Reform Scotland proposes a Basic Income

Reform Scotland have published a report with detailed costings for a Citizen’s Income  scheme – they call it a Basic Income Guarantee.  Unlike most of these schemes, it doesn’t rely on the wholesale abolition of other  benefits for its costings.  Income Tax would stand at 40p in the pound from £0 to £41,786, then be 60% to £150,000.  This is higher (and more transparent) than the Citizen’s Income Trust approach, which tried to retain National Insurance contributions delivering no benefits and to abolish many benefits that shouldn’t be abolished.

There are lots of small niggles I could raise about the details of specific benefits mentioned in the report. (For example, the abolition of Income Support would lead to some increase in costs for Carers Allowance; the provision of basic income would reduce some costs for ESA; DHPs shouldn’t be removed).  These aren’t especially important for understanding the scheme in broader terms.  There are bigger issues in the detailed scheme which ought to be be resolved:

  • the position of pensioners
  • the interaction of BI with means-tested benefits such as HB and CTR, and
  • alternative methods of finance – the tax rates mentioned are too high, but it doesn’t have to be done all by income tax

I’ve never accepted the argument that Basic Income could resolve all the issues that bedevil our social security scheme.  What it could do, however, is to offer people a stable, secure, predictable income to cover essentials – as Child Benefit does.

 

 

 

 

3 comments

  1. Paul Spicker

    Thanks for the updated reference. There is still a clear, strong statement to say that National Insurance Contributions will be maintained, and indeed increased: “For all three schemes, National Insurance Contributions (NICs) above the Upper Earnings Threshold are raised from 2% to 12% and the Lower Earnings Limit is reduced to zero.” (By the way, if the means-tested benefits are maintained and NI is increased I can’t see how “a Citizen’s Income would deliver reduced marginal deduction rates.”)

    It’s not at all clear just what is included in the scheme and what isn’t, and Malcolm Torry refers out to other documents. Just last month he wrote this, in praise of own 2007 scheme:

    “In 2007, the Citizen’s Income Trust submitted evidence to the House of Commons Work and Pensions Select Committee’s Benefits Simplification enquiry. … In 2013 the figures were updated and the publication was reissued. [13] In each case, the Government’s accounts, along with population and other statistics, were employed to show that a Citizen’s Income could be paid for by reducing tax allowances and means-tested and contributory benefits. The figures are robust …”

  2. Malcolm Torry

    Dear Paul
    Gareth Morgan has kindly alerted me to your blog (which I didn’t know about, although I’ve read some of your books), and also to the correspondence that has followed your post of the 1st February.
    The figures contained in the 2007 and 2013 publications were indeed ‘robust’, in the sense that there was nothing wrong with the figures, and they showed that the schemes would have been approximately revenue neutral. However, as you know, our subsequent research showed that there would be losses for too many low income households if a Citizen’s Income at that level were to be implemented and means-tested benefits (apart from Housing Benefit and Council Tax Support) were to be abolished: hence our work on scheme B in the ISER paper. It is of course true that some households’ marginal deduction rates would rise: from 45% to perhaps 60% on high earnings: but for households floated off means-tested benefits by their Citizen’s Incomes marginal deduction rates could fall from anything between 65% and 96% to 35%. Recent research published in the most recent Citizen’s Income Newsletter shows how many households would be taken off means-tested benefits, and how many would be taken to within £30 per week of coming off means-tested benefits, which would mean that they would be more able to free themselves from means-tested benefits by increasing their earned incomes or reducing their costs.
    There would be a variety of ways of funding a Citizen’s income, and removing the Personal Allowance and increasing NICs on high earnings would be just two possible methods. There would be others: and we would be pleased to see research on alternative methods. What matters is the implementation of a Citizen’s Income, which would have the same ffect that Child Benefit already has for families with children: a level of financial security when everything else is insecure; and a benefit that comes with no stigma attached and with no bureaucratic intrusion. To extend these advantages across the entire population would offer clear social and economic advantages. Because of the complexity of the current tax and benefits system there are no simple answers to the question as to which would be the best funding method and which the best implementation method, which is why we shall continue with our own research and would be pleased to see lots of other people joining in.
    Many thanks for your interest in this important debate.
    Malcolm
    Dr. Malcolm Torry, Director, Citizen’s Income Trust, and Visiting Senior Fellow, London School of Economics
    http://www.citizensincome.org

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