The Problem with the Idea of a Citizen’s Income
August 27th, 2009 by Dan Paskins Posted in Citizen's income, Uncategorized, Welfare reform, livelihoods, uk povertyHere’s the problem that advocates of a citizens income face: a recent political party newsletter in Hackney, attacking another political party, claimed that the Citizens Income would mean ’spending £188 billion on central government payments for millionaires’. This is just one of the objections to the policy which would be likely to be raised by its opponents. Others include the fact that it involves paying people to sit around and do nothing, and that many people will end up paying more in tax than they receive from the citizen’s income. The Citizens Income Trust even calls for winter fuel payments and free TV licenses to pensioners to be scrapped. For a proposal which involves giving everyone free money, the critical headlines in unsympathetic newspapers almost write themselves.
I am very sympathetic to the aims of the Citizens Income, and recognise the problems that it attempts to address – in particular the very high marginal tax rates that many people on low incomes suffer from.
Many classical liberals and libertarians are attracted to the principle of a basic income because they see an opportunity for reducing the size of the state, while socialists and social democrats see an opportunity to redistribute wealth from rich to poor. These objectives are extremely difficult to reconcile.
The proposals set out by the Citizens Income Trust, for example, claims to be revenue neutral, but in fact implies a substantial increase in state spending. In addition to the £191 billion on a Citizens Income, there would also continue to be housing and council tax benefits of at least £17 bn, disability benefits of at least £20 billion and support for lone parents.
There would be some odd anomalies – parents on maternity leave, for example, would lose statutory maternity pay of £123.06/week, and get less than half of that as a citizens income. Any basic income proposal which cost the same, or even less, than the current benefits system would end up making some of the poorest people in the UK worse off. This is the problem inherent in any attempt to radically simplify the UK’s welfare state – it will create losers not just amongst higher earners, but amongst some of the poorest people in the UK.
I think it would be unwise to try to introduce a Citizens Income in place of nearly all welfare benefits in a sort of ‘big bang’ approach. Instead, we should gradually build up support and understanding of the merits of universal, non-conditional payments. The best and most sustainable welfare policies are ones which were not imposed from above, but which were won through grassroots campaigning, which ’starts with what people know, builds with what they have’.
One suggestion which I’ve heard time and time again from people who have direct experience of poverty (as well as many people who aren’t in poverty) is that the cost of childcare is too high. Making child care free for working parents would achieve many of the same aims as the citizens income, and would help to build support for universal services which we all pay for. Or, to take another example, the Community Allowance proposals would allow community organisations to be able to pay people to do work that strengthens their neighbourhood without it affecting any of their benefits. Helping to make sure that these pilot projects work well will provide a really good example of how to beat the benefits trap with practical, real life stories and examples.
One day, a citizens income might be part of the answer to poverty in the UK. To get to that stage requires some more detailed work to understand how to minimise the number of poor people who would lose out from its introduction. It also requires campaigning to build public support for the principles of universal welfare services which we all contribute to, and which we all benefit from. In the short term, that means focusing on achievable policies such as the community allowance and free childcare, rather than calling for radical benefits simplification which would cost more than two hundred billion pounds.
The views expressed in this blog are those of the author and do not necessarily reflect the views of Oxfam GB.
2 Responses to “The Problem with the Idea of a Citizen’s Income”
By Max Krahé on Oct 6, 2009
One of the really really annoying thing in 95% of basic income discussions is the analytical laziness shown on both sides of the argument. Whilst I’m not accusing the author of this article of outright laziness, there are a few clarifications that might usefully be added:
1. To claim that a BI is a hand-out to millionaires is to ignore the wider picture. Consider a second criticism voiced in the first paragraph: “many people will pay more in tax than they receive in citizen’s income”. But of course they will – that is how a BI is paid for. After all most people TODAY pay more in tax than they receive from the state through the plethora of government spending. And most likely millionaires will be amongst those who pay more in tax than they receive (unless they have good accountants. But they beauty of a BI system, and the simplification of the tax code that it would encompass, would be to make ‘tax optimization’ considerably harder).
2. You mention the two main objectives behind a citizen’s income: On the right the main objective is to reduce the size of the state, and the extent to which it interferes with the lives of its citizens. On the left the main objective is to alleviate poverty and allow people to lead lives worth living (which, given the way property is currently distributed, necessarily involves transfers from the rich to the poor). But you then go on to say that these two are ‘extremely difficult to reconcile’.
I fail to see how this is so: the administrative simplicity of BI schemes require less manpower to run than current welfare regimes (far less in fact). Furthermore the lack of strings attached allow citizens to choose how to lead their lives, free from government ‘nudging’ (to use a newly fashionably phrase). Hence a smaller and less involved state. But a simple system can be extremely redistributive (indeed, as I said above, more so than a complicated one. There is less wiggle-room for sophisticated accounting). Just consider a BI coupled with a 40% marginal tax rate on any additional earnings – people who earn twice as much as the average pay twice as much as the average…Thus fulfilling the aims of the left.
3. Revenue neutrality and increased average level of benefit received are compatible. This is fairly obvious – the difference comes from the savings made from firing thousands of civil servants. (there are currently roundabout 100,000 civil servants in the Department for Works & Pensions. A BI scheme could feasibly be run on a tenth of that.).
However, this leaves at least two important criticisms standing:
a) odd anomalities. These would certainly exist. How much of a problem they would be is hard to ascertain – families for example would of course benefit from their childrens’ BI entitlement, which may or may not offset the loss in maternity pay. But other pockets, e.g. the disabled, would remain.
b) Disruptions caused by its introduction. These could potentially be huge. The sacking of tens of thousands of civil servants alone would be enough to bring the country to a grinding hold…
I hope this helps to clarify some of the confusions commonly prevalent. Personally I am strongly in favour of BI/CI, though it can probably do its best work in developing countries. Unfortunately fruitful debate on it will most likely remain impossible until we’ve seen a few pilot schemes in action (like the B.I.G. one in namibia). Whether or not it can best be achieved in developed countries through a piece-meal approach or through a big bang, I am not sure…
yours, max
By Craig on Nov 4, 2009
Great post thanks for the hard work! Will look into this further