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Editorial
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.
Their
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
What
will be clear to regular readers of this Newsletter is that
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 Marginal Deduction
Rate 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.
In
particular, we would 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
Office 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
News
The
second edition of Basic Income Studies is now available
on www.bepress.com/bis. Readers might wish to know that
this electronic press has a guest access policy. Guests
to the site can read articles once they have filled in a
form which alerts their institution to the existence of
the journal.
A
Joseph Rowntree Foundation research project has shown
that 'point-in-time studies underestimate the scale of poverty
in the UK. Over an eight-year period, a third of the population
experience poverty at least once: twice as much as the poverty
rate at any one time'. The 'dynamics research' approach
has highlighted three different types of poverty: transient,
persistent and recurrent. While most people who enter poverty
leave quickly, a minority experience persistent poverty.
The study has also found that poverty in one generation
increases the chances of poverty in the next. The full report,
A Review of Poverty Dynamics Research in the UK, is available
as a download from www.jrf.org.uk.
The report concludes: 'strategies to eradicate poverty are
undermined if they "cream off" those experiencing
transient poverty, if persistent poverty is not targeted,
and if re-entry is not safeguarded against.'
The
Conservative Party's Social Justice Policy Group has
published its report, Breakthrough Britain. Volume 2, on
'Economic Dependency and Worklessness', suggests as a policy
proposal that 'at low wages, there should always be a tangible
reward for working longer hours, and/or working for higher
wages. Our focus should be on ensuring that the net minimum
wage is rewarding, rather than simply looking at gross minimum
wage. Hence, for gross incomes below 40 hours per week at
minimum wage, we should seek to reduce the marginal tax
and benefits rate over the long term, so as to ensure worthwhile
take-home pay' (p.91). To see the report, go to http://www.conservatives.com/tile.do?def=news.story.page&obj_id=137513
The
Institute for Public Policy Research (IPPR) has urged
the government to abolish jobseeker's allowance, income
support, incapacity benefit and carer's allowance and introduce
instead a single benefit paid at one flat rate for all out-of-work
claimants. In a research report, One for all: active welfare
and a single working age benefit, IPPR argues that the current
benefits system is too complex to be effective, presenting
barriers to claimants who want to move into work, and that
a single benefit with entitlement based simply on the grounds
of not being in work would be fairer and more transparent.
Under the IPPR proposal
- the
new benefit would be calculated on an individual rather
than household basis, reducing the need for people to
register changes of personal circumstances;
- anyone
of working age who is out of work would be guaranteed
a basic replacement income for 12 weeks and would not
need to have a medical assessment or lengthy means test;
- the
level of the benefit would be the same for all claimants
regardless of why they are out of work, their previous
work record or the length of time on the benefit;
- after
the initial 12 week period there would be a means test
that would ensure resources would be targeted only at
those in financial need;
- there
would be no risk to a claimant's benefit if they tried
working because the benefit would be the same before and
after a period in work;
- income
replacement benefits and additional needs benefits would
be separated so that the level of the former could be
set at a level that 'preserved work incentives for all';
and
- needs-based
benefits such as disability living allowance would be
enhanced and would ensure extra needs were met.
Based on these changes applying only to new claimants,
and if the level of the benefit was set at £60 a
week for an individual, IPPR suggests that the cost of
the proposal would be between £400 million and £1
billion, representing 5.1% of the DWP's annual budget.
For
more information, see the report at http://www.ippr.org.uk/publicationsandreports/publication.asp?id=552
Help
the Aged has reported that many pensioners find the
present benefits system muddled and confusing. There are
23 different benefits, each with different criteria. The
charity says that the whole system needs simplifying if
older people are to benefit from it properly. In particular,
Help the Aged wants to see an end to means testing. Many
older people feel uneasy revealing details of their personal
and financial affairs. The Government must find a fairer
way to ensure that all older people receive the money they
are entitled to. To see the report, go to http://www.helptheaged.org.uk/en-gb/Campaigns/PensionsAndBenefits/Benefits/default.htm#we
The
Centre for the Analysis of Social Exclusion at the
London School of Economics has discovered considerable short-term
variability in the incomes of many low income families.
These findings 'highlight the dilemma facing those administering
systems such as tax credits. Such systems can be run on
a basis of fixing payments for a while on the basis of past
income. Alternatively payments can be adjusted to reflect
current incomes. On the one hand, the degree of volatility
we find suggests that the justice involved in basing tax
credits on past incomes would be rough. On the other, this
volatility makes administration of a system intended to
adjust for it during the year - as the new tax credit system
attempts - very difficult indeed' (quoted from the CASE
annual report for 2006. For the full report see J.Hills,
A. McKnight and R. Smithies, Tracing Income: How Working
Families' Incomes Vary Through the Year, HMRC Research Report
15 / CASE Report 32).
Obituary
Hermione
Parker
Political
economist, parliamentary research assistant, writer specialising
in income redistribution, and co-founder in 1984 of the
Basic Income Research Group.
We
regret to announce the death of Hermione (Mimi) Parker on
11th July. She had been ill for some time and leaves a widower,
Arthur, three daughters and nine grandchildren. She was
one of the group of people who, back in 1984, founded the
Basic Income Research Group, from which the Citizen's Income
Trust developed. She edited our Bulletin (writing most of
it herself) until well into the 1990's.
Born
in Quetta in 1928, she was the daughter of Brigadier George
Fothergill Ellenberger, through whom she had strong links
with the Quakers. She was educated at Priorsfield School
at Godalming, and then at St. Andrew's University, where
she was awarded a double first in Politics, Political Economy
and Modern History. She spoke French fluently and some German.
After
university she worked in Paris where she learned to cook
before moving to Berlin and working in military intelligence.
There she met Arthur Parker, then a professional soldier,
to whom she was married for nearly 50 years. The next years
were devoted to bringing up their three daughters and living
wherever Arthur was posted.
As
the girls became more independent she became a Parliamentary
Research Assistant at the House of Commons, and worked for
Nick Edwards (now Lord Crickhowell), Sir Ralph Howell, Lord
Gilmour and Sir Brandon Rhys Williams.
In
1989 she published a book on the subject of the integration
of the tax and benefit systems, Instead of the Dole. It
put forward the idea of a Basic Income Guarantee as a feasible
alternative to our present welfare state.
In
1987 she also founded the Family Budget Unit and thereafter
served for many years as its director and driving force.
She was responsible for reports on budget standards for
families in 1998, for pensioners in 2000, and subsequently
for Muslim families and low paid families in the East End
of London in 2001.
