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Editorial
The
Flat Tax Proposal
During
August there was much discussion in the press about a 'flat
tax' ( For instance, in The Daily Telegraph on the
19th August) a single-rate tax on all income. The idea has
sometimes been likened to the Citizen's Income proposal
because there is clearly a similarity: simplicity, and therefore
both efficiency and transparency. But there the similarities
end. As we showed in the third edition of this newsletter
for 2004, a Citizen's Income will redistribute somewhat
from rich to poor (and in the sample scheme outlined in
that newsletter net income rose 26% for people in the lowest
earnings decile and fell 4% for people in the highest earnings
decile). With the flat tax proposals circulating during
the summer net income would rise for people in the higher
earnings deciles and would be likely to fall for people
in the lower earnings deciles.
If
there is a problem with marginal tax rates of 40% for high
earners, there is even more of a problem with the 85% or
more marginal tax rates experienced by people on low incomes
(See April 2004 Tax Benefit Model Tables (Department
for Work and Pensions, 2004): http://www.dwp.gov.uk/asd/asd1/TBMT_2004.pdf).
Turning personal tax allowances into a Citizen's Income
would go some way towards solving this problem.
Subsidising
low wages
In
December 2004 the Joseph Rowntree Foundation held its centenary
conference. The first keynote speaker was Professor Jonathan
Bradshaw, who told the audience that the State provides
more support for market earnings at half average earnings
than any other EU country, and that in effect the taxpayer
is providing a large subsidy to low-paying employers.
This is because tax credits are reduced as wages rise, making
it worthwhile to the employer, and not very disadvantageous
to the employee, for wages to be low.
A
Citizen's Income would, of course, have a different effect.
Because it would not be withdrawn as wages rise it would
not be at all in the employee's interest for wages to remain
low. The employee will always be advantaged by higher wages,
so low-paying employers would be likely to see their employees
going elsewhere, or improving their skills so that they
could seek higher-paid employment, or going self-employed
- because as self-employed earnings rose the self-employed
would retain their Citizen's Income. Low-payers would need
to increase wages to the market rate, which would be good
for competition, good for the economy, good for skills levels,
and good for employees.
Carbon
taxation
In
2000 a Royal Commission on Environmental Pollution recommended
carbon taxation as a means of reducing the consumption of
carbon fuels. (See: Royal Commission on Environmental
Pollution, Twenty-second Report: Energy - the changing climate,
Cm 4749, London: Stationery Office, 2000.) The possibility
that such a tax could "provide revenue for improving
social assistance schemes" (Meg Huby, 'The Sustainable
Use of Resources on a Global Scale', Social Policy and
Administration, 35 (5), December 2001, p.533) has of
course been noted, and the Green Party would like to see
both a carbon tax and a Citizen's Income.
Recent
debate on how to fund a Citizen's Income has concentrated
on reducing tax allowances and means-tested and National
Insurance Benefits rather than on new forms of taxation.
This tendency has probably been driven by the feeling that
one radical reform is difficult enough for people to digest,
and that two would be impossible. A Citizen's Income, funded
by income taxation, is a single radical reform, and carbon
taxation is also a single radical reform. Combining the
two reforms risks alienating politicians, civil servants,
and the general public.
Another
reason for the caution in advocating carbon taxation is
that such taxes tend to penalise the poor. To increase the
duty on petrol hurts poorer rural drivers more than it hurts
wealthy urban drivers of 4x4s. However, such hesitancy will
be reduced by a recent report, Green taxes and charges:
Reducing their impact on low-income households by Paul
Ekins and Simon Dresner (York: Joseph Rowntree Foundation,
2004). This reports on a research project undertaken by
the Policy Studies Institute and funded by the Joseph Rowntree
Foundation. The report concludes that a combination of fuel
duty, congestion charging and a car purchase tax graduated
on CO2 emissions would reduce the use of carbon fuels, provide
additional revenues, and not penalise the poor more than
the rich.
News
Department
for Work and Pensions Welfare Reform Advisers Forum
The
Department for Work and Pensions has brought together a
panel of experts to form the Welfare Reform Advisers Forum
to discuss and contribute to the debate on wider welfare
reform.
The
Forum comprises prominent specialists and thinkers who will
meet to discuss the challenges of creating a welfare state
appropriate for the 21st Century. Their advice will help
inform the Secretary of State's thinking on issues in social
policy and welfare, and will give the Department a valuable
external perspective on one of the key areas of its remit
- including drawing on the network of professional and academic
expertise available in Britain.
Members
of the Welfare Reform Advisers Forum are:
- Suzanne
Fitzpatrick (Director, Centre for Housing Policy, Joseph
Rowntree Professor of Housing Policy, University of York)
- Lisa
Harker (independent consultant, Chair of the Daycare Trust)
- John
Hills (Professor of Social Policy, Director of the Centre
for Analysis of Social Exclusion, LSE)
- Martin
Knapp (Professor of Social Policy, Director of the Personal
Social Services Research Unit, LSE)
- Nigel
Mathers (Professor of Primary Medical Care at the University
of Sheffield and Head of Policy and Research at the
- Royal
College of GPs)
- David
Miles (Chief Economist, Morgan Stanley)
- Geoff
Mulgan (Director of the Young Foundation)
- Nick
Pearce (Director IPPR)
- Alan
Walker (Professor of Social Policy, University of Sheffield).
Administration
of Tax Credits
In
the 2004 budget the Chancellor announced that Her Majesty's
Revenue and Customs would be taking over the payment of
Working Tax Credit. From November 2005 all new WTC claims
are to be paid by HMRC directly into claimants' bank accounts
or by cash cheque. During the next few months HMRC will
be writing to employers to ask them to stop paying Tax Credits
through the PAYE system. By March 2006 all payments will
be made by HMRC direct to the claimant.
