Building a New Scotland: Social security in an independent Scotland

Sets out the Scottish Government’s proposals for social security in an independent Scotland.

Social security in an independent Scotland

The transition to an independent social security system

While independence would provide an unparalleled opportunity to redraw a fairer and more adequate system of social security in Scotland, many of us rely on current social security payments and that is why the first priority would be assuring a safe and secure transition.

In the event of a vote for independence, negotiations between the Scottish and UK Governments would begin on detailed arrangements for the transfer of all reserved social security powers.

These discussions would be part of wider negotiations between both governments about the distribution of the UK’s assets and liabilities.

The two governments already work closely together in managing the transfer of the devolved social security powers and this would continue in the transition to independence. A priority for both parties, as responsible governments, would be to continue to protect the interests of the people of Scotland – and of the rest of the UK – in the run up to and during the transition period.

Both the DWP and HMRC already have significant resource located in Scotland, delivering a range of current reserved functions. DWP had 8,095 civil servants based in Scotland (9% of the department) at 31 March 2023, while HMRC had 7,820 civil servants (11% of the department).[81] There are currently four Universal Credit centres, two Pension Centres, four HMRC offices[82] and over 80 job centres in Scotland.[83] Most of these locations, with the exception of local job centres, are providing services to the whole of the UK. Similarly, offices in England and Wales provide services to the whole of the UK, including Scotland. The significant DWP and HMRC presence in Scotland, combined with the presence of Social Security Scotland, offers a good platform to ensure a smooth transition in benefits and service provision and the implementing of a new social security system in an independent Scotland.

This Scottish Government would work with DWP and HMRC to transfer benefits and service provision safely and securely, ensuring that everyone continues to receive their benefits, on time and in full while we develop existing systems to support delivery of a full social security system in an independent Scotland. This work would build on the systems that Social Security Scotland has already put in place and make best use of the DWP and HMRC resources and delivery mechanisms that already exist in Scotland.

For the many DWP and HMRC staff who live and work in Scotland, independence would provide opportunities to contribute to setting up a comprehensive social security system, a system firmly based on the Scottish social security principles and charter.

Recognising the close links that would remain between Scotland and the rest of the UK, appropriate cross-border arrangements would be agreed to protect individuals’ existing accrued rights through any transition period and beyond to facilitate continued free movement between Scotland and the rest of the UK and Ireland.

Consideration would also need to be broader than these islands, as Scotland has responsibilities for EU citizens who currently live here, and this government would prioritise re-joining the European Union (EU) following a vote for independence.

This government would ensure that EU citizens in an independent Scotland would retain entitlement to the social security benefits they are currently eligible for.

Furthermore, on rejoining the EU as a member state, an independent Scotland would participate in the social security coordination rules, which mean that Scottish citizens moving to another EU country would have protected social security rights, as would EU citizens in Scotland.

Early changes to social security with independence

A new, comprehensive social security system cannot be developed and fully implemented overnight – any responsible government of a newly independent Scotland would wish to take time to make sure that what was being introduced would be fair and future-proof – recognising the scale of the future challenges set out later in the next section.

However, in the short term, this government would look to make immediate changes to the current system to reform Universal Credit and work towards the levels of the ‘Essentials Guarantee’ and better align support for unpaid carers and disabled people. This would include the following ten key actions:

1. Removing the two-child limit, and scrapping its ‘rape clause’, to increase family incomes and lift some families out of poverty. The two-child limit policy was introduced in 2015 to reduce the costs of social security, restricting benefits to the first two children. When it was introduced, the UK Government said that it would require those in receipt of benefits to make ‘the same financial choices about having children as those supporting themselves solely through work’.[84] The evidence shows that the policy has had very little impact on family size but has increased the number of children in larger families who are living in poverty.[85], [86] On top of this, official figures from 13 July 2023 revealed a total of 2,590 women across the UK had to disclose details of rape to receive support for a third or subsequent child.[87] This change of approach would not only protect women from the inherent harms of the ‘rape clause', it would also increase the financial support available to larger families and help with the government’s aim of ending child poverty. The estimated cost for this policy is around £120 million in 2023-24.[88]

2. Removing the benefit cap, again helping low-income families. The benefit cap was introduced as part of the UK Government’s welfare reform agenda, with the aim of making work pay and reducing the benefit bill.[89] The benefit cap limits the amount of annual benefits that a household can receive to £14,800 for single adults if they live alone with no children, or £22,000 for couples or single households with children.[90] This compares to a median UK disposable income of £32,300 in 2022.[91]

The benefit cap as introduced primarily affects families with children. No child should grow up in poverty. We are already investing in mitigating the benefit cap through Discretionary Housing Payments, but to mitigate in full under devolved arrangements is challenging. Independence would give Scotland the full powers to lift the benefit cap.

3. Scrapping the bedroom tax. In an independent Scotland, this government would remove the bedroom tax from social security legislation as soon as practicable.

The Scottish Government has used its own resources to make sure, as far as possible, that no household in Scotland is affected by the bedroom tax. Introduced by the UK Government, the bedroom tax reduces benefits for those considered to have ‘too many bedrooms’ in their home. In reality, families elsewhere in the UK have been forced out of their homes and in some cases out of their communities because they could not afford to have their benefits cut.