After
Arthur retired from the army, they moved to Pirbright, in
Surrey, where Mimi created a beautiful garden and kept a
horse in the meadow beyond. She learned to ski in Austria
as a girl which was a lifelong interest, and played both
the piano and the violin. She was a person of impressive
energy and intelligence and her contribution to any cause
she supported was always invaluable.
Susan
Raven
Conference
reports
Institute
for Fiscal Studies conference, 'Reforming the tax system
for the 21st Century: The Mirrlees Review' (Cambridge, 12th
to 14th April 2007)
By
Anne Miller
The
purpose of the Mirrlees Review is '… to identify the
characteristics of a good tax system for any open developed
economy in the 21st century, to assess the extent to which
the UK tax system conforms to these ideals, and to recommend
how it might realistically be reformed in that direction.'
Sir James Mirrlees is an eminent Scottish economist and
Nobel Laureate. The Review is funded by the Nuffield foundation
and the Economic & Social Research Council.
This
conference was very well attended by some 140 delegates
(with a waiting list), from a variety of backgrounds including
from academia, the not-for-profit sector, civil service,
professions, and business. The press was represented by
the Financial Times and The Economist.
The
project was inspired by the approaching 30th anniversary
of the 1978 Meade Report (IFS, 1978). When the Meade Report
was published, being aware of his endorsement of social
dividend schemes, I was disappointed to find that a full
social dividend scheme was rejected by his committee in
favour of a two tier social dividend or a new Beveridge
Scheme, on the grounds that the necessary income tax rate
to finance a full SD of 40% of annual income would be 55%
(pp. 271-2). Much of the discussion of these alternative
schemes was taken up with presenting various means by which
benefits could be made to respond to different circumstances
(i.e., complicating it).
Working
drafts of the eleven chapters for the Mirrlees Review had
been posted on the IFS website before the conference. They
covered the following subject areas: Taxation in the UK;
Political economy; Tax rates on family earnings; Indirect
taxes; The main household tax base; Wealth taxation; Tax
implementation issues; Company taxation; Taxation of international
capital; Small business taxation; and Environmental taxation.
All of the papers are labelled as 'Draft paper - please
do not quote without the authors' permission', and the website
explains that the factual evidence in them cannot be guaranteed
for accuracy at this stage, and that the authors' views
expressed in them will not necessarily represent their final
ones, since the process is expected to be interactive, and
they welcome comments on the drafts.
The
format for most sessions, lasting about 70 minutes, took
the form of a short presentation of the chapter, followed
by one or two commentaries, each lasting about 10 minutes,
to which the authors responded, followed by 30 minutes of
discussion from the floor. This was quite a tight schedule
as so many people wished to comment. Fortunately, time-keeping
during the sessions was well disciplined. The conference
was intense and hard-working. On the last day there were
five overview sessions.
While
most of the conference was taken up by other aspects of
taxation, there seemed to be a general consensus that income
maintenance was probably the area that needed the most urgent
changes. Delegates thought that the income tax returns were
long enough, but they were horrified at the even greater
amount of information that was required from claimants every
time that they had a change in their lives. There was also
some comment about the large amount of economic theory in
the papers, and a lack of sociology or psychology. This
may reflect the fact that only 5 of the 32 authors of the
eleven chapters were women, and none were sociologists or
psychologists.
It
was also acknowledged that lobbying by different interest
groups, usually on behalf of privileged groups, led to the
many distortions and anomalies in the tax system.
The
chapter about tax rates on family earnings, with the working
title 'Optimal Household Labor (sic) Income Tax and Transfer
Programs', was the one that interested me most, with its
relevance to our own Citizen's Income concerns. This chapter
was one where the comment about a superfluity of economic
theory was relevant. Nearly half of the paper is devoted
to a fairly mathematical exposition and analysis of optimal
tax theory, which tries to arrive at a trade-off between
redistribution and the increased tax rates on income that
result, creating greater disincentives to work. Even if
its results are directly relevant to the design of benefits
and personal income tax, for most of us this could be delegated
to an appendix. One suspects that its inclusion was in deference
to James Mirrlees' chairmanship of the review, such subject-matter
being the main work for which his well deserved Nobel Prize
for Economics in 1996 was awarded.
To
me, this chapter on family earnings reads like a comedy
review of the 'good news, bad news' type, but without the
comedy. It recognises many of the shortcomings of the Tax
Credit systems currently in place, and recommends replacing
Tax Credits, Income Support, Job Seekers Allowance and possibly
Child Benefit, with a new system to be called Family Allowances.
This would be payable on an individual basis (good news),
but would pay less to the partners of a couple than to a
single adult (bad news), giving £40 pw to each single
adult, £80 pw to lone parents, £66 pw to a childless
couple, £82 pw to a couple with children, and £47.60
pw for each dependent child, paid to the mother. The penalisation
of couples does nothing to reduce the complexity of the
system, nor does it get rid of the distasteful cohabitation
rule. Nor was the problem of defining a non-married couple
addressed. One fairly convincing economic law predicts that
if the price of something is increased, people will choose
less of it. The penalisation of marriage and cohabitation
could contribute to the break up of two parent families,
especially those on low incomes, where family finance is
one of the main causes of divorce and separation.
The
recommendations are designed to avoid the very high effective
marginal tax rates which arise from the withdrawal of Means
Tested Benefits and the payment of income tax at the same
time. This is to be brought about by increasing the income
tax thresholds for each group (good news), so that after
a £100 pw earnings disregard, the withdrawal of Family
Allowance at 45% is completed first, before becoming liable
for standard rate income tax. (This is effectively a type
of Negative Income Tax system - good news). The standard
rate will become 25%, by abolishing the current 10% rate
and raising the current 22% rate to 25%. Adding 11% National
Insurance contributions gives an effective rate of 36%.
Then all tax payers become eligible for the higher rate
of income tax of 40% at the same threshold of gross income
as currently (£39,825 pa), making for some complicated
administration (bad news). They were also considering the
introduction of a higher rate of taxation of 46.5% on gross
incomes of about £60,000 pa.
Why
introduce 4 different rates of tax at roughly the same rate
(45%, 36%, 40% and 46.5%)? Why not just have a flat rate
tax of 40% between the £100 pw earnings disregard
and the higher rate tax of 46.5% (or even 50%) on gross
incomes over £60,000 pa?
While
the Children's Family Allowance is to be paid to the mother
(good news), it is also withdrawn from the mother at the
45% rate (bad news), compared with Child Benefit, which
can be regarded as the child's income but administered by
the mother. Child Benefit is easily the most effective,
efficient and successful income transfer system that we
have ever had. Why get rid of it? Why not extend it?