Tax
Credits for registered civil partnerships
The
Civil Partnership Act comes into force on the 5th December
2005. From that date people in registered same-sex partnerships
on Tax Credits will need to tell Her Majesty's Revenue and
Customs that they are part of a couple and they will need
to make a new joint claim.
Pensions
Policy Institute reports
The
Pensions Policy Institute has issued a Mid-project Review
report in which it states:
'The
PPI investigated whether the eligibility criterion for the
state pension should be on a contributory basis or on a
universal basis:
- Under
a contributory system, eligibility for state pension is
decided by how many National Insurance contributions you
have paid or been credited. Partial pension can be paid
for less than the full number of years. The work-based
nature of the Basic State Pension means that low earners,
part-time workers and carers are particularly susceptible
to receiving less than the full BSP.
- In
the universal system, eligibility is determined by how
long you have lived in the UK.
'The
current contributory system could be modernised to better
achieve its objectives. However, a universal system has
always been considered a feasible alternative and has support
as it is simple and inclusive.'
In
another report the Pensions Policy Institute asks: 'Will
coverage of the Basic State Pension improve over time ?'
The answer would appear to be that only by reducing the
number of years of contributions required to qualify for
the pension will coverage increase appreciably. The Institute
concludes: 'Some concerns and uncertainties would remain.
How low would the reduction in qualifying years need to
go to make a significant difference to the level of coverage?
And is it necessary to retain complex rules and administration
to determine eligibility for the BSP if the aim is for virtually
everyone to become eligible?'
Basic
Income Studies
Basic
Income Studies: An International Journal of Basic Income
Research (BIS) is a new international journal devoted to
the critical discussion of and research into universal basic
income and related policy proposals. BIS is published twice
a year by an international team of scholars, with support
from Red Renta Basica, the Basic Income Earth Network and
the U.S. Basic Income Guarantee Network.
The
inaugural issue of BIS will appear in 2006 with articles
by Joel Handler, Stuart White and Yannick Vanderborght and
a retrospective on Robert van der Veen and Philippe Van
Parijs's seminal article on 'A Capitalist Road to Communism'.
The retrospective includes a reprint of the original article
and a set of specially written comments by Gerald Cohen,
Erik Olin Wright, Doris Schroeder, Catriona McKinnon, Harry
Dahms, Gijs van Donselaar and Andrew Williams.
For more information, please visit the website at www.basicincomestudies.org
or contact the editors, Jurgen De Wispelaere and Karl Widerquist,
at editor@basicincomestudies.org.
Radio
12th
May 2005, Radio 4, Today:
a discussion took place on the future of pensions in which
David Blunkett, then Secretary of State for Work and Pensions,
suggested that as people are living longer there need to
be greater incentives to save for old age and equally there
need to be incentives to earn amongst the working age population
because the wealth they create supports our ageing population.
Malcolm Rifkind MP also recognised the need to provide incentives
for savings and suggested that the Basic State Pension needs
to be linked to average earnings. Steven Webb, for the Liberal
Democrats, asked for a simple state system because that
will enable private and employers' pensions to function
more efficiently.
Tuesday
11th October 2005, the Simon Mayo Programme, Radio 5 Live:
The context for this programme's discussion of tax credits
was the National Audit Office's decision not to sign off
the Government's accounts because of the high proportion
of errors made in the assessment of Tax Credit payments.
Another element of the context is the considerable amount
of recent discussion on the difficulties faced by families
who have been overpaid and from whom Her Majesty's Revenue
and Customs then claims back the overpayment, causing them
financial hardship. Philip Vince, the Citizen's Income Trust's
Secretary, took part in the discussion, and made the point
that a simpler system, based on a Citizen's Income, would
generate far fewer such effects.
Reviews
Ruth
Lister, Poverty, Polity Press, Cambridge, 2004,
xi + 238 pp, paperback, 0 7456 2564 9, £14.99 Oder
this book
You
might think there was nothing new to say about poverty.
You might think that Ruth Lister, who has worked on poverty
issues for most of her career, might think that she had
nothing new to say about poverty. This book would prove
you wrong on both counts.
What
Ruth Lister succeeds in doing is to construct a clear theoretical
framework for those thinking about and working on poverty,
from the perspective of a committed poverty activist and
analyst. She also clarifies many of the confused arguments
about poverty along the way.
She
clearly distinguishes concepts, definitions and measures
of poverty, and thereby unravels many a misunderstanding.
'Concepts of poverty operate at a fairly general level'
(p. 3), providing a framework for definitions and measures,
and shaping the meaning of poverty both for those who live
it and for others. They also incorporate discourses about
poverty - the ways in which it is discussed - and this is
important; in this book, language and images are seen as
key to the politics of poverty.
Definitions
of poverty 'provide a more precise statement of what distinguishes
the state of poverty and of being poor from that of not
being in poverty/poor' (p. 4). In practice, there may be
some overlap between concepts and definitions. But definitions
more clearly focus on what is key to poverty, rather than
on other factors which may also be shared by others not
living in poverty (such as violations of basic rights and
human dignity).
Measures
of poverty are often confused with definitions. But they
are narrower, in part because they can be applied to certain
characteristics of poverty more easily than to others. Understandings
of poverty derived from participatory approaches often highlight
aspects - such as powerlessness or 'voice poverty' - which
are key to the experience of poverty, but which are not
usually captured well in traditional measures. As Ruth Lister
says, 'to move straight to definitions and measures without
first considering the broader concepts can result in losing
sight of wider meanings and their implications for definitions
and measures' (p. 5).
This
seems straightforward, but is rarely clarified by other
writers on poverty, and by itself would justify the publication
of Poverty. But Ruth Lister also develops a theoretical
framework for understanding poverty which manages to link
redistribution, recognition and respect, and to bring together
the politics of redistribution and the politics of identity
as they apply to poverty. Her insight is that the politics
of identity as traditionally understood in recent political
philosophy need to be radically rethought in their application
to people experiencing poverty.
This
is because the relationship of people experiencing poverty
to identity politics is different. They do not want their
difference to be recognised - as women, black people or
disabled people might - but want to be treated as human
beings of equal worth alongside others. But the demand for
respect is nonetheless similar.
Respect
is a crucial theme in Poverty, not just because of these
topical theoretical debates but also because it is a central
factor emphasised by people experiencing poverty when they
are asked about their own experience. When we treat people
experiencing poverty with disrespect, we are engaged in
a process of 'Othering', which sees 'them' as different
from 'us'. It is the responsibility of politicians and the
media in particular to ensure that they do not encourage
this process, as they have so often done in recent years.
Whilst Ruth Lister draws on the work of others, in particular
Iris Young and Nancy Fraser, the fact that 'othering' is
increasingly recognised as a significant issue in poverty
analysis is due to this publication.
Poverty
also manages to highlight the agency of people experiencing
poverty, without thereby losing sight of the major structural
reasons for the existence of poverty. These reasons include
the network of inequalities (of race, gender, disability,
and age amongst others) within which poverty is framed,
which is given its due weight here.
Ruth
Lister emphasises the importance of 'voice' - the right
of people experiencing poverty to have a say in decisions
that affect their lives. And she demonstrates that their
experience is instead often one of powerlessness - or of
token participation which is insulting. This is where the
politics of poverty is related to debates about citizenship
and democracy, and cannot be taken forward positively in
the longer term without setting poverty within this wider
context. This book is a major contribution to that endeavour
- and so should be read not only by students and academics
but also by anti-poverty activists.
Fran
Bennett
Keith
Dowding, Robert E. Goodin and Carole Pateman (eds.), Justice
and Democracy, Cambridge University Press, Cambridge,
2004,
paperback, 0521545439, £14.99, hardback, 0521836956,
£40 Now avaiable in paper back £15.99. Order
this book
This
series of essays is a 'festschrift' in honour of the political
philosopher Brian Barry. Its aim is to bring together the
themes of 'justice' and 'democracy', which have tended to
be treated in parallel universes in political theory, and
to highlight the tensions that can exist between them. 'The
central questions about the relationship between democracy
and justice - or, more precisely, about the relationship
between different interpretations of "democracy"
and "justice" - remain largely unaddressed' (p.
6) the editors observe. In their introduction they illustrate
the potential interrelationships between the two using the
examples of participation, personal satisfaction, public
goods and gender. They then map out the possible patternings
of these interrelationships. They suggest that 'the need
for really hard choices between them arises only if "democracy"
and "justice" become greatly at odds with one
another; and the distance between them will deepen the nearer
societies are to being truly "divided" rather
than merely "multicultural"' (p. 14).
Most,
though not all, of the chapters address the interrelationship
between justice and democracy at some level. The majority
of them are written by political theorists for political
theorists and are not therefore for the fainthearted lay
person. A few of the chapters raise wider issues, however,
which may be of interest to Newsletter readers. In particular,
David Miller considers how the principle of social justice
might be applied to public goods, i.e. 'goods made available
to everyone without charge' (p. 127) such as street lighting
and sanitation. Julian Le Grand addresses the tricky question
of voluntary social exclusion and Philip Pettitt discusses
how to identify 'the common good'.
The
only explicit references to basic/citizen's income are to
be found in the introduction and in Keith Dowding's chapter.
The editors argue that, although usually discussed as part
of the social justice agenda, basic income 'might be seen
as a way of fostering democratization…A basic income
can allow all people, including those who provide vital
non-pecuniary services, to be seen as fully-fledged citizens.
Basic income might be important to democratic arguments
as well as ones concerned with social justice' (pp. 10-11).
It
is disappointing that none of the chapters uses the lens
of gender as an analytical tool, not least as the editors
observe that 'the interrelationships between justice and
democracy emerge particularly strikingly with respect to
groups historically denied both: not least women, half the
human race' (p. 11). It is also surprising given that one
of the editors is Carole Pateman who has done so much to
contribute to gendered debates on both democracy and justice,
yet there is no chapter by her (nor by any other woman).
The
aim of bringing together thinking on justice and democracy
is to be applauded. However, as someone who is not trained
in political philosophy, I found much of this book hardgoing
and I doubt whether it would appeal to many Newsletter readers
who also lack such a training.
Ruth
Lister, Professor of Social Policy, Loughborough University
and Citizen's Income Trust trustee.
John
Hills and Kitty Stewart (eds), A More Equal Society?
Policy Press, Bristol, 2004,
408 pp, paperback 1 8613 4577 1, £15.99, hardback
1 8613 4578 X, £44. Now avaibale in paper back £19.99.
Order
this book
When
Labour was elected to government in 1997, it inherited a
country that had experienced worsening inequality and poverty
over the twenty years. Between 1979 and 1997 the proportion
of households that were workerless more than doubled to
16 per cent. From the start of the 1980s until the mid-1990s,
the Gini coefficient - the standard measure of inequality
- rose faster in the United Kingdom than in ten industrialised
nations with available data (including Sweden, Germany,
France and Australia). By the mid-1990s the Gini coefficient
was higher (and so inequality was worse) than in any of
these other countries except the United States. The UK also
had the third worst record in terms of child poverty compared
with 15 other countries. Only the United States and Italy
reported a higher percentage of children living in worse
conditions by the mid-1990s.
