Basic Income continued

It’s a problem with social media that there are so many ways to respond, so people following this blog won’t necessarily get to see the comments that people make on Twitter and in other ways.  Some of the criticisms that people made yesterday were directed at my Evil Assertion that the best way to deal with the loss of jobs was to make jobs.  Another  person challenged my argument that Basic Income wouldn’t leave poorer people better off if it got knocked off their benefits – we’ve seen this before, because it’s what used to happen to Child Benefit.  “I’d like to see Professor Spicker’s basic income proposals that leave poor people no better off, as I have seen none-such that do that.”  So here are a few.

Reed and Lansley, authors of the Compass schemes, do their best to hold losers to the minimum (7% of the second income decile for their Scheme 1, while about a third are no better off.) They explain:

“it is not possible to design a scheme that is revenue neutral, pays a decent sum and withdraws most means-tested benefits without significant numbers of losers.”

Malcolm Torry is Director of the Citizens Income Trust, and the author of a clutch of recent books on Basic Income.  He has produced three schemes for the CIT, labelled A, B and C. (The RSA scheme is also based on the CIT models.) He acknowledges that there will be losers:

“A feasible way to implement a Citizen’s Income showed that in 2012/13 a Citizen’s Income of £71 per week (with less for children and young people, and more for elderly people) could have been largely funded … but that at the point of implementation such a scheme would have imposed losses of over 10% of disposable income on 21.12% of low-income households (defined here as households in the lowest disposable income decile). … In relation to schemes A and C, while it is true that the high losses imposed on households at the point of implementation are the result of the complexity of the current tax and benefits scheme, and not of the Citizen’s Incomes, such losses would make the schemes impossible to implement.”

Scheme A would leave 28% of the lowest paid households worse off by more than 10% of current income, Scheme C would leave 29% worse off. Scheme B is the one that leaves existing benefits in place, and takes BI off them; while scheme B largely avoids losers, the poorest who currently receive benefits will remain in the means tested system.

That’s six schemes so far. Neither Reform Scotland nor the Green scheme do the same kind of modelling, but while they aim to be more generous, which is one of the ways of reducing dependence on means-testing, both abolish Tax Credits. There will be losers as well as gainers.

5 comments

  1. Alison Lord

    Surely the whole point of a basic citizen’s income is that we do away with means tested benefits? We provide a basic income for everyone, if you want to earn more, fine, if you don’t then you live on what you have. There would be extra money for people with children or people who have disabilities, are bereaved, etc.

    • Paul Spicker

      Yes, that is a major point – but it leads to two problems. The first is that BI has to come in at a level which is high enough to remove the necessity for means-testing – which is quite an ask, because the tapers for means-tested benefits are so extended. That’s why there are losers; it’s also why the CIT has been modelling schemes that retain some means-testing. The second problem is that if you’re only replacing money which is currently being given, you’re not necessarily improving the situation of people on low incomes. We need to understand that the bulk of the costs associated with UBI are there to direct money, not to the benefit of the poorest, but overwhelmingly to people who don’t receive benefits at present. I’ve given a great deal of thought to ways around the dilemmas – the use of partial BI, the injection of a contributory element, and redesigning PAYE – but I’ve not yet been able to make the sums work.

  2. Gareth Morgan

    Two points Paul.

    Yes, including BI as part pf a continuing means tested system will not improve the real incomes of many existing claimants (although treating it as earnings, rather than income, under Universal Credit would). It wouldn’t though make anyone worse off, while offering the scope for many more people to float off benefits and make real gains.

    Secondly, it would make a real difference to the substantial number of people who do not claim benefits despite being entitled to them.

  3. Paul Spicker

    BI in itself shouldn’t leave people worse off; the losers are produced by schemes which propose to abolish other benefits to pay for it (which is nearly all the schemes I’ve seen). The second point is important, but it doesn’t necessarily lead us to BI. By contrast, it considerably strengthens the case for a universal Citizens Pension – currently NI pensions reach the better off extensively while Pension Credit. doesn’t plug the holes in the system..

  4. Malcolm Torry

    Dear Paul
    Thank you for referencing a research paper that I wrote in 2015. Last year the Institute for Social and Economic Research published updated research on an illustrative Citizen’s Income scheme: ‘An evaluation of a strictly revenue neutral Citizen’s Income Scheme’, https://www.iser.essex.ac.uk/research/publications/working-papers/euromod/em5-16, and ‘Citizen’s Income Schemes: An amendment and a pilot project: An addendum to EUROMOD Working Paper EM 5/16, https://www.iser.essex.ac.uk/research/publications/working-papers/euromod/em5-16a.
    These show that a Citizen’s Income scheme can be constructed that is revenue neutral and that leaves in place and recalculates current benefits can avoid losses at the point of implementation for low income households, can minimise losses for all households, can reduce poverty, can reduce inequality, and can take appreciable numbers of households off means-tested benefits and reduce substantial the average level of means-tested benefits claims.
    Best wishes
    Malcolm
    Dr. Malcolm Torry, Director, Citizen’s Income Trust, and Visiting Senior Fellow, London School of Economics

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