Lastly,
the Family Allowance is for all families with children,
low-income people without children, and unemployed people
(good news), but there will be a work availability requirement
for this latter group (bad news).
There
was much of interest in this conference. The once-in-a-generation
opportunity to review, and maybe influence the reform of,
the tax system is very exciting. There were some obvious
omissions. For instance, while the increasing inequalities
in income are well known, the greater and increasing inequality
of wealth was acknowledged, but not addressed. There was
a section on the taxation of income from capital (interest
and dividends), Capital Gains Tax, and the taxation of capital
transfers, but nothing on taxation of the holding of wealth.
There were references to a Land Value Tax, but no meaningful
proposal or analysis.
The
chapters, and the comments made on them at the conference,
are available on the IFS website, and they make for stimulating
reading.
References:
The
Institute for Fiscal Studies, 1978, The Structure and
Reform of Direct Taxation: Report of a Committee chaired
by professor J.E. Meade, London: George Allen &
Unwin.
www.ifs.org.uk/mirrleesreview/
Foundation
for International Studies on Social Security (FISS), Fourteenth
International Research Seminar on Issues in Social Security,
'Social Security, Happiness and Well-being' (Sigtuna, Sweden,
15-17 June 2007)
Report
by Bill Jordan
This
conference tangled with questions which have traditionally
been avoided in social security studies. Whereas both econometric
analyses of distributional effects and surveys of policy
consequences have been mainly concerned with final incomes,
these papers squared up to doubts about whether income is
really a reliable indicator of the quality of life of its
recipients.
This
radical departure has been brought about by the findings
of research on well-being, understood either as successive
moments of happiness or misery, or as overall satisfaction
with life. Because the Citizen's Income principle deals
in cash transfers, the lack of any long-term correspondence
between rising incomes per head and measured Subjective
Well-being (SWB), in affluent countries especially, is as
much a challenge to this as other social security approaches.
Should
the evidence of a minority of poor people who are as happy
as their richer counterparts affect our principles for redistributive
equity? Is the finding that believers and religious activists
enjoy higher levels of SWB grounds for faith-based welfare
agencies? Are citizens of countries with large social assistance
components of their benefits systems less supportive of
poverty relief and if not (as turns out to be the case),
what does this imply about the stigma of poverty in such
societies?
The
participants in this seminar were clearly both puzzled and
invigorated by these questions. They felt licensed to trade
in qualitative examples of anomalies, and to speculate about
quirky statistical patterns. There was a rich diversity
of examples, from East Asia and the Middle East as well
as Europe and North America. The index of children's well-being,
which left the UK at the bottom of the OECD league table,
provoked almost as much controversy here, when presented
by Jonathan Bradshaw, as it had in the media in April.
The
opening papers set the terms for the debate. Robert MacCulloch
showed that the advantages, in terms of equality and security,
produced by welfare states were demonstrable, but that the
failure of Subjective Well-being to rise in line with average
incomes demanded explanation. Neither the idea of adaptation
to higher consumption levels, nor that of the existence
of some unexplored missing variables (such as long working
hours, insecurity of employment, stress or pollution) was
entirely convincing. Why does an individual's measurement
of SWB so quickly revert to near its previous level after
rising with a pay increase, yet remain lower for much longer
after sudden redundancy or the loss of a partner, for example?
Erik
Schokkaert argued that the answers are not to be found in
reversion to Benthamite utilitarianism (recording our happiness
on hedonimeters from moment to moment), but in refining
Amartya Sen's capabilities approach to well-being. The latter
sees human flourishing as made up of a number of 'functionings',
including freedom, health, education, employment and mobility,
but has difficulty in indexing them within a combined measure
of well-being; perhaps overall, reflective satisfaction
with one's life might supply this? But he advocated eliminating
those elements of SWB which involved personal choices, such
as marriage and religious faith, as 'ethically non-relevant'
for distributive equity, despite their strong influence
on measured outcomes. Some participants questioned his justifications
for 'responsibility-sensitive egalitarianism'.
Bernard
van Praag, one of the pioneers of happiness research, presented
global data on the ageing of human populations, and the
challenge for social security systems. Although older people
tend to be happier than those in middle age, this trend
undermines social security systems, not only because of
rising costs of pensions, but also because of the risks
of isolation from social sources of well-being in increasingly
mobile and consumption-oriented societies.
Of
the many other papers, some of which were given in parallel
session, three dealt specifically with CI as a policy proposal.
Tony Fitzpatrick analysed the relationships between streams
of unconditional income which were (paternalistically) released
over time, and one-off or occasional lump sums (grants or
dividends) of the kinds advocated by Ackerman and Le Grand.
He showed that it was possible to present arguments for
combining these two principles in several ways. Hartley
Dean contrasted 'hedonic' and 'eudaemonic' approaches to
social security, and examined the implications of the Aristotelian
version of the good life (civic duty and intellectual fulfilment)
for social security. He considered the Global Left's demands
for a universal basic income in this context. My own paper
looked at whether CI would better enable the exchanges of
social value (care, respect and the sense of belonging)
which are more important components of SWB than purely material
goods, and concluded that it could, if cultural and public
service shifts supported a transformation of this kind.
Linked
with this last point, several of the papers considered the
forms taken by measures for poverty relief and income protection,
from the standpoint of how they distributed social esteem
or stigma. Michael Rassell's research investigated why Russian
war and work veterans, the main beneficiaries under the
Soviet system, came out in mass protest at the conversion
of their in-kind subsidies (travel concessions, rent reductions,
fuel allowances, etc.) into cash benefits. This was mainly
because such subsidies had been given as privileges, associated
with high status and public recognition, whereas cash was
seen as a lowly form of compensation, which was in many
cases less successful in achieving full social inclusion.
Another
example was the form of poverty relief taken in the Lebanon.
Rana Jawad's paper analysed the moral and religious basis
for the support given by religious agencies, mainly to women
and children. The ethos for these systems is similar to
that of such charities as the Charity Organisation Society
in nineteenth century Britain, yet they command high loyalty
and commitment from donors and recipients, and supply some
of the explanation for the support mobilised by Hizbullah.
The
challenge for CI advocates is to show how a proposal which
at first sight might seem the logical counterpart to extreme
liberal, individualist economic relations might be made
consistent with more solidaristic and communal social relations,
in which those who used their CI for informal cultural and
political activities are given high esteem. Neither the
paternalism of Soviet privileges, nor the sectarian basis
for Lebanese social support, fit the conditions for a diverse,
secular, multi-ethnic society, but both should cause us
to reflect on the bases for the esteem and inclusion that
are essential aspects of well-being.
The
advantage claimed by CI, that its unconditionality allows
greater access to the goods of self-respect and citizenship
than the selective coercions of welfare-to-work can deliver,
are nullified if those who do caring and community work
are not valued for their contributions. This point was reinforced
by the finding in Monika Mischke, Michaela Pfeifer and Claus
Wendt's paper, that in EU countries with large social assistance
sectors (such as Ireland, the UK and some Mediterranean
states), support for a 'guaranteed minimum income' for citizens
was higher than in countries with more comprehensive social
insurance provision. In other words, the argument against
selectivity - that it confers stigma on recipients - may
be offset by various cultural factors, perhaps including
the recognition that brute luck is a major factor in poverty,
especially in conditions of rapid economic transformation.
Among
the other interesting papers was one by Beverley Searle
and Susan Smith, which examined the idea that housing wealth
might act as a substitute for income maintenance safety
nets in a post-Thatcher 'property-owning democracy'. Home
ownership is now widely used as the means of access to a
stream of credit in the UK; the paper related mortgage equity
withdrawal as a substitute for other types of loan (or benefit)
to rates of well-being. Having a housing asset confers a
'feel-good' factor (safety against uncertainty), and can
also smooth income after unemployment or marital breakdown;
it already plays an important role in strategies for household
financial management.
However,
those whose homes are their only investments are vulnerable
to price variations and must work hard to sustain their
value; they score lower on SWB than those who have a wider
financial portfolio, or those who lack an investment strategy.
This
finding mirrors many others in research on the human consequences
of economic restructuring in countries such as Australia
and the USA. Housing wealth is sought after and used as
a welfare resource, which offsets the cutbacks in benefits
and public services characteristic of such regimes. But
this illustrates the changing character of the 'welfare'
enjoyed by citizens in Anglophone countries, which stems
from neither solidaristic inclusion nor egalitarian membership,
but from competitive, possessive individualism. This form
of 'welfare' seems to diverge more from well-being than
its predecessor. In many ways, the conference, like the
debates in psychology and economics which led to it, signals
a recognition that a model for public policy which conflates
welfare and well-being within the concept of 'utility' (or
uses money as a proxy) is in danger of pointing us towards
an impoverished quality of life.
Meanwhile,
there are plenty of dilemmas for income maintenance in those
countries, which have been less gung-ho about economic restructuring,
as was demonstrated by several papers from Swedish participants,
and by two from Japan. The latter showed how that state's
policies are adapting to a combination of economic stagnation
and the ageing population, through a long-term care element
in social insurance provision. Having studied the German
and Dutch systems, they have opted for an in-kind version,
with no option for claimants to receive their support in
cash. Given that our UK model is moving towards 'individual
budgets' for the purchase of packages of long-term care,
this is an interesting divergence; but not, it seems, one
that directly addresses well-being.
The
Japanese government fears fraudulent claims which have cost
the German system, with its cash option, heavily. Some issues
persist in one form or another through every change in the
organisation of social protection.
Main
article
Corporate
Watch, Consumer Responsibility, and Economic Democracy:
Forms of political action in the orbit of a Citizen's Income
*
By
David Casassas (Department of Politics, University of Oxford)
and Sandra González Bailón (Nuffield College,
University of Oxford)
The
political power of private corporations has grown in the
last decades and some governments have used their power
to favour the private interests of corporations (even by
cutting individual rights and liberties, or promoting processes
of re-militarisation in areas of geopolitical interest)
and it is difficult still to claim that globalisation works
at the margins of politics. In the same way that the British
Empire was, during the 17th and 18th centuries, a necessary
condition for British capitalism, the great economic powers
of today use the influence of states to consolidate their
positions of privilege in markets of strategic interest.
This
scenario has prompted the emergence of certain forms of
resistance. Campaigns of consumer and stakeholder activism
have, in some instances, forced big companies to use concepts
such as social responsibility, business ethics, environmental
policies, community development or corporate governance.
Despite the possible hypocrisy of the means, these campaigns
open a space where citizens can pursue their goals: in exchange
for a good image (and higher sales), corporations are pushed
to adopt measures that protect their products from the ethics
of consumers; and consumers get, in return, a bit of the
terrain stolen from their sovereignty. The will that citizens
once expressed with their votes (regardless of the attention
that such may have received 1) can now also be expressed
at petrol stations, sports departments, and supermarket
tills - at least, to the extent that social structure allows:
citizens who participate in these processes belong mostly
to the middle and upper classes of the northern hemisphere.
Against
that background, this paper poses the following question:
can a Citizen's Income (CI) contribute to the conditions
that promote a consumer ethics? The question that this paper
poses is threefold. First, can a CI favour a distribution
of paid employment time in such a way that citizens can
obtain a critical distance from the workings of the machinery
in which they take part and obtain a perspective from which
to scrutinise the product being generated? Second, can a
CI equip 'consumer-citizens' with a purchasing power which
enables them to exert a real influence on the behaviour
of corporations? And third: can a CI guarantee to the 'producer-consumer-citizens'
a fallback position that allows them to increase their bargaining
power in the labour market?
It
seems reasonable to think that, with a CI, individuals could
participate in (and take greater command of) a process in
which, right now, their opinion - their voice 2 - is not
being considered. Can a CI empower citizens by linking their
role as consumers with their role as producers? Can it provide
them with the capability to demand, both as consumers (with
a renewed purchasing power) and as producers (with a greater
resistance power) more democratic contractual and organisational
forms of labour, closer to that which they would really
choose in conditions of full liberty and autonomy? 3 As
Erik Olin Wright has already suggested, 4 a CI could decommodify
labour, strengthen its power in relation to that of capital,
and open a way towards new forms of organisation, freer
and more autonomous, both in production and consumption:
something that could pose a real challenge to the ugliest
aspects of capitalism.
In
answering those questions, this paper aims to find the point
of convergence between the strategies of corporate watch
and the proposal for a CI. Exercising citizenship in a world
run by big corporations demands having the ability to decide
in the marketplace - of goods and services, but also of
labour. Our claim is that a CI would promote the expansion
of this new form of political expression and ethical consumption
beyond the middle classes; it would make it as universal
as the vote is now. The effects that, in the long run, would
follow the introduction of a substantial CI (equivalent,
at least, to the poverty line) would surely be radical and
irreversibly linked to the configuration of new relations
of power, both in the consumption and the production spheres:
freer individuals from the demand side (of commodities)
would choose their goods and services with a higher responsibility,
and freer individuals from the supply side (of labour) would
choose how to produce with higher autonomy. But these lines
do not aim that far: having placed the case for the universal
right to vote in the background, the objective of this paper
is simply to highlight the complementary relationship that
exists between a new way of social protest and the support
promised by the introduction of a CI.