Faced
with this deterioration a key test for any reformist government
is how successful it has been in stemming and reversing
this tide. So, has Labour created a more equal society?
The answer to this question is the preoccupation of this
edited collection. It provides a comprehensive and state-of-the-art
picture of Labour's record to date which will be of value
to researchers, policy-makers and students alike. Paraphrasing
a recent election slogan, the judgement of the book is that
while there are noteworthy achievements, much more remains
to be done, especially on inequality.
The
book starts off by setting out what it means by social exclusion.
Kitty Stewart and John Hills in their opening chapter note
that social exclusion became an important theme early on
in Labour's term of office. In August 1997, Peter Mandelson
announced the formation of the Social Exclusion Unit that
was intended to deliver 'joined-up' government by co-ordinating
the efforts of different departments to tackle exclusion.
Critics of Labour might worry that the social exclusion
agenda is spin that is intended to conceal an attempt to
exit from a commitment to address poverty and inequality.
Stewart and Hills are more sympathetic to the concept of
social exclusion, arguing that it helps capture the complex
nature of poverty and inequality. They adopt an understanding
of social exclusion that concentrates on employment, education,
health and social and political participation.
The
book charts progress in each of the above areas. When assessing
the overall impact of Labour, the book rightly concentrates
on assessing progress on an independent plane rather than
seeing whether the government simply lives up to its own
targets. Most of the chapters rely on quantitative data,
though the chapter by Anne Power and Helen Willmot report
findings from their qualitative study on the perceptions
of families who live in poor neighbourhoods. One of the
themes of the book is the plethora of initiatives that have
been pursued by government. For example, Liz Richardson
in her chapter on social and political participation draws
attention to schemes such as Fair Share, Community Chest,
Millennium Volunteers, Community Development Programme and
the Development Fund/Volunteer Recruitment Fund. While most
of the authors praise the government for paying attention
to the different facets of exclusion, and point to real
(though sometimes modest) achievements, they highlight the
persistence of important problems and doubt whether further
progress will be made without additional redistribution.
Abigail McKnight in her contribution on employment notes
that for working-age adults without children, the risk of
living in poverty has remained constant for all household
types between 1996/7 and 2002/3. Franco Sassi contends that
a much more aggressive redistributive policy is needed to
tackle stubborn inequalities in health.
The
above evidence is supplemented by case studies of particular
groups deemed to be at risk, looking at children, older
people, ethnic minorities, asylum seekers and residents
in deprived areas. Most progress seems to have been made
in relation to child poverty, with Kitty Stewart noting
that government spending on child-contingent support such
as tax credits are up by around 70% since 1997/8, and early
years spending on schools increased by around 80%. Stewart
records that the government is on track to reduce child
poverty by 25% by 2004/5. The percentage fall in child poverty
is better than anywhere else in the European Union. Much
less positive things can be said, however, about other areas.
Tania Burchardt shows that the treatment of asylum seekers
is lamentable.
So
what does this all add up to? The volume paints a portrait
of a government committed to tackling exclusion, though
arguably more interested in poverty, especially child poverty,
than inequality. The fact remains that while child poverty
has fallen during Labour's tenure in office, income inequality
has not altered much since 1997 (and on some indices, such
as the gap between the very top and the very bottom, has
risen slightly). Though it is not the book's brief to explore
in detail the utility of different policy tools, it is interesting
to speculate how further progress might be made. At least
two things can be said on this matter. First, the evidence
from most of the chapters points to the continuing significance
of redistributive taxation. We might add that it is worthwhile
examining the role that might be played by a Citizen's Income.
Second, some of the chapters hint at alternative policy
tools. For example, there is a glancing reference to the
Child Trust Fund and more broadly 'asset-based welfare'.
This approach looks to the stocks of assets that people
own as well as the flows of income that people receive.
These themes deserve further scrutiny, and such a study
could build from the solid foundations provided by this
book.
Rajov
Prabhakar
Howard
Glennerster, John Hills, David Piachaud and Jo Webb, One
Hundred Years of Poverty and Policy, Joseph Rowntree
Foundation, York, 2004,
paperback, 188 pp., 1 85935 221 9, £8.95 Order
this book
One
Hundred Years of Poverty and Policy traces the development
of the concerns of its title, offering an accessible overview
of poverty and policy 'then and now'. As the authors' state,
their aim is 'to look at current concerns taking the longer
view of where we have come from...' (p.9). While its ambition
then is not to be a comprehensive historical text it nevertheless
presents a detailed and interesting account of the changes
and conceptualisations of poverty and attempted solutions
from the late nineteenth century to the present day.
This
is a book of four parts with the last shorter section concluding
by looking at future challenges in the poverty and policy
arena and the potential outcomes of current anti-poverty
policy. Part one is an overview of the methods and findings
of some founding poverty researchers, paying particular
attention to the Rowntrees' contribution but also examining
and summarizing some less well-known studies by female researchers
and early investigations of rural poverty. It then moves
on to look at the construction of poverty lines, making
links between early poverty standards and contemporary measures,
followed by examining the changing patterns and causes of
poverty.
