Skip to content

The ideal and realities of a citizen’s income

March 4, 2015

Debate about a basic income paid to every citizen needs to confront important choices about what kind of social support we are willing to pay for

MY PAPER PUBLISHED BY JOSEPH ROWNTREE FOUNDATION

The apparent popularity of the idea of a citizen’s income feels rather baffling when set against other indicators of public opinion. If we believe the British Social Attitudes Survey, taxpayers’ attitudes towards people on benefits have hardened even with today’s tight requirements to look for work if you’re not earning. Why then should an unconditional payment to each citizen be acceptable? The answer given by advocates, that people will support a citizen’s income because everyone will receive it, simply will not do.  The money has to come from somewhere, and any citizen’s income system will have net losers as well as gainers, once the taxation needed to pay it is taken into account.

The appeal at least of the idea of a baseline income for all citizens shows that we retain some sense of solidarity among our country’s core values. We do want to ensure that none of our fellow citizens are destitute. We like the idea that everyone should start from a common baseline, a minimum living standard, on which they can build. And the citizen’s income promise that this would create a simpler system of income support, in which means-testing becomes unnecessary and  people can therefore thrive on their own efforts, addresses many things people dislike about our present system.

If this idea is to get anywhere, however, people need to understand its huge implications. My analysis of the potential for a citizen’s income published today suggests that it would not only remove conditionality but require far greater tax rates, with income tax possibly at 50% or more if it were to pay for a citizen’s income providing a minimum, adequate standard of living.  Quite simply, to pay for an unearned income for everyone, you need to take earned income back in taxes much faster than you do now.

So a citizen’s income does represent a huge act of solidarity, and an acceptance that a much greater  proportion of the income we earn will be redistributed by the state. Such radical measures are unlikely to feature in party manifestos published in the next few weeks. I fear that the implications of a citizen’s income, once understood, will put it off the political map for the present

However, there are two implications of the citizen’s income idea which could be useful in guiding long-term thinking about what kind of protection we are giving to low income households. The first is that, under the Universal Credit as under tax credits, low income working families face extremely high effective marginal tax rates – typically 76 per cent, including the amount by which in-work support is reduced as income rises. A citizen’s income implies that effective tax rates would be no greater on a low income than a higher one, giving a big cash boost to such families. It would be perfectly possible to move towards a more unified rate of income withdrawal under the Universal Credit – by reducing taper rates and increasing income tax rates. Politics may not make this possible today, but it is a policy aspiration for the future.

The second implication is that the citizen’s income idea should prompt a rethink of the measures we take to make decent housing affordable to low income families. Our main tool for doing this at present is Housing Benefit, a means-tested payment to help cover rent. Keep this system and you gravely undermine the objective of a citizen’s income, because a large proportion of the population will remain dependent on means-testing.  Yet it would be almost impossible to replace it with a flat-rate payment, as part of the citizen’s income, given today’s housing market. Set the payment too high and it would be absurdly expensive; set it too low and many families would be condemned to overcrowding or homelessness; adjust it to local housing markets and manual workers in Gateshead would be subsidising Kensington millionaires. In a Britain with a much better supply of genuinely affordable housing, on the other hand, these drawbacks would be lessened.  This strengthens the case for helping people afford housing by making it cheaper, not just by offering means-tested help to pay the rent.  Even without a fully-fledged citizen’s income, the availability of homes at reasonable rents at which anyone could access adequate housing would make it far simpler to set a safety-net level of income for all households.

Advertisements

From → welfare system

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: