Written evidence from Steering Group of the Scottish Citizens Basic Income Feasibility Study [PCW0015]

Introduction and Background on the Scottish Citizens’ Basic Income (CBI) Feasibility Study

In September 2017, the Scottish Government announced in the Programme for Government that it would support local authority areas to explore the feasibility of a Citizens’ Basic Income (CBI) scheme. In March 2018, four local authority areas – Fife Council, City of Edinburgh Council, Glasgow City Council and North Ayrshire Council – collaboratively prepared and submitted a joint bid to the CBI Feasibility Fund. The Scottish Government confirmed on 21 May 2018 they would provide £250,000 over two years to support the undertaking of a feasibility study for a CBI pilot in Scotland. In addition to the Scottish Government fund, each organisation provided in-kind resource to progress the feasibility study.

The feasibility project builds on earlier work undertaken by the local authorities who were exploring the role of CBI in reducing poverty and tackling inequalities. The feasibility work has been undertaken in collaboration across the four local authorities, NHS Health Scotland (now part of Public Health Scotland), supported by the Improvement Service and Scottish Government. Representatives from each of the collaborating organisations were brought together to form the Citizens’ Basic Income Feasibility Study Steering Group.

The group was asked to consider the role of a CBI in reducing poverty by exploring the feasibility of conducting local pilots in Scotland. This included details of the ethical, legislative, financial and practical implications of conducting a pilot as well as its potential costs, benefits and savings.  The group gathered and synthesised CBI evidence across published research, engaged with relevant organisations, collated learning from contemporary pilots, community engagement and survey data, as well as commissioned new research to address evidence gaps.

Two pieces of research were commissioned by the Steering Group:

1. Exploring the social security implications of a CBI pilot[1] was carried out by the Child Poverty Action Group in Scotland. This work explored how a pilot study of CBI might impact on the pilot participants’ eligibility for other welfare benefits and associated ‘passported’ benefits.
2. Economic Modelling of the potential distributional and macroeconomic implications of a national policy rollout of CBI[2] was led by the Fraser of Allander Institute at the University of Strathclyde in collaboration with the Institute for Public Policy Research (IPPR) Scotland and Manchester Metropolitan University.

The feasibility study was undertaken between August 2018 and June 2020. A draft final report on the findings of the feasibility study was released on 11th June 2020.[3] The report has been released as local authority partners proceed through committee reporting to discuss and debate the project findings. The final report will be formally submitted to Scottish Government once the process is complete. 

Call for Evidence Responses

3. Is there a need to consider new, long-term approaches to addressing change in the labour market: for example, introducing a Universal Basic Income (UBI)?

The aim of the feasibility study was to test the role of CBI in reducing poverty in Scotland and explore the feasibility of local pilots of basic income. While the study did not directly consider the role of CBI as an appropriate long-term response to labour market changes, there is evidence an unconditional and universal CBI (delivered alongside some retained welfare benefits which support additional financial needs) could improve long-term financial security.

Proponents of CBI suggest a well-designed CBI policy has the potential to positively impact on many aspects of contemporary society by providing financial security and support for individuals whether they want to earn, learn, care or set up a business.[4] Based on a rationale of reducing poverty and promoting greater equality, CBI is regarded as a way of removing barriers which prevent individuals from reaching their full potential.

Recent statistics suggest 10.5% of workers in Scotland are in insecure employment, including those employed on zero-hour contracts, agency, casual or seasonal workers, and low-paid self-employed.[5] The use of sanctions to suspend social security payments has also become more prevalent in the last 10 years.[6] One of the primary supporting arguments for a regular CBI payment is improved income security and the associated benefits this provides to individuals in terms of predictability of income and lower income-related stress and anxiety.

To ensure financial security for people on low incomes and to meet the greater financial needs of some groups, it is essential that some benefits are retained and continued alongside a CBI. Entitlements which should be retained are those relating to disability, work capability, housing and childcare support. To prevent any loss of income relating to retained benefits, the CBI payment should be disregarded as income for the calculation of means-tested benefits.

Economic modelling research commissioned by the CBI Steering Group suggests a CBI like a scheme proposed by the Steering Group could reduce poverty, child poverty and income inequality. It would also have the potential to reduce economic precarity and change the nature of labour/leisure/training/creating/caring choices that people currently face.

