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Citizen's
Income Newsletter, Issue 1, 2008 is now available
- Editorials:
on growing inequality and employment incentives
- News
items
- Conference
reports
- The
main article is Eight Challenges for Basic Income,
by Tony Fitzpatrick
- Book
reviews
- A
research note on the utility or otherwise of being employed
for a few hours a week
For
previous Citizen's Income Newsletters, please click on the
'resources' button on the right
Both
the House of Commons and the House of Lords support a Citizen's
Income approach to the reform of tax and benefits
Three
years ago we published the results of a survey of members
of the House of Commons in which we asked whether a Citizen's
Income might be a useful basis for reform of the tax and
benefits system. We have recently completed a survey of
members of the House of Lords. Click
here to see the results.
The
Work and Pensions Select Committee's report Benefits
Simplification
It
is a real pleasure to read the Work and Pensions Select
Committee Report, Benefits Simplification, published
on the 26th July. The committee has studied the sources
of complexity (and particularly tax credits and means-testing),
the benefits of simplification, the possibility of introducing
a 'complexity index', the effect of high marginal deduction
rates on incentives to work, the claimant experience, and
the Department for Work and Pensions' Benefit Simplification
Unit. The final chapters of the first volume of the report
discuss possibilities for incremental change towards greater
simplicity and also possibilities for fundamental change.
Conclusions
and recommendations include the following:
- 'There
is a direct correlation between the amount of mean-testing
and the complexity of the system. We recommend that the
Government specifically evaluates the current caseload
of means-testing in the system as part of its simplification
efforts and, where possible, reduces it.' (paragraph 51).
- 'The
contributory principle adds an additional layer to the
current system and research suggests it is no longer as
relevant to the benefits system as it once was. We therefore
recommend that the Government reviews whether or not the
contributory principle remains a relevant part of the
modern benefit structure' (paragraph 55).
- 'There
is no Government Minister, department or unit which is
attempting to address the combined and overlapping complexities
of the benefits and tax credits systems. This omission
must be urgently addressed' (paragraph 148).
- 'We
recommend that the Government undertakes research to investigate
whether there remain some groups of claimants for whom
work does not offer the best route out of poverty, and
more detailed analysis of the impact of high Marginal
Deduction Rates in parts of the benefits system on overall
work incentives' (paragraph 176).
- 'It
is not enough to rely on 'masking' complexity; there is
a need to go further and address the rules of the different
benefits and the structure of the system itself' (paragraph
262).
- 'the
Government should establish a Welfare Commission, similar
in format and remit to the Pensions Commission, which
can take a holistic view, model alternative systems, and
come up with a considered blueprint for a way forward.
A benefits system which DWP staff, claimants and welfare
rights advisers have a hope of understanding is in everyone's
best interests' (paragraph 381).
A
Single Working Age Benefit (SWAB)
This
report is one of those cases where the most important material
is in the appendix. Appendix A contains the committee's
detailed proposal for a single working age benefit (SWAB):
'The
SWAB would provide an income for anyone who is legitimately
resident in the UK and is both willing and able to work
(or is exempted from the latter criterion because of illness,
disability or caring responsibilities ......). It would,
therefore, replace Income Support, Jobseeker's Allowance
and the planned Employment and Support Allowance, and the
need for any linking rules for people moving between them'
(p.108).
The
SWAB would continue as an in-work benefit, and would be
reclaimed through the tax system at a Government-agreed
Marginal Deduction Rate (MDR) as wages rose until it was
exhausted (the MDR taking into account current rates of
income tax and national insurance contributions). The SWAB
would therefore replace tax credits and all benefits withdrawal
rates and would avoid the need for people moving in and
out of employment to notify changes. People already in work
would be able to claim the SWAB. The system would abolish
means-testing at the point of application. Additions for
carers and people with disabilities would be paid, and a
SWAB claim would automatically trigger Housing and Council
Tax Benefits.
