model. That is to say that the Scottish Parliament does not have the necessary range of social security and tax powers to pilot a UBI scheme. Using the existing legislative and delivery powers would place significant restrictions on the pilot model design and potentially compromise learnings.

The Steering Group’s report suggested that UBI pilots could result in changes in poverty, child poverty and unemployment rates, though the nature of these changes were only being explored in the context of a national rollout. It also indicated that there could also be wider positive effects, for example, improved health and wellbeing, but these were unquantified.

UBI or MIG work elsewhere in the UK and the rest of the world

Basic incomes have retained their popularity in the UK, and it is worth noting that following the recent national elections in Wales, that the Welsh First Minister, Mark Drakeford, has stated that pilots for a UBI will go ahead in Wales.

There have recently been a number of councils in England and Wales that have also called for UBI pilots to be conducted in their areas, including Hull, York and Cardiff, however, none of them have been able to secure the required engagement and co-operation from the UK Government to progress these.

A full UBI has not yet been implemented in any country although there have been several pilots of interventions that meet at least some of the basic criteria for a UBI. There have been recent tests of different forms of CBI in numerous countries worldwide, including Finland, Canada and the Netherlands. However, as yet there have been no comprehensive results published of tests of UBI in the UK or countries with similar welfare state provision.

The Minimum Vital Income (MVI) was launched in Spain during May 2020, sometimes incorrectly described as a UBI. MVI was introduced to support vulnerable groups at risk of poverty and consists of an economic allowance of €462 for a single person and up to €1,015 for a family with two children for low-income households on a monthly basis. MVI is available to individuals aged between 23 - 65 years old who have an average monthly income of €10 less than the economic allowances noted above.