However,
introducing a CI would not necessarily lead to more conscientious
consumers, or to a higher civic pressure on corporations.
First, consumers might use the resources made available
by a CI to fulfil an apolitical consumption: that is, they
might use those resources with no intention whatsoever to
reward or sanction corporations. There is no evidence to
support the assumption that a degree of political commitment
in this particular area would develop. 5 Secondly, in contemporary
capitalism the marketing apparatus of corporations very
often determines the demand for their products and, ultimately,
the functioning of markets. And thirdly, with a CI, strategies
to put pressure on corporations would most probably still
be restricted to consumers of certain sectors of the middle
classes in the developed world.
Having
said that, a CI properly integrated with the tax system
would confer a level of economic security that would allow
individuals to scrutinise the production process and choose
alternative ways to consume should they wish to do so. We
can even claim that, with a CI, the decision to maintain
consumption patterns could be seen as a decision taken in
a condition of greater autonomy. In other words, corporate
watch, consumer responsibility and the fight for economic
democracy, like all forms of social and political action,
are 'income-sensitive' forms of social and political action.
Individuals can take part in them if they enjoy the material
security that is necessary to do so, that is, to devote
their spare time (and their energy) to fight for other forms
of production and to foster the ethics of consumption. This
is precisely the reason why those who engage in campaigns
of responsible consumption tend to belong to middle and
upper social classes. Our claim is that a CI would lower
the threshold from which citizens might consider taking
part in those campaigns, and allow them to take decisions
from a more autonomous position, either as consumers or
workers. The economic security that a CI would grant to
individuals would not constitute more - but not less either
- than a condition of possibility.
The
Pressure: Strategies of Boycott and the New Consumer Ethics
In
the mid-nineties the oil and gas company Shell became the
target of a boycott launched by consumers against its environmental
practices and its collaboration with the corrupt government
of Nigeria. This episode of consumer belligerency marked
a turning point in the expression of political activism
and showed that citizens are still willing to make use of
their political power, but from a terrain where traditional
politics is not sufficient, namely by using their purchasing
influence to promote changes in the policy of corporations.
These incidents also showed that the loss of popular sovereignty
is being confronted by citizens (or, at least, by those
citizens with their daily subsistence guaranteed) who aspire
to recover it by trying to re-politicise their participation
in the production and consumption spheres.
Together
with selective purchasing, other strategies have also put
pressure on multinationals. A lawsuit by McDonald's caused
an impact on public opinion and revealed how different the
reality of a corporation can be under the cellophane of
their corporate image: deplorable labour conditions, cruelty
to animals, the use of not very healthy raw materials, and
abuses of marketing power were uncovered by the two English
ecologists who, also in the mid-nineties, were taken to
court by the company. 6 Even though such libel lawsuits
are still a guarantee of victory for big corporations (which
find in the law - and in their substantial resources to
make use if it - an efficient instrument to criminalise
the dissidents that make public their voice), the victory
of this strategy was bad publicity: a counterweight to marketing,
and a window that breaks the disinformation so often promoted
by corporations.
Finally,
a third strategy in the cause of business ethics has been
timidly activated - though with clear signs of its political
potential - from the very heart of corporate power: it is
the pressure that, from their shareholder positions, citizens
and groups can exert through corporations' Annual General
Meetings. Ethical demands have found in investments a way
to influence decision processes. Again, the success of this
strategy does not reside in its power to affect directly
the corporation policies, but in its ability to generate
negative publicity. This is exactly what happened at the
AGM of the petrol group BP, at which a coalition of environmentalists
and ethical investment groups arrived disguised as polar
bears to protest against the activities of the company in
the Arctic Ocean. 7 What this strategy manifests is the
importance of having access to the status of owners, besides
that of consumers, in a world where the most important decisions
are being taken in private forums.
Our
question here is: can a CI provide the necessary material
and civil independence to allow individuals to make use
of AGMs, with a real independence of thought? Can a CI favour
an autonomous process in which individuals can form their
preferences with regard to the spheres of production, consumption,
investment and financing? Can a CI act as a catalyst for
these proposals of social innovation - from corporate watch
and responsible consumption to ethical banking or cooperativization?
All
in all, the three strategies explored so far (selective
purchasing, lawsuits to force corporations to be transparent
in their activities, and the pressure that citizens can
put on corporations as shareholders and investors) share
a common objective: to hold corporations accountable for
the political implications of their activities and to enable
the market to ameliorate the lack of accountability exercised
by institutional politics. The philosophy that underlies
these initiatives is to establish a consumer ethics to fill
in the gap left by the absence of an economic ethics. In
practice, the aim is to use the only language understood
by corporations (their sales) to encourage respect for human
and labour rights, the protection of the environment, the
promotion of investments founded on ethical principles,
and sanctions against oppressive regimes - so often maintained
by the corporations themselves - by withdrawing investments.
The new consumer ethics seeks to incorporate all these elements
in the equation of costs and benefits that determines the
corporation's priorities, and it does so by re-politicising
all of the areas that globalisation has left exposed and
by making use of the same instrument which drives other
corporate priorities: the market.
What
we aim to analyse here is to what extent the coordinated
action of consumers could become a real monopsony (monopoly
purchasing power) in which the only buyer could dictate
to the suppliers - be these many, few or just one - the
conditions of production and sale. What we claim in the
next section is that such a possibility is reinforced when
it is accompanied by a CI as this guarantees the material
independence and the freedom necessary for citizens to judge
the productive process in all its dimensions. Before developing
this, though, we will explore some of the impacts of this
consumer strategy.
The
Consequences: Consumer Responsibility and Economic Democracy
in the orbit of a Citizen's Income
Whilst
some might argue against crossing the frontier that separates
politics from businesses, the reality is that big corporations
have crossed that line on multiple occasions: for example
in Germany, after Schroeder's first government attempted
to increase taxes on corporations. A coalition of these,
including Deutsche Bank, Allianz and BMW, threatened the
government with relocating their plants and investments
in low cost countries. In the words of one of the spokesmen
of the coalition, the matter affected no less than 14,000
workers. The episode ended with the resignation of the Finance
Minister and with a plan to reduce taxes which took them
to lower levels than in the United States. 8 The list of
similar episodes has grown in recent years in all countries
of the (so-called) advanced economy.
It
is here that the CI proposal finds common ground with the
movements of responsible consumption. The argument is more
fundamental than programmatic: it is not just that by giving
a CI to every citizen they will have a greater power in
relation to corporations. It is rather that, given the circumstances,
the republican dictum according to which there is no freedom
without material autonomy has become truer than ever.9
In
particular, if corporations occupy a progressively larger
political terrain, and one of the few ways of putting pressure
on those non-elected organisms is acting as both workers
and consumers with a reinforced social position, then the
resources guaranteed by the right to a CI, on which that
action can be based, appears as a condition for the individual's
participation in the production and consumption spheres.
It is only in this way that they can get closer to their
condition as citizens. To the scream of 'don't vote, shop',
10 a CI contributes a guaranteed condition of material and
civil independence; that is, of citizenship.
If
big corporations have started to worry about the social
impact of their activities it is because they have discovered
that it is in their interest to do so: because it is their
names and their sales figures which are at stake, and because
to have workers in good conditions allows them to be more
productive. The more sanctions individuals can impose with
their purchases, the more hostile to the pure economic profit
will become the niche to which corporations will have to
adapt. The question is not whether they have to be ethically
responsible; the question is rather that their customers
- some customers from some places, at least - ask them to
be responsible in order to recover their power. If citizens
see in their purchases, more than in their votes, a means
of political pressure, then a CI appears to be one of the
few ways in which to make real the right which every citizen
has to participate in politics.
But
we can go still further. A CI constitutes a tool able to
generate a real deal between capitalists and consumers-producers,
a deal aiming at the heart of the production and consumption
processes of contemporary societies. This is a true deal
- not a resigned submission - brought about by the twofold
threat that the consumers-workers can pose to the owners
of the means of production: denying their purchase (of certain
products) and denying their production (for certain brands).
The capability to deny consumption and to deny production
could become a power of resistance (and the right to resist)
of those occupying the most vulnerable positions, enabling
them to match the bargaining positions of capitalists. 11
A
CI opens the channels to turn what was an ignored voice
into a real exit: exit from certain channels of distribution
and consumption, on the one hand; and exit from certain
units of production, on the other. It is in the interest
of the owners of the means of production to retain the consumers-workers;
and this makes it feasible to think that they would finally
attend this twofold demand: the demand on the labour side
understood as complementary to the demand from the consumption
side. Dismissing the first demand carries the danger of
leaving corporations both without consumers and without
producers.
In
this situation, the owners of the means of production would
realise the necessity of taking the rights of individuals
(consumers and producers) seriously. Indeed, it is not a
matter of letting companies that are governed by non-accountable
actors decide, under temporary pressures, that they want
to achieve an agreement with those putting the pressure
on. Nor is it just a matter of creating the possibility
for these companies to put a kind face to their equally
despotic attitude, as a benevolent dictator would. The introduction
of a CI would mean that corporations would be forced to
assume the interests of the consumers-producers. In this
sense, the constitutional guarantee of a CI equals the 'constitutionalisation'
of companies. 12
The
issue is not to trust that corporations really produce in
ethically desirable conditions, as those who talk about
companies' 'capital of trust' believe; it is rather about
having the certainty, as consumers, that the workers had
the possibility to 'exit' the production process when ethically
unacceptable labour conditions were imposed on them. It
is also about providing these workers, fighting to obtain
fairer labour conditions, the purchasing power to interfere
in the formation of the production processes as potential
consumers capable of rewarding or sanctioning corporations
through their purchases. 13
The
possibility exists, then, that the same measure - the CI
- can stimulate the struggle for two objectives that are,
in fact, complementary: to strengthen the bargaining position
of non-owners as workers; and to provide those individuals
with the required signs to transform the 'trust in corporations'
into 'security with respect to their behaviour'. In the
extreme, with a CI, only those goods and services produced
in a process where the owners were able to retain their
workers would reach the market. Both demands - that of the
workers and that of the consumers - stem from the same concern:
to create a social and economic order where production,
exchange, and consumption develop in conditions of freedom.
It
has been already mentioned that without material autonomy
the idea of freedom is reduced to an empty motto. At the
same time, it is true that the material autonomy that a
CI would confer is a necessary, yet not sufficient, condition
for the enjoyment of freedom -individual and collective
freedom. In this sense, it must be noted that recognising
the presence of relations of power at the core of social
life (that is, the politicisation of the analysis of social
and economic life) enables the urgent re-articulation of
the political sphere that contemporary societies need, once
the actors that dominated it have lost their hegemony and,
with the introduction of a CI, power is re-distributed in
a more homogeneous fashion. 14 This way, the fight against
the dominium (the eradication of the ties of material dependence
among individuals and thus the constitution of a society
effectively civil); and the fight against the imperium (the
fight in favour of the articulation of political institutions
freed from the greed of big corporations) appear as peaks
to be reached at the same time. And, in this ascent, the
CI has, we believe, a lot to offer.
Notes
*
This text has benefited from the support provided by the
research project HUM2005-03992/FISO, funded by the Spanish
Ministry of Education and Science. The authors would like
to thank Antoni Domènech and Daniel Raventós
for their valuable remarks. This paper has also benefited
from comments made by the participants of the 5th Congress
of the US Basic Income Guarantee (USBIG) network, held in
Philadelphia on 22-24 February 2006, and those of the 11th
Congress of the Basic Income Earth Network (BIEN), held
in Cape Town on 2-4 November 2006.
1
Many states have a disguised limited suffrage - those with
minimal levels of participation, absence of real political
alternatives, indifference to political institutions by
large segments of the population left behind socio-economically
and symbolically, etc.
2
We take the terms 'voice' and 'exit' in the sense given
by A.O. Hirschman in his classic Exit, Voice, and Loyalty:
Responses to Declines in Firms, Organizations, and States,
Cambridge, MA: Harvard University Press, 1970.
3
We recall here the assertion of the late John Rawls (Justice
as Fairness. A Restatement, Cambridge, MA: Belknap Press
of Harvard University Press, 2001, p. 257): '[w]hat men
want is meaningful work in free association with others'.
4
Wright, E.O. (2005): 'Basic Income as a Socialist Project',
Basic Income Studies, Vol. 1, no. 1.
5
One could claim that there is no evidence, either, against
such an assumption.
6
Klein, Naomi (2000), No Logo, London: Flamingo, p. 387.
7
Hertz, Noreena (2001), The Silent Takeover, London: William
Heinemann, p. 125.
8
Hertz, N. (2001), pp. 53-54.
9
Domènech, Antoni (2004), 'Basic Income and the Present
Threats to Democracy', 10th Congress of the Basic Income
European Network, Barcelona, September 2004.
10
Hertz, N. (1999), 'Better to Shop than to Vote', New Statesman,
21 June.
11
For an analysis of the bargaining power that social agents
have in a context where resources are scarce see Elster,
Jon (1990) The Cement of Society. A Study of Social Order,
Cambridge: Cambridge University Press.