4. Replacing Universal Credit ‘budgeting loans’ with grants to help individuals and families in the first weeks of claiming the new benefit. This would ease the five-week wait and mean that Universal Credit was paid at its full rate, without the deductions and the debt that people face just now. Mitigation of the five-week wait for new applications to Universal Credit is estimated to cost around £100 million in 2023-24.[92]

5. Scrapping the existing sanctions policy, to make sure that people are supported into sustainable employment and better long-term outcomes, creating a fairer, more dignified and respectful approach to social security. Although sanctions are often in place for just a short time, any sudden drop in income can have long-term consequences for households. In March 2022, as the cost of living crisis was unfolding, around 60,000 households in the UK were subject to sanctions that reduced their benefit award.[93] This was down to around 49,000 in July 2023.[94] Changes announced in the UK Government Spring Budget statement this year and set out in the Health and Disability White Paper mean that even more households, including women with young children, disabled people and those with long-term health conditions will face a real risk of having their benefits reduced due to sanctions. The UK Government’s Autumn Budget Statement went even further with additional requirements to ‘incentivise compliance’ – including introducing even tougher punishments for those already subject to sanctions, removing access to free prescriptions and legal aid for those outside of Scotland.[95]

6. Ending the young parent penalty in Universal Credit as an early priority. With independence, this Scottish Government would ensure that parents under 25 receive the same amount of financial support for their family as those over 25. Rent and food cost the same no matter your age. The estimated cost of delivering this policy is around £20 million in 2023-24.[96]

7. Doing more to make sure people apply for their full entitlements. The Scottish Government is already committed to promoting take-up of Scottish benefits and supporting households to maximise their income. With a wider reach, more can be done. This includes changing the role of work coaches to make sure that people in touch with Job Centres get the advice they need to access their full entitlements.

If Scotland chooses independence, this government would work with those with experience of the current system to learn how to remove the barriers that stop people from accessing their full entitlements. We would work across government to improve outcomes for everyone, especially those communities and individuals who are most likely to be let down by the current system – older people, women, single parents, disabled people and minority ethnic communities, amongst others – to make sure they can have equal access not only to social security but to the world of secure, fair, paid work and wider collective services. We would also work to improve take-up of Pension Credit for those of pensionable age.

8. Strengthening support with the cost of moving into paid work. In recognition of the financial insecurity faced by individuals when entering the labour market, we would strengthen support available for people entering work by increasing investment to ensure everyone who is eligible gets the help they need with the likes of up-front childcare costs, travel and clothing. We would also transform the delivery of existing support, including through Jobcentre Plus work coaches and Access to Work, to actively promote the help and support already available and draw upon lived experience to ensure that services are responsive and meet the needs of those who rely on them. This policy could cost around £15 million in 2023-24.[97]

9. Going further, faster to improve support for unpaid carers. Using current powers, the Scottish Government has introduced additional support for unpaid carers with the Carer’s Allowance Supplement and the Young Carer Grant, both unique to Scotland. The Carer Support Payment is now being rolled out, improving signposting to wider support and expanding entitlement to many student carers, and there is a clear plan for further improvements. However, interactions with the currently reserved benefits and tax systems are complex, with significant dependencies. Independence would allow this government to address barriers better, deliver improvements more quickly, and take a more holistic approach to designing a tax and social security system that works better for all carers. A more holistic approach would better support carers to provide care for their loved ones in a meaningful and sustainable way while still being able to work, attend education and have full lives away from caring.

10. Stop the roll-out and roll-back changes to the delivery of existing health and reserved disability benefits introduced as a result of the UK Government's Health and Disability White Paper. In an independent Scotland, future governments would not be bound to implement changes proposed by the UK Government – changes that could have far reaching consequences for people currently in receipt of payments under Universal Credit and Employment Support Allowance. Abolishing the Work Capabilities Assessment criteria as set out in the UK Government White Paper would bring many hundreds of thousands of people into the work conditionality regime, exposing highly vulnerable people to the risk of benefit sanctions. We will ensure that changes to disability benefits are driven by our principles and, importantly, by the evidence of what is in the best interests of disabled people, rather than by the need to reduce spending.

These early steps could start to reduce some of the financial pressures and long-term harms that the sustained reduction of UK benefits has had on the poorest households in Scotland. However, these changes would only be the starting point of a long-term programme – and are largely based on mitigating the harms and inadequacies of an existing system, designed by successive UK governments.

The estimated cost of the immediate reforms to Universal Credit above – on top of existing spend to mitigate against UK welfare reform measures – is over £250 million in 2023-24.[98] This is not insignificant in itself but needs to be seen in the context of the £24.7 billion spent on social security in Scotland by the UK and Scottish Governments in that same year. The reforms are in line with the approach to fiscal policy set out in the Economy paper. The financial impact of other reforms, for example on sanctions and additional employment support, will depend upon the future review and design of those programmes.

More significant improvements could be made over the long term. An independent Scotland could choose, as a nation, to increase the amount we spend on social security. New models could be developed to link social justice, health and social care, a dynamic wellbeing economy, and a thriving labour market more seamlessly together. These approaches have proved beneficial for a number of countries comparable to Scotland that now outperform the UK; so, in time, a more ambitious approach could help make Scotland a wealthier country.

Moving to a more ‘social democratic’ model of social security is linked to Scotland’s ability to have a stronger economy with independence, and to match the performance of other independent European countries that have low levels of poverty and inequality and high levels of economic success. One key element of this is the overall size of the working-age proportion of the total population contributing to the tax base. As set out in previous papers, this government’s ambitious proposals on migration would welcome individuals and families to Scotland, boosting our working-age population and contributing to a wellbeing economy, helping grow the tax base.

More progressive social security models are discussed in the next section.



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