Glennerster
begins the second part of the book by examining the origins
of poor relief and the implementation and subsequent changes
in government anti-poverty strategies and state support
from the turn of the century to 1970. He notes that social
insurance was the preferred policy method for the avoidance
of poverty over this period. John Hills then briefly outlines
the social and policy changes throughout the 1980s and 1990s,
a period of burgeoning poverty, before exploring in depth
recent policy changes and the consequences of these for
different groups of people in poverty. He acknowledges the
1999 pledge by New Labour to end child poverty but also
the absence of any commitment to reduce poverty overall
and the conflict between the government's initiatives in
tackling poverty and inequality alongside their drive to
reduce public spending. Although since 1999 selective increases
in benefits have meant significant improvements in living
conditions, many others 'continue to live on incomes that
are falling in relative terms' (p93).
Part
three firstly examines the UK position on poverty relative
to Europe and some major industrial countries. The UK has
improved, especially in relation to families with children
and low paid workers. Indeed, around half of the recommendations
of the 1995 Joseph Rowntree Foundation's Income and Wealth
Inquiry group have come about, bringing positive benefits
to people in poverty. The book also notes however that health
and wage inequalities remain large and that means testing
is an increasing element of contemporary policy. The book
concludes in part four by suggesting that a combination
of policy avenues should be pursued concurrently, ones that
aim both to prevent poverty and also to aid people, financially
and otherwise, who may fall into poverty. The authors acknowledge
that much post-1997 policy has adopted this multifaceted
approach but that some 'gaps and challenges' remain. Unfortunately,
though, their appraisal fails to look beyond the possible
outcomes of current policy. This is a missed opportunity
to introduce the idea of alternatives, such as the citizen's
income, as a potential approach for addressing the complexities
of modern poverty which the book charts so well.
Despite
this lacuna this book is an excellent introduction to poverty
and policy over a century, being easily accessible to the
general reader but with the feel of a textbook, albeit a
superior one, most suitable for those in further education.
Illustrations and photographs add to the appeal, especially
for the student reader, making this a good book for those
coming to the issue of poverty and related policy for the
first time.
Jan Flaherty
Thomas
Aronsson, Karl-Gustaf Löfgren and Kenneth Backlund,
Welfare Measurement in Imperfect Markets, Edward Elgar,
2004,
viii + 196 pp, hardback, 1 84064 779 5, £59.95 Order
this book
If
you are interested in the way in which we keep our national
accounts (whether or not you believe that GDP and GNP are
useful measures), and if you have some understanding of
economic theory, then this book will interest you.
Traditional
measures tell us how much has been paid for goods and services
and how much has been spent on physical capital. The authors'
view is that "a comprehensive concept of consumption
should reflect consumer preferences, and not be restricted
to conventional goods and services; it would also be likely
to include other 'utilities' such as leisure and environmental
quality" (p.1). (Why the quotation marks around 'utilities'?
Leisure and a sustainable environment are utilities). "Similarly,
a comprehensive measure of net investments should include
all capital formation undertaken by society and not merely
changes in the stock of physical capital" (p.1). The
book is a detailed exploration of this 'national product
related welfare measures' or 'Green Net National Product'
agenda.
Market
failure and the effect of environmental damage are constant
and important themes, and chapter 6 is a useful discussion
of the difficulties facing green accounting and green taxation
in a world in which taxation is a national responsibility
and pollution a global problem. Unsurprisingly, chapter
8 concludes that "even if aggregate consumption has
the desired levels, green NNP in utility terms will fail
on a welfare measure when the distribution of consumption
is suboptimal. Therefore, a suboptimal distribution across
agents affects the welfare measure in the same way as other
market imperfections" (p.147).
The
mathematical models employed by the authors are applied
to such notions as 'taxation', 'welfare' and 'pollution'.
Whilst the mathematical models might be detailed and informative,
the real welfare economy is in fact full of much smaller
detail. The detail of tax and benefits systems has a considerable
effect on welfare, and it would be interesting to see the
authors apply their models to such issues as the impact
of means-testing on welfare measures.
Didier
Fouarge, Poverty and Subsidiarity in Europe: Minimum
protection from an economic perspective, Edward Elgar,
2004,
264 pp, hardback, 1 84376 605 1, £59.95 Order
this book
Whilst
member states of the European Union, and especially those
in the Eurozone, have agreed to European Central Bank and
European Commission control of economic policy instruments
previously under the control of member governments (for
instance, interest rates, value added tax rates and the
level of budget deficits), social protection systems remain
diverse and remain the responsibility of member governments.
Chapter
1 of this timely book studies different methods of economic
integration within the European Union, and notes that EU
states have chosen a flexible open method of co-ordination
(p.10); chapter 2 discusses the notion of subsidiarity;
and chapter 3 discusses the idea's relevance to economics
and argues that social protection can be a productive factor
in the economy, that it is therefore the proper concern
of public authorities, and that "the need for fine-tuning
in the social field at the European level follows from the
need to prevent distortive competition on the one hand,
and to preserve the social character of the European model
on the other" (p.71).
This
makes it both legitimate and important for member states
to agree European levels of social protection.
Chapter 4 employs Esping-Andersen's categorisation of welfare
states regimes and concludes that
"persistent poverty is expected to be lowest in the
Netherlands because of its universalistic approach to social
protection, next lowest in Germany and highest in Great
Britain. Our conjecture is that a status-oriented welfare
regime, such as Germany, is best able to absorb temporary
income shocks. Such shocks are likely to be large in Great
Britain, where market mechanisms play a more important role.
For this reason, too, household and employment shocks on
income are expected to be larger in Great Britain"
(p.92).
Chapter
5 studies income redistribution and poverty data for the
Netherlands, Germany and Great Britain, and finds that both
inequality and poverty (which are of course related, as
a relative definition of poverty is employed) are highest
in Great Britain. Chapter 6 studies the dynamics of poverty,
for poverty is as much an inability to increase one's income
as it is to be on a low income in the first place, and because
persistent poverty is very different from occasional poverty.