Importantly,
the SWAB would have no long-term rate (thus eliminating
an employment disincentive), and the individual (and not
the household) would be the claimant unit.
Nine
tenths of the way to a Citizen's Income
The
SWAB is nine tenths of the way to a Citizen's Income and
to all of the advantages which a Citizen's Income would
offer, particularly in relation to simplicity and to incentives
to increase earnings. All that would be required to complete
the journey towards the greatest possible simplicity and
employment incentives would be to replace the MDR with a
reduction of personal tax allowances (which would have the
same effect as the MDR), to remove the seeking-employment
and incapacity tests (which, in the absence of an MDR, would
become irrelevant), and to enable every individual to claim
a SWAB, whatever their earnings.
A
way forwards
The
Work and Pensions Select Committee has put us all in its
debt by publishing a wide-ranging and thorough report, and
by suggesting a policy change which coheres with the conclusions
it comes to and the recommendations which it makes. We would
encourage Her Majesty's Government to study the Committee's
report carefully, and in particular to give early attention
to the contents of Appendix A.
We would also, of course, encourage the Government to study
carefully the evidence which the Citizen's Income Trust
submitted to the Committee: evidence which nicely complements
the committee's proposal.
The
Select Committee's report was published on the 26th July
2007 by authority of the House of Commons by The Stationery
Officer Ltd., ref. HC 463 (2 volumes). The first volume
can be found at:
http://www.publications.parliament.uk/pa/cm200607/cmselect/cmworpen/463/46302.htm
The Citizen's Income Trust's evidence to the committee can
be found in the second volume on page Ev 84 at
http://www.publications.parliament.uk/pa/cm200607/cmselect/cmworpen/463/463ii.pdf
On
the 5th December the House of Commons debated the report.
To read the debate click
here
The
Seventh Congress of the U.S. Basic Income Guarantee Network:
WHAT
NEXT: FRAMING A BIG DISCUSSION FOR THE NEXT ELECTION AND
BEYOND. March
7-9, 2008, Boston Park Plaza Hotel, Boston, MA: for details,
click here
As
part of its Teaching Citizenship in Higher Education
project the University of South-ampton has developed
a teaching resource on Citizen's Income. Click
here to see it.
The
Department for Work and Pensions has published Welfare
in the Future, a wideranging review by David Freud.
To read the report, click
here Chapter 6 will be of particular interest. It is
summed up by the following section of the Executive Summary
(pp. 9,10)
'There
is a strong case for moving towards a single system of
working age benefits, ideally a single benefit, in order
to better support the Government’s ambition of work
for those who can and support for those who cannot. A
range of international evidence suggests that complexity
in the benefit system acts as a disincentive to entering
work, and that badly designed systems create unemployment
and/ or poverty traps. The UK has made progress on both
(and virtually eliminated the unemployment trap) but it
can go further still. It should also do more to change
the perception, where it exists, that moving into work
does not pay; a perception which can be a function of
fragmented delivery by the central benefit system, local
authorities and tax authorities.
'The report has considered a number of options for fundamental
reform of benefits but none is straightforward and all
would create winners and losers. Debate on further reform
should be informed by detailed modelling on the impacts
on work incentives, costs and benefits (for individuals,
the Exchequer and society) and take into account the interactions
between all out-of-work and in-work support. This should
call on existing expertise in academia, think-tanks and
the private and public sectors.'
Our
comment: Whilst tax credits have ameliorated the unemployment
trap to some extent, marginal withdrawal rates remain at
85% and sometimes 95% for many family types (see the evidence
in the Department for Work and Pensions Tax
Benefit Model Tables); and any assessment as to whether
a trap has been ameliorated has to take into account the
administrative difficulties which individuals and families
face when someone crosses the boundary from unemployment
to employment.
We
entirely agree that there needs to be debate on further
reform. We shall be happy to participate.
The
results of our recent surveys
of the House of Commons and the House of Lords suggest
that members of both houses want to see radical reform as
well.
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