UK Poverty Post

A Citizen’s Income: part of the answer to poverty

There are two aspects to income poverty in the developed world: the household’s current situation, and the ease with which a household improve their situation. The current benefits system makes both of these harder.

The main problem which needs fixing is that for many people, increasing their untaxed income does not result in more money in their pocket, which makes it much harder to get out of poverty.

Millions of households receive only 15p of every extra £1 they earn, and millions more only 5p for every extra £1 they earn. They lose the other 85p to 95p in income tax, national insurance contributions and withdrawn benefits.  Families with children are the worst affected, and because the way benefits interact with each other is so complicated, many households cannot predict the effect that starting work or changing their job will have on their net income.

Many people think that targeting more money on the poor is the way to end poverty. As we have seen, this isn’t true. Targeted means-tested benefits simply make steeper the sides of the pit which a household needs to climb out of. And if someone starts employment and they then lose their job then restarting benefits can be a long and complicated process, plunging the household deeper into poverty in the meantime.

The only benefit which does not contribute to any of these problems is child benefit, because it is not withdrawn as earnings rise. And it really is not a problem that the rich receive child benefit – they pay far more in tax than they receive in child benefit.

So part of the solution to income poverty is a Citizen’s Income: an unconditional, automatic and non-withdrawable payment to each individual as a right of citizenship, paid for by reducing tax allowances and means-tested and other benefits.

Our research shows that a Citizen’s Income needn’t cost any extra money, and in 2007 the House of Commons Work and Pensions Committee published our evidence in its report Benefits Simplification. Subsequent research shows that a larger Citizen’s Income would be equally feasible.

A Citizen’s Income is a serious contender in thinking through how we reform our over-complicated tax and benefits system. At the moment there is little financial incentive for someone on benefits to take a part-time job, even if that would fit with their caring responsibilities. With a Citizen’s Income the situation changes considerably, to the advantage of both the household’s income, the carers’ ability to care for dependents, and the economy, as when any wages earned are additional to the Citizens Income, there is a greater incentive to return to work, work that fits with caring is affordable, and people returning to work are not risking the security of their income.

The Citizen’s Income on which we have done most of our research also redistributes from rich to poor, increasing the net income of households in the lowest earnings decile by 25% and decreasing the net income of households in the highest earnings decile by only 4% – and all this at the same time as reducing the poverty and employment traps which households find themselves in today.

For further information on a Citizen’s Income please see our website at www.citizensincome.org.

The views expressed in this blog are those of the author and do not necessarily reflect the views of Oxfam GB.