During the 1990s Great Britain is found to have had 50%
more recurrent and persistent poverty than Germany or the
Netherlands (p.156). The author hopes to see improved standards
of social protection, encouraged by the European institutions;
and chapter 8 identifies poverty traps as a particular difficulty
faced by any attempt to improve social protection (p.208).
An important conclusion, consistent with an open and flexible
co-ordination of social policy, is that
"member
states should agree on minimum floors that are relative
to the economic situation of the individual member states.
…… Obviously, in order to avoid poverty traps
and to circumvent possible disincentive problems, these
minimum floors should not be too high" (p.211).
What
might be more usefully co-ordinated are the structures of
social protection systems, for it is clear from the discussion
of poverty as a dynamic phenomenon that the ability to exit
poverty is the way to tackle it. So to co-ordinate a downward
trend in deduction rates for people on low incomes might
be a more useful co-ordination than agreeing on minimum
floors.
What is now required is a comparative study of deduction
rates (for a variety of wage levels and a variety of family
types and housing tenures) across the EU. The welfare regime
structure which gives the lowest deduction rates could then
be recommended to member states - and the economic benefits
of increasing employment, training and saving incentives
would mean that member states would be likely to accept
co-ordination around the model which provides the lowest
rates.
John Cunliffe and
Guido Erreygers (eds.), The Origins of Universal Grants:
An Anthology of Historical Writings on Basic Capital and
Basic Income, Palgrave Macmillan, 2004, xxix
+ 179 pp, hardback, 1 4039 1896 1, £50 Order
this book
This
is a marvellous resource for anyone interested in the history
of the Citizen's Income proposal, but will also be of interest
to people involved in the contemporary debate, for many
aspects of today's discussions can be found in these pages,
even though the most recent contribution is Lady Juliet
Rhys Williams' Something to Look Forward To: A Suggestion
for a New Social Contract, published in 1943: a proposal
for a flat-rate income conditional on employment or proof
that the claimant is seeking employment.
The
edition's introduction is a most useful summary of the contemporary
debate, though amongst the responses to the 'parasitism'
objection they might have included the point that people
who are not employed are already in receipt of benefits
and that because these are normally means-tested the incentive
to seek employment is reduced: a problem which is not a
feature of non-means-tested Citizen's Income.
The
second section of the introduction, 'Histories and Pasts',
shows how the Citizen's Capital and Citizen's Income ideas
have disappeared and re-emerged several times during their
histories. The third section is a brief history of the Citizen's
Capital idea (from Thomas Paine to modern Belgian advocates)
and the fourth a history of Citizen's Income (from eighteen
century radical land reformer Thomas Spence to 'the Bristish
tradition': Mabel and Dennis Milner, Bertram Pickard, C.
Marshall Hattersley, G.D.H. Cole, and the previously mentioned
Juliet Rhys Williams). The final section of the introduction
charts the "striking similarities within and between
these recurrent proposals for basic capital and basic income"
(p.xxv).
The
texts then follow: first those on 'Basic Capital proposals'
and then those on 'Basic Income proposals'.
Now
that Citizen's Income proposals are frequently discussed
in undergraduate and postgraduate courses on social policy,
welfare economics and social ethics, this book will be an
invaluable resource for teachers, and we hope that the editors
will consider a sequel: a collection of more recent significant
texts from such authors as James Meade, Keith Roberts, Philippe
van Parijs, Hermione Parker, Tony Walter and Tony Fitzpatrick.
If texts were chosen to illustrate different aspects of
the debate then such a Reader would be doubly valuable.
If
such a sequel is considered then the editors will need to
address the connected issues of terminology and definition.
'Citizen's Income' is more descriptive than 'Basic Income';
and, perhaps more importantly, is Juliet Rhys Williams'
work-tested income a Basic/Citizen's Income?
There
is a useful index, the list of references is about the right
length, and there is a well-deserved acknowledgement of
Walter van Trier's important role in charting the history
of the Citizen's Income idea.
Martin
Rein and Winfried Schmähl, Rethinking the Welfare
State, Edward Elgar, 2004,
480 pp, hardback, 1 84376 102 5, £79.95 Order
this book
This
book considers pensions in OECD countries, in the transition
economies of Eastern Europe, and in Latin America, and the
picture given is one of diversity but with a general trend
towards greater involvement of the private sector.
The
introduction is in many ways a concluding chapter in that
it draws conclusions from the collection as a whole.
The
first conclusion is that it is difficult to find examples
of unambiguous models. All the authors can find are hybrid
systems. Generally, public schemes survive but are less
than adequate, whereas private schemes are being extended
to larger sectors of the population. The second and related
conclusion is that private pensions have increased in value
as well as in coverage; the third that private and occupational
schemes are in some cases substituting for public systems
(for instance, through the invitation to opt out of SERPS
and into an occupational or private scheme) creating a closer
link between contributions and benefit levels; the fourth
that public pension schemes remain in place, especially
in transition economies, and that in many cases we are seeing
continuous change in the mix of different types of pension;
and the fifth that occupational schemes are in transition
from the defined benefit model to the defined contribution
model.
From
these five conclusions Rein and Schmähl draw the conclusion
that income inequality in old age will increase (because
high earned incomes can ensure larger private and occupational
pensions) - though it is the detail which matters, and some
countries are achieving a high public/private mix and a
low inequality.
The
introduction ends with a discussion of the notions of 'private'
and 'public'. Neither is a full description of the schemes
in view, for private schemes are regulated and subsidised
by governments, and public schemes are sometimes funded
by investment in the equity market or administered by private
companies.
