Ryan Shorthouse: How benefits lottery would help jobless to find work

The Scottish Government is taking control of billions of pounds of benefits and it should change the system to reward those who try hard to get a job, writes Ryan Shorthouse.

People who regularly go to job interviews or try hard to get them could be rewarded with extra benefits

In the years ahead, Scotland has an opportunity to build a welfare system that is better than the one in the rest of Britain.

Having an effective and popular welfare system is not only a moral imperative, but an economic one too. In a free and market-based economic system, businesses and employment will sometimes inevitably fail: if this system is to be sustained, then people need and deserve to be properly supported when faced with tougher times.

Following the passing of the Scotland Act in 2016, the Scottish Parliament is gradually assuming full responsibility for the delivery of 11 new benefits and control over roughly 15 per cent, or £2.7 billion a year, of Scotland’s welfare expenditure. Most significantly, Holyrood is gaining powers to create new – or top up existing – benefits.

Especially after nearly a decade of deep and disproportionate Westminster cuts to working-age benefits, it really needs to use them.

So far, the Scottish Government has made welcome, but modest, reforms. The Universal Credit – the new mega-benefit slowly being rolled out across the whole of the UK, which combines six existing benefits such as Jobseeker’s Allowance and Child and Working Tax Credit – is paid monthly in arrears to claimants. That is a hell of a long time to wait for a cash injection if you are struggling financially. The Scottish Government, quite rightly, has given Scottish claimants the option to receive Universal Credit payments twice monthly.

This year and next, Scottish claimants will also receive an increased Carer’s Allowance and will be eligible to claim a new Best Start Grant and Funeral Expenses Assistance grant.

But the Scottish Government can and needs to be much bolder. There is, admittedly, some inclination that the SNP wants to think big. They have provided a substantial grant to help trial the Universal Basic Income – where all citizens receive a fixed amount of money to guarantee a basic standard of living, rather than the current means-tested benefits system – in four Scottish local authorities over the next two years.

Trouble is, this fashionable policy, trumpeted by both socialists and Silicon Valley types, is nonsense upon stilts. One of the main arguments in favour of it is that technological advancements will wipe out loads of jobs in the coming decades, so this non-stigmatising support from the state will be required. Well, it has long been feared that technology will cause mass redundancy. But, here we are in 2018, with record levels of employment in this country. In fact, the Brookings Institution, a respected US think tank, recently found that, in 18 advanced countries between 1970 and 2007, automation had created more jobs than it had destroyed.

Even if high unemployment will soon be upon us, it is unclear why a Universal Basic Income is the answer. To ensure everyone – especially those living with a disability or large families – receive sufficient resources from the state, then the amount of the Universal Basic Income will have to be set very high. Then, a huge amount of government money will have to be redistributed to people who really don’t need it. This strikes me as a deeply reckless and wasteful use of precious fiscal resources.

Forget the utopian Universal Basic Income, Scotland should pioneer an alternative vision and agenda for welfare reform. It should be rooted in a popular and prevailing conception of fairness: namely, that rewards should be linked to effort. The welfare system should be redesigned so that it is more generous to those who contribute more to it. The Scottish Government should use its powers to reward Universal Credit claimants with more financial support if they meet either of two criteria.

First, if a Universal Credit claimant is consistently meeting the most demanding conditions around job-seeking and preparation set by the JobCentre to receive their benefits, they should be awarded with a supplement on their basic amount.

Successive UK governments in recent decades have intensified the conditionality requirements to receive out-of-work benefits and expanded them to a wider range of jobseekers. These conditions and threat of sanctions should of course be used sensitively, but overall the evidence does show that, generally, they do lead to higher rates of exit from the benefits system into employment. The application of benefit conditionality to more lone parents since the 1990s has helped significantly increase their employment rates. And tougher conditionality requirements on jobseekers introduced by the UK Coalition Government also assisted in reducing long-term unemployment this decade.

At the moment, though, there is only the penalty of being sanctioned and losing your benefit income for not fulfilling conditionality requirements. Scotland can be different: it could also reward people for consistently meeting the most demanding jobseeking requirements. In fact, to further incentivise the right behaviour, why not introduce a lottery for Universal Credit claimants? Those that consistently meet the most demanding conditionality requirements could be entered. Then, each year, a handful of them could win a financial prize.

Second, Scottish Universal Credit claimants should receive a supplement on their basic amount if they have a longer history of work. Actually, you could introduce increased supplements for claimants who have achieved certain milestones in the number of years worked.

Scotland should use the powers and the opportunity it now has to build a better and contributory-based benefits system.

Ryan Shorthouse is the director of Bright Blue, an independent think tank for liberal conservatism. Bright Blue Scotland will be launching soon.