A proposal for Basic Income in Scotland

There are those who’d like to see a Citizens Income in Scotland, or in the UK, and there were several submissions on that basis to the Expert Working Group on Welfare, who made a nod in that direction after representations from Ailsa McKay, sadly missed, who had been firmly committed to the principle.   A report this month from the Centre for Welfare Reform develops many of the arguments.    They don’t offer costings, but they do write:

“In the current UK system the least generous rate of Income Support is £2780 per year.  If this was extended as a benefit to all 63 million people in the UK the total cost would be £169 bn.  This is less than the current costs of all benefits and pensions in the UK (£185 bn).”

I ‘ve been doing some back-of-the-envelope calculations for Scotland.  As things stand, benefits in Scotland cost £17.7 billion, and personal tax allowances – an important part of the potential funding pool – cost probably £6.8 billion.  That makes £24.5 billion, but from that we probably have to knock off some benefits that can’t be replaced by a basic income, such as £0.9m disability benefits or £0.3m payments to expatriates.  The population of Scotland has roughly 1.1 million pensioners, 3.3 million people of working age (16+) and 0.9 million children.  I’ve argued in previous writing for a simple equivalence scale:  1 for the first adult in a household, 0.5 for each subsequent adult and children.  There are 2.4m households, so there are 2.4m first adults.  The pot needs then to be divided into 7.4 million shares, and comes to £3135 pa, or £260 pcm.  Let’s call it £250 a month, because this is after all a quick demo.  There’d be £250 for each household, £250 for each adult, and £250 for each child.

It sounds attractive at first, but I’m not at all convinced.   This would be good for lots of people, but bad for others.  As the figure includes a replacement for Housing Benefit, people on high rents wouldn’t get their rent paid.   Getting rid of personal allowances means that all income will be liable to tax.  Getting rid of Tax Credits may appeal but there have to be different arrangements for low paid work (a higher minimum wage)  and for child care.  On £500 pcm for a single pensioner, and £750 for a couple, pensioners would lose out – Scotland’s Future promises a single pension of £160 pw – and try to explain to anyone  why a blind pensioner should get less benefit so that we can have a simpler system.  Benefits are complicated for good reasons, and while there is certainly a case to offer more benefits like Child Benefit on a simple, unconditional basis, this kind of short-cut won’t meet people’s needs.

3 comments

  1. Caroline Leclercq

    Yes these things are complicated by nature, which is why IDS’s silly Universal Credit schemme will never get off the ground – and has already wasted millions of pounds! Slightly off subject, but it reminded me.

  2. Leon Paternoster

    BI only really works as a replacement for the various unemployment benefits and the state pension, mainly because housing is so messed up in the UK. You’d need to tackle that separately.

    However, Dr Malcolm Torry has made a costed case for simply giving all adults around 70 quid a week, children 56 and pensioners 140 (http://www.citizensincome.org/MoneyforEveryone.htm see appendix 16). This would replace unemployment benefits, child benefit and the state pension. It’s funded through administrative savings and abolishing the income tax allowance. I don’t see how that’s a problem as you get BI on top of any income you earn.

    BI is a better mechanism than the minimum wage for helping people on a low income. MW serves to legalise low pay.

    I’m not sure you view that as realistic? Presumably the same calculations would apply in Scotland.

    The main losers are the very wealthy (and the DWP, of course). Pensioners and the unemployed receive around the same as they do now, more if they have children in their household, while the low paid come out a lot better. You do also get rid of the whole sanctions regime, which must be a good thing.

  3. Paul Spicker

    If the pension is double the personal allowance for people of working age, the level of benefit comes down from roughly £250 per month to £200 – but arguably that still leaves pensioners worse off (the average benefit for pensioners currently in Scotland is over £8700 per year). There are three problems with Malcolm Torry’s proposal. First, if the figures don’t replace other benefits – including personal tax allowance – the funding isn’t sufficient to give an adequate minimum. Second, if the only benefits replaced are the three you name, the claimed advantages of CI aren’t realised. Housing Benefit, CTR and tax together produce most of the poverty trap. Third, if the benefits are at the level stated, they leave many people worse off, partly because the limited benefits will be spread up the income distribution, partly because they offer little or no net benefit to those who are poorest. To get a CI that is also progressive, you need to replace the tax allowance and set the benefit against tax – the sums are explained in Tony Atkinson’s book, The Economics of Inequality.

    On your other point, CI plus minimum wage achieves distributive outcomes that neither can achieve alone.

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