Of
particular interest to British readers will be the first
chapter: David Blake on 'Contracting out of the state pension
system: the British experience of carrots and sticks' -
the carrot being the tax incentives offered to encourage
companies and individuals to opt out of SERPS, the second
state pension, and the stick the continuous reduction in
the value of the state pension. The chapter starts with
a thorough survey of pension schemes in the UK and of recent
reforms, including the means-tested Minimum Income Guarantee
(MIG) and the subsequent Pension Credit which penalises
saving rather less than the MIG did; it discusses recent
reforms of private pensions and the political economy of
pension reform (concluding that it was easy to reduce the
value of SERPS because it was fairly new and few people
felt much loyalty towards it, and that reduction in the
value of the basic state pension has been easy to achieve
because it is only low earners who rely on it and they have
little political influence); and it debates the risks and
returns of different types of individual- and employer-funded
schemes (concluding that the industry and government could
bear more of the risk which pensioners currently bear).
The chapter closes with a section on the investment performance
of investment fund assets and a concluding section which
outlines regulatory changes which might improve the performance
of private pensions. The final suggestion is that pensions
will only be adequate when contributions are mandatory.
Subsequent
chapters are on Japan's experience of contracting out and
contracting back in again; on the mandating of contractual
agreements in Australia, Switzerland and the Netherlands;
on Germany, the USA and Sweden, where carve-outs have occurred
(i.e., government subsidising private or occupational pensions
rather than directly funding higher state provision); on
the different types of private/public mix available; on
governance of pension funds; on Latin America and economies
in transition; and on the impact of different systems on
pensioner wellbeing.
Two
minor points: this book is about pension reform. The introduction,
the blurb and the title suggest that the trends identified
relate to the welfare state as a whole, but this is not
argued. The book is an excellent example of good research
leading to well-argued conclusions - except over this important
issue. Maybe it was the publisher who wanted the title so
the authors agreed to give the non-argument a line in the
introduction. They shouldn't have done.
And
there is a problem over terminology. I have used 'private'
to mean pension plans sold to individuals and funded by
them. The
authors
use 'private' to mean that, to mean occupational pensions,
or to mean both. Terminological clarity is important, and
it should have been imposed by the editors.
A
major point: neither the editors nor any of the authors
give any space to options for reform of state pensions -
and the final chapter of the book suggests that they should
have done:
'The
British, Dutch and Swedish examples would seem to suggest
that the hypothesis that 'the smaller the role of public
sources the higher the level of inequality' needs to be
qualified. The proposition holds under certain conditions,
namely, when coverage of the occupational pension is limited
to a small segment of the population and when public pensions
have a low and declining replacement rate. The issue of
the relative role of public and private pensions is very
much on the political agenda of many countries, hence
understanding under what conditions occupational pensions
can reinforce rather than threaten objectives to equalize
income and reduce poverty becomes important.
'All
countries seem to be moving towards a public-private mix.
Our analysis shows that it is not the mix per se that
affects the wellbeing of the aged, but how the mix is
designed' (p.432).
If
this is the case, then careful attention needs to be given
to the adequacy of state pensions, and particularly to the
level of the Basic State Pension in the UK and to its design.
Redesign of the Basic State Pension as a Citizen's Pension
(as in the Netherlands - see pp.124ff) would be a good way
to start.
George
J. Miller, Dying for Justice, Centre for Land Policy
Studies, Teddington, 2003,
74 pp, pb, 1 901202 04 6, £7.95. Order
this book
George
Miller has two convictions: that poverty causes ill health
and early death, and that raising public revenue from economic
rent of land and natural resources (i.e., from land's contribution
to wealth creation), rather than by taxing wages and investments,
is the way to fund the NHS. So this is really two books:
one about health, and one about taxation. The 'health' book
asks for higher 'welfare' provision (without being too specific
about what that would look like) and increased spending
on the NHS - though it isn't obvious (and the author is
aware of this) that higher funding of the NHS will generate
significantly less illness or significantly less early death.
The kind of 'welfare' is of course crucial, because an increase
in means-tested social security payments might exacerbate
rather than help the situation. The 'taxation' book recommends
the abolition of tax on wages and investment, and the collection
of tax on the economic rent of land. Whilst a Chancellor
might consider the latter proposal (for, as the book shows,
there are good arguments for it), they are unlikely to consider
the former, for to collect smaller amounts of tax by a variety
of routes is easier politically than to collect larger amounts
via a smaller number of routes.
The
book is somewhat disorganised and repetitive, and is trying
to do too many things at once, but the Centre for Land Policy
Studies should continue to encourage debate on the taxation
of economic rent. A particular issue on which they might
wish to sponsor high-quality research is the Council Tax,
which, whilst more like a tax on economic rent than was
the Community Charge, is not the same as the old rating
system and doesn't have the same effects. The business rate
could also be included in such a study. After such a study
the Centre might like to sponsor public opinion soundings
on whether an extension of such taxation would be preferable
to higher income taxes. Such an exercise would give them
useful information as to whether their proposals for national
taxation of economic rent would be likely to be pursued
by any future Chancellor.
Edward
N. Wolff (ed.), What has Happened to the Quality of Life
in the Advanced Industrialized Nations?, Edward Elgar,
2004,
424 pp, hardback, 1 84376 193 9, £75 Order
this book
Average
per capita income has risen faster in the USA than in other
industrialized countries, but whether American citizens'
'quality of life' or 'well-being' has increased is another
matter. This book assesses established measures of well-being,
proposes new ones, compares the options, and examines empirical
data in relation to proposed indicators.