12
For an analysis of the significance and meaning of the processes
of 'constitutionalisation' of companies see López
Arnal, S. (2005): 'Entrevista político-filosófica
a Antoni Domènech', in M.J. Bertomeu, A. Domènech
y A. de Francisco (eds.), Republicanismo y democracia, Buenos
Aires: Miño y Dávila.
13
We assume here that a CI would increase the purchasing power
of the middle and lower classes.
14
Raventós, D. y Casassas, D. (2005): 'Republicanism
and Basic Income: The articulation of the public sphere
from the repoliticisation of the private sphere', in G.
Standing (ed.), Promoting Income Security as a Right. Europe
and North America, London: Anthem Press.
Reviews
Stuart
Adam, Mike Brewer and Andrew Shephard, The Poverty Trade-off:
work incentives and income redistribution in Britain, Policy
Press, Bristol / Joseph Rowntree Foundation, York, 2006,
viii + 55 pp, paperback, 1 86134 863 0, £12.95
It
would be difficult to better the first three paragraphs
of this report as a description of the dilemma facing policy-makers:
'If
you offer someone money on condition that they have a particular
characteristic, you give them an incentive to acquire or
keep that characteristic. That is the fundamental source
of the trade-off between income redistribution and work
incentives that confronts all governments with a dilemma.
'Concern
for poverty or inequality motivates governments to want
to redistribute income, but providing benefits on the basis
of low income reduces the incentive for people on low incomes
to work themselves out of that position (over and above
additional disadvantages of means-tested benefits such as
stigmatizing recipients, requiring burdensome form-filling
and achieving less than full coverage among the entitled
population). Similarly, cutting taxes on higher incomes
encourages people to work to increase their income, but
leaves behind those who do not do so.
'Thus
the two main ways for a government to help people with low
incomes - providing them with support directly and encouraging
them to earn more themselves - are in head-on conflict with
each other. How best to deal with this conflict has long
been one of the central questions facing academic economists
and economic policy makers' (p.1)
The
researchers choose not to employ models which predict individuals'
employment market behaviour in relation to tax and benefit
changes, but instead translate 'work incentives' as the
financial reward for working compared with not working and
as the financial reward for working harder compared with
not working harder. They find that, among the demographic
groups studied, lone parents have the weakest work incentives;
that from 1979 work incentives have increased on average;
that from 1999 changes in tax and benefits have weakened
work incentives; and in particular that since then tax and
benefits changes have caused incentives to progress (i.e.,
to work harder) to deteriorate ( - the incentive to progress
being indicated by the effective marginal tax rate which,
on average, has increased by 3% since 1999).
The
researchers find an ambiguous picture when they ask whether
in general a trade-off has operated between increasing work
incentive and reducing poverty, but they find a clearer
picture when they simulate tax and benefit changes. Here
they find that changes which unambiguously strengthen work
incentives take more from the poor than from the rich or
give more to the rich than to the poor.
The
report is full of useful research results which will be
of interest to anyone who wants to study in detail the ways
in which tax and benefit changes affect financial incentives
to enter the employment market or to progress within it:
and, whilst the authors are careful to outline the additional
research needed on individuals' labour market behaviour,
on personal preferences, and on consensus over social goals,
they are able to draw some useful policy conclusions. For
instance, 'while increasing Working Tax Credit would encourage
the first person in a family to work, it would discourage
them from progressing further …… lowering [benefit
and tax credit] taper rates and increasing in-work support
carry a real risk of moving people above the poverty line
but then leaving vast swathes of them barely above that
level' (p.51). The report rightly suggests that 'if such
outcomes help to meet poverty targets, that is partly a
reflection of the deficiencies of headcount measures of
poverty' (p.51).
The
report lists a variety of policy options and particularly
favours an increase in Child Benefit (pp.29-30) as this
would reduce poverty in a government target group (families
with children) and would not damage work incentives because
Child Benefit is not withdrawn as earned income rises. A
particular advantage of increasing Child Benefit is that
'benefits accrue disproportionately to the poor' (p.30).
Gaps
in the report invite further (and I would say urgent) research
in two areas:
It
really is important to factor in individuals' labour market
behaviour. Whilst the models available are not perfect,
they at least give us some idea how tax and benefit changes
might alter actual behaviour and therefore give us a better
estimate of work incentives than simply assuming that financial
incentives translate directly into work incentives.
Given
the report's favourable verdict on Child Benefit as an important
means of reducing poverty without damaging work incentives,
and its suggestion that people without children ought not
to have their work incentives weakened (p.50), it really
is important to follow this report with a study of the effects
which a Citizen's Income would have both on work incentives
and on the alleviation of poverty.
On
the evidence of this careful report, we would have every
confidence that this team of researchers could produce a
further clear and reliable report which would contribute
significantly to the necessary policy debate.
Richard
Berthoud, Work-rich and Work-poor,
Policy Press, 2007, viii + 55 pp, pbk, 978 1 86134 954 5,
£12.95
'In
1974, 7% of adults in Britain between the ages of 20 and
59 were dependent on transfers, mostly social security benefits,
from outside their immediate family. That is, they themselves
were not in employment; and they did not have an employed
partner either. The proportion had soared to 19% by 1993
- nearly one-fifth of the whole age group. In 2003, even
after a 10-year period of economic growth and falling unemployment,
the rate was still 14% - double the figure from the early
1970s' (p.1).
These
facts set the agenda for the research project which has
resulted in this important report. The project set out to
describe and to explain the changing distribution of jobs
among families. Some generally useful data on employment
probabilities is clearly presented at the beginning of the
report, and conclusions are drawn in relation to employment
trends for individuals. The analysis then moves on to families
and employment in order to understand the substantial increase
in the proportion of people in non-working families. Graphs
at the foot of p.35 are particularly clear representations
of the upward trends in no-earner and two-earner families.
The
incentive structures of the tax and benefits system are
often blamed for the decline in the number of one-earner
families, but Berthoud believes that a sociological explanation
might be more important:
'All
the signs are that the social division of employment is
a dominant factor, overriding any economic calculus. There
remains a strong normative expectation against female breadwinners.
Once the existence of such a taboo is hypothesised, many
of the conundrums surrounding no-earner families fall into
place. The number of non-working husbands has increased.
Women are all but forbidden to work if their husbands have
not got jobs, so the wives in these families cannot share
in the general increase in employment experienced by women
in other domestic situations. This means that the number
of no-earner couples must increase. Such a process could
entirely explain the apparent growth in within-family polarisation
….' (p.51).