The modelling also outlines the potential fiscal costs of a nationwide CBI scheme and the considerable uncertainty regarding the economic impact of both the CBI and the way in which it is funded. Overall, the modelling concludes that the CBI would have major impacts on society and the economy, driven by how citizens’ behaviour changes in response to the introduction of a CBI and any changes in taxation required to fund it, and by other economic impacts such as changes in productivity. The modelling suggests that in most scenarios, the potential benefits of the CBI proposed could come at a cost of reduced economic growth and reduced real incomes for the richest groups compared to what they would have been in the absence of a CBI.

3.1.   Is UBI an appropriate short-term response to shocks in the labour market?

The feasibility study did not directly consider the feasibility or role of CBI as an appropriate short-term response to labour market shocks, however as outlined above, there are suggestions that a CBI could improve financial security. The universal and unconditional aspects of CBI would ensure that all citizens receive support when required and no one would fall through the cracks of provision. 

3.2.        What can the Government learn from the international evidence on UBI?

International evidence on basic income and basic income-type interventions was collected as part of the feasibility study. Evidence was sought from two areas and is summarised below and as follows: i) evidence from previously published research on international CBI-type interventions; and ii) learning from contemporary international basic income-type experiments.

3.2.1.  Evidence from previously published research on international CBI-type interventions

There are relevant international studies from which we can learn about the potential impacts of CBI-type interventions on a range of outcomes. Studies which provide all individuals with an unconditional, substantial, regular sum of money may not be available, but there have been several studies that involve the unconditional provision of substantial cash payments to either individuals or households. To ensure maximum transferability of learning from findings, the focus is on evidence from upper middle- and high-income countries. These studies encompass various types of interventions that can be broadly deemed as like a basic income: unconditional cash transfers (UCT), negative income tax (NIT), or those simply described as basic income.

A systematic scoping review published by What Works Scotland[7] synthesised evidence on studies which considered unconditional provision of cash payments to either individuals or households in middle- and high-income countries. A recent update of this scoping review was carried out, focusing on upper middle- and high-income countries only.[8]

A summary of the available evidence suggests that a CBI could impact on a wide range of employment, social and health outcomes, but the evidence base for CBI is largely drawn from other contexts and may not be directly applicable to Scotland or the UK today. Evidence on health impacts is mixed, with some positive effects on birth weight and mental health, but less evidence for other health outcomes. Similarly, impact on labour market participation is mixed, but overall employment impacts were small for men and greater for women with young children. There is an absence of evidence to assess the effects on long-term service use and wider economic impacts.

Impact on poverty levels is difficult to assess as this was not reported on as an outcome from the studies found. However, results from studies in the US found that children who were living in poverty at the start of the studies appeared to have benefited most from the scheme. This was reflected in outcomes relating to child and adolescent mental health (with symptoms reaching the level of those children not previously living in poverty), and improvements in school attendance, length of time in education, and high school completion rates.

3.2.2.  Learning from contemporary international basic income-type experiments

In addition to evidence from published results of previous CBI-type experiments or schemes, there have been several contemporary pilots of interventions that meet at least some of the basic criteria for a CBI. There have been recent tests of different forms of CBI in numerous countries worldwide, including (but not limited to) Finland, Canada, the Netherlands, Kenya, Barcelona and South Korea. Although specific to their local context, such experiments provide an opportunity to learn about the practicalities and challenges associated with implementing CBI pilots. For some of these experiments results are not available as they are currently underway or have not started.[9]

Evaluation results of the two-year experiment which was carried out in Finland in 2017-2018 have been published. The study targeted 2000 individuals aged 25-58 years old who were already in receipt of unemployment benefits. A group of 173,000 unemployed individuals acted as a control group. The aims of the study were to test the effects of basic income on employment, income and wellbeing.

The results show that compared to the control group, there were small effects on employment for basic income recipients, better perceived economic security and improved mental wellbeing.[10]

As part of the feasibility study, researchers produced a report based on the learning gained from the design and implementation of contemporary CBI-type experiments in Finland, the Netherlands and Ontario, Canada.[11] The report concluded that the ways in which people respond to a CBI are largely dependent on the model design and institutional arrangements. For example, in countries with CBI-like pilots, the political context and framing have had considerable impact on the pilot design and outcomes of interest. The report also suggests that an unconditional CBI and removing or reducing conditionality associated with welfare benefits has the potential to make significant positive impacts on participant behaviour and health outcomes.

June 2020