In
the introduction, Amartya Sen's and Monroe Lerner's definitions
of well-being in terms of the individual's ability to function
well in individually- and socially-determined roles is outlined,
and income is related to these definitions as one of the
resources required for high-level functioning. In chapter
1 Wolff shows that in the USA the poorest have become relatively
poorer since 1973 and that household debt is growing. In
contrast, chapter 2 shows that inequality of consumption
expenditure has not increased during the same period. In
chapter 3 Jencks, Meyer and Single show that if a different
price index is employed, and if per capita income rather
than household income is measured (because average household
size has decreased), then families with children have not
seen their resource positions worsen. Chapter 4 pursues
the debate as to which price index should be used.
Chapters 5 and 6 offer comparisons between the USA and other
industrialized nations and reveal the relatively greater
inequalities experienced by Americans. Only in the UK is
the gap in real incomes between low-income and middle- and
high-income groups greater than it is in the USA.
Chapter
7 studies asset ownership amongst different racial groups
in he USA and discovers significant inequalities; and chapter
8 finds that in Chile, because incomes are generally too
low to allow significant levels of saving, increasing human
capital amongst poorer sections of society has little effect
on wealth distribution.
The final chapters study additional factors related to well-being:
stature, time use, worker rights, and the quality of the
environment.
An
important conclusion of Edward Wolff's chapter on recent
trends in living standards in the USA is that sluggish growth
in labour earnings hasn't been affected by substantial progress
in educational attainment: "Despite incredible success
in reducing disparities of schooling within the American
population, the inequality of income has not only failed
to decline but has actually risen sharply over the last
three decades. These results show a growing disconnection
between earnings and schooling" (p.22).
The
reason for slow growth in labour earnings is a national
income shift from labour to capital: one of the reasons
for growth in income amongst the rich. So education alone
is not the answer, and 'education, education, education'
isn't either.
Wolff
recommends increasing the minimum wage, extending the Earned
Income Tax Credit, redistributing income through the tax
and benefits system, and re-empowering labour. But the problem
with the Earned Income Tax Credit is that it is withdrawn
as earned income rises, so to extend it would extend the
poverty trap. What is surely required is a redesign of the
tax and income support system (p.23) in the direction of
universality so that it reduces the poverty trap and enables
higher earned income to result in higher net income.
Current
and future projects
- We
hope soon to have all of our publications available for
downloading from our website. The project is starting
with BIRG Bulletins and Citizen's Income Newsletters and
we shall then move on to our other publications.
We would like to be able to undertake the following projects:
- We
have recently undertaken a research project amongst MPs
involving a questionnaire asking about options of reform
of social security and taxation. We are now planning a
similar project amongst members of the House of Lords.
Other similar surveys might then follow (£900).
- A
series of seminars in a variety of centres drawing in
participants who are experts in a variety of the issues
which will need to be considered if a Citizen's Income
is ever implemented (£14,000).
- A
teaching pack for University teachers who wish to incorporate
sessions and assignments on the economic, social science
and philosophical aspects of the Citizen's Income debate
into existing modules or who wish to teach an entire module
on the subject. The pack will include materials for teachers
and students, and the materials will include powerpoint
and other presentations and printed resources. Much of
the material will be specially commissioned (£25,000).
- A
Commission on a Citizen's Income's role in future reform
of tax and benefits (£150,000).
These
and future projects would be a lot easier to manage if the
Trust again had a paid director, a part-time administrator
and an office base (£65,000 per annum).
If
you would like to support any of these projects financially
then please contact the Director, Dr. Malcolm Torry.
A
volunteer staff team
The
trustees of the Citizen's Income Trust have agreed that,
in the absence of any grant-making trust having the promotion
of debate on the reform of tax and benefits amongst its
grant-making criteria, we shall continue our work on the
basis of voluntary labour and a limited budget. The Director,
Dr. Malcolm Torry, offers half a day per week to the work
of the Trust, and the trustees offer what time they can.
In order to be effective we need some additional skilled
voluntary labour, in particular to do the following tasks:
- Reading
the press and keeping in touch with other media and responding
(in consultation with the Director) where relevant
- Attending
conferences and fostering relationships with think-tanks,
political parties, etc.
- Monitoring
relevant research and writing summaries, papers for conferences,
etc.
Anyone
interested in applying to work in a voluntary capacity for
the Trust should contact the Director.
The
Citizen's Income Trust Essay Prize for 2006
The
Citizen's Income Trust invites entries for its 2006 essay
prize. Entrants should be studying at a UK university during
the academic year 2005/6 at undergraduate or graduate level.
Essays should be in the fields of philosophy, political
science, social policy, economics, or other social sciences;
should be of up to 5,000 words in length; and should contribute
to the current debate on the desirability and feasibility
of a Citizen's Income: an unconditional, nonwithdrawable
income payable to each individual as a right of citizenship.
Provided that at least one entry is of sufficient quality
the winner will be awarded a prize of £500 and the
winning essay will be published in the Citizen's Income
Newsletter.
Rules:
A hard copy of the essay, along with the entrant's name
and address, should be sent to: Dr. Malcolm Torry, Director,
Citizen's Income Trust, P.O. Box 26586, London SE3 7WY,
and an electronic version (in Word or Rich Text Format)
either by disc to the same address or by email attachment
to info@citizensincome.org. Confirmation that the entrant
is studying at a UK university needs to be sent, signed
by a faculty member. The closing date is 1st May 2006. No
trustees, employees, or former trustees or employees of
the Citizen's Income Trust, or their relatives, may enter.
The judges' decision is final, and no correspondence will
be entered into.
©
Citizen's Income Trust 2005
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