If
this is the case (and the report itself doesn't offer evidence
for this explanation: an additional qualitative research
project would be required), then there is surely a strong
argument for providing incentives for higher employment
rates amongst individuals in no-earner families or for part-time
employment for both men and women. Labour market rigidities
create a clear divide between the full-time male earner
and the male non-earner: surely one of the roots of the
two-earner / no-earner divide. If this is one of the roots
of the problem then that is where the pursuit of a solution
must surely begin.
Christian
Albrekt Larsen, The Institutional Logic of Welfare Attitudes,
Ashgate, 2006, 184 pp, hbk, 0 7546 4857 5, £45
It's
not that public attitudes to welfare determine welfare policy;
rather, welfare policy determines public attitudes. That
is the evidence-based conclusion of this important book.
Following
an introductory chapter, chapter 2 recognises that we now
expect change in welfare regimes, and that public debate
about the justice and appropriateness of welfare structures
is an increasingly important factor in their design ( -
though given the lack of public debate about tax credits
before they were introduced in the UK, a somewhat more nuanced
conclusion might have been appropriate). Chapter 3 studies
national surveys of values and norms in relation to different
countries' welfare regimes, and finds a correlation between
welfare regime and attitudes towards salary differentials
between skilled and unskilled workers (a factor chosen because
it is likely to tell us how people feel about redistribution
of income). Chapter 4 suggests that 'the degree to which
the poor and unemployed fulfil a number of so-called 'deservingness'
criteria could be the missing link between welfare regimes
and the cross-national differences in attitudes [towards
them]' (p.45). The regime which Larsen knows best is the
Scandinavian one, in which a raft of universal healthcare,
educational and pension benefits means that there's little
sense of there being different groups with different deservingness
levels in society - as opposed to the liberal American system
of fractured provision in which 'the poor and unemployed
….. will be asked to fulfil much harder deservingness
criteria' (p.55).
Further
chapters discuss the European context (in which discussion
of the welfare state's sustainability has complicated policy
attitudes), and stigmatisation of groups selected for social
assistance in less universal welfare regimes.
The
author concludes that 'the perception of the poor and unemployed
[is] most negative in liberal [means-tested and selective]
regimes (maybe moderated by the fact that the recipients
really are in need), more positive in conservative [i.e.,
contributory] regimes (especially caused by the modest job
opportunities), and most positive in social democratic [more
universal] regimes (maybe moderated by the fact that many
of the potential poor have rather good living conditions)'
(p.141).
There
is good control for variables other than welfare regime
( - variables such as gender, ethnicity, age, education,
etc.), but more detailed discussion of the notion of causality
and of the difficulty of determining the extent of it in
each direction when feedback loops are present would have
been welcome.
This
is an important study. If it is the case that welfare structure
determines public attitudes (even if not wholly), then it
is more important to examine reform proposals objectively
in the light of their likely economic, employment market
and quality of life effects than it is to ask whether they
will be acceptable to public opinion. The reformed structure
will change public opinion in its own favour once it is
in place; and if the reform removes boundaries between different
groups in society then public opinion towards previously
stigmatised groups will change.
David
Craig, with Richard Brooks, Plundering the Public Sector,
Constable, London, 2006, viii + 263 pp., paperback, 1 84529
374 6, £9.99
This
is a carefully researched study of the British Government's
love-affair with consultants: both management consultants
and information technology consultants. It shows how vast
sums of public money have been wasted through inappropriate
use of consultancies, poor drafting of contracts, the elimination
of competition, inadequate management, and poor performance.
The
copyright notice reveals that Richard Brooks of Private
Eye wrote chapters 2, 7 and 8, and that David Craig wrote
the rest, which must be one of the reasons for a certain
amount of repetition. This is one of those books which could
easily have been shorter than it is; but it's still worth
reading carefully, because the cumulative case against the
Government is fairly devastating.
The
brief account of the introduction of tax credits comes early
in the book (pp.7-11):
'One
of the most noteworthy fiascos must be the system developed
by EDS and now run by Capgemini for the Inland Revenue to
pay tax credits to poor families. A policy that could not
have been designed to be more administratively complex combined
with inadequate software to produce unprecedented confusion
and hardship for hundreds of thousands of the most vulnerable
members of society. The policy itself, demanding repayments
of tax credits in-year when claimants' incomes increase,
was a recipe for disaster for people on relatively low incomes
who tend to spend their money and have trouble meeting demands
for repayments out of the blue. It was never going to be
helped by a useless computer system' (pp.7f).
Whilst
the Treasury, Inland Revenue and the Department for Work
and Pensions get plenty of attention in the book, one management
and computing system significantly unmentioned is that of
Child Benefit. Presumably Child Benefit's simplicity means
that nobody ever thinks it necessary to involve consultants
of any kind in its management and technology. We hope it
stays that way.
Viewpoint
Critic
of UBI (CI) wins Nobel prize for Economics
by
Conall Boyle
Edmund
Phelps, the newly created Nobel laureate in economics is
clearly not a friend! As he explained (in the Boston Review
in 2000) why he didn't like UBI:
"Philippe
Van Parijs makes the strongest imaginable case for universal
basic income. But I remain opposed. For me, there are two
sticking points.
1.
The demogrant (Phelps's somewhat obscurantist name for UBI)
device has no monopoly on the beneficial effects that make
us like it, whatever the balance of its total benefits and
total cost. The alternative to it - a subsidy to employers
for every low-wage worker in their full-time employ - would
have some of those effects and some other benefits as well.
The subsidy, in pulling up paychecks and the number employed
at the low-wage end of the labor market, would mitigate
serious disadvantages of talent and background; it would
expand the jobs that low earners could afford to reject;
and it would widen low earners' latitude in meeting their
needs.
2. The other sticking point is that the demogrant idea seems
in an important respect to go against the grain of the traditional
American conception of a liberal republic. This conception,
I will argue, would cause many Americans to hesitate to
embrace a universal basic income while being willing, at
least in principle, to contemplate low-wage employment subsidies."
So that is the nub of Phelps's argument: The US public would
never accept a 'money-for-nothing scroungers' charter'.
And anyway, Phelps believes that subsidizing wages would
work better than UBI. He had previously expounded his belief
in wage-subsidy in an influential book Rewarding Work: How
to Restore Participation to Free Enterprise. There is somebody
else who believes in wage-subsidies, and has had the power
to do something about it - Gordon Brown. His WFTC - working
families tax credit scheme - has been developed over his
ten-year tenure at the Treasury. (It has now transmogrified
into CTC and WTC)
The
consequences of WFTC have been spelled out in many previous
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