Introducing a citizens’ income for everyone in Scotland would cost the public purse an extra £12.3 billion per year and lead to punitive income tax rises, official analysis has revealed.
A paper prepared by Scottish Government civil servants for First Minister Nicola Sturgeon has warned that taxpayers could face an income tax rate of 50 per cent across all bands to fund the scheme.
The analysis also suggests that the tax-free personal allowance would have to be removed in order to pay for the multi-billion pound scheme to give everyone cash, regardless of their wealth.
In recent weeks Ms Sturgeon has signalled she intends to consider introducing a basic income for all, despite receiving the document in March.
The First Minister announced a Citizens Basic Income (CBI) would be trialled by several local authorities when she unveiled her Programme for Government last month.
She underlined her commitment to investigating the feasibility of the controversial scheme during her speech to the SNP conference last week. The briefing, obtained by the Scottish Conservatives through Freedom of Information legislation, was compiled by Liz Hawkins, the Scottish Government’s housing and social justice director.
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The document was given to Ms Sturgeon, Finance Secretary Derek Mackay and Social Security Secretary Angela Constance.
The briefing paper said: “It is a very costly policy that is unlikely to gain public acceptability and ultimately may not have the desired transformative effect.”
The paper said that whatever system was adopted it would require a tax rate on all earned income of 40 per cent – a figure that rose to 50 per cent if the universal income was to cover housing benefit.
It went on to warn that “due to income distribution between Scotland and the rest of the UK there may need to be an even higher tax rate in Scotland”.
It then made a series of calculations based on a CBI model proposed by the RSA (Royal Society of Arts, Manufactures and Commerce), which would see working age adults receive up to £71 per week. The increase in benefits expenditure resulting from a Scottish CBI came to £12.3 billion on the basis that the universal income would replace the majority of social security payments, except Disability Living Allowance, Personal Independence Payments, Severe Disablement Allowance, Industrial Injuries Disablement Benefit and Housing Benefit.
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This would be accompanied by an additional income tax bill of £6.8bn (raised by the removal of the personal allowance) plus an extra £2bn in national insurance payments.
Despite the tax rises, there would still be a funding shortfall of £3.6bn.
Last night the Scottish Government said the scheme would require a “net investment” of £3.6bn once the increases in tax and national insurance had been taken into account.
The document further warned CBI would “have little incentivising impact” and that “most governments will not be able to afford both CBI and a generous welfare state”.
Another issue identified was the potential “to further entrench gender stereotyping” with evidence suggesting a CBI would see women reduce working hours and take on greater domestic roles.
At Westminster, Chancellor Philip Hammond is also being lobbied by SNP MPs to look seriously at the idea. The entrepreneur Richard Branson is an advocate of such a scheme, arguing that it would act as a safety net for those who fall on hard times.
But Ms Sturgeon was attacked by the Scottish Conservatives, who claimed she had ignored her own civil servants’ warnings about the cost of the proposal.
Shadow Social Security Secretary Adam Tomkins said: “Nicola Sturgeon and her finance team were told in no uncertain terms that a scheme for citizen’s basic income would be utterly unaffordable and not remotely sustainable. Despite these stark warnings, she continued to create an impression that she was going to introduce it.”
A spokesman for Ms Constance said: “With their disgraceful record of cruel welfare cuts while slashing taxes for the rich, the Tories are making inequalities in our society ever deeper – so their hysterical reaction to even considering a proposal such as a basic income is no surprise.
“Clearly a nationwide Citizen’s Basic Income would be a significant financial investment – and the document does not suggest that this could be £12.3 billion as the Tories wrongly claim - but the whole point is that it could potentially lead to significant savings elsewhere in the social security system and in the wider public sector.”