Email I just sent, for the record. Direct quotes from the MP’s email to her constituents in italics.
Dear Ms M……
I am the Secretary of the Citizen’s Basic Income Trust (formerly “Citizen’s Income Trust”).
Two of your constituents (I have bcc’d them in, in case they wish to pursue the matter further) have asked me to contact you regarding certain unsubstantiated claims you have made about Basic Income in general and our research in particular.
“The question of feasibility is one we should consider. No matter how desirable a UBI-style programme might be, it must also be feasible in the present context of our economy. When considering feasibility, we must address… whether it could be introduced in a manner that prevented losses amongst the most vulnerable in our society.”
We agree entirely!
We assume that when you say “the most vulnerable” you mean existing welfare claimants. Three points here:
1. It would be easy to set the basic income at a level which such people’s welfare payments do not fall significantly or do not fall at all. Whether we call it “income support” or “universal credit” or anything else, £1 paid out as “basic income” costs the DWP LESS than £1 paid out as “income support” or “universal credit” because there is little or no admin cost involved (short of basic fraud detection, which as we know from Child Benefit is nigh undetectable with flat rate benefits).
2. These people are particularly vulnerable because they know that benefits are very conditional, if there is the slightest administrative hiccup or they inadvertently breach a certain condition, they can lose their welfare income for weeks or months. A reliable non-withdrawable weekly payment of £90 each and every week is worth far more than knowing you will get £100 in most weeks but sometimes you will get nothing at all for a month or two.
3. You ignore the most “vulnerable” of all. For example those who have just lost their job, those who do irregular low paid jobs (zero hour contracts), and many more who do not receive any welfare payments at all because they do not meet the bureaucratic requirements (the homeless), or are discouraged from claiming because they know – or reasonably believe – that they might have to wait for several weeks to receive their Universal Credit, by which time they might have found a new low paid job and have to pay everything back, thus compounding the misery.
“could dramatically increase the number of children living in poverty (as was also found in modelling by the Citizen’s Income Trust)”
We have published lots of examples of Basic Income systems. Some replace most existing mainly means tested benefits with a single payment; others replace fewer such benefits and pay the Basic Income in addition, which automatically reduces the entitlement to and cost of means tested benefits. It would have helped your constituents in forming a decision had you actually provided full details of the particular example you were referring to.
Some of our examples do indeed show that certain groups (in particular unemployed single mothers) would receive £10 or £20 less a week. Others show that they would be largely unaffected. It is up to the government of the day to decide which system to choose.
“The report found that the additional tax revenue required to support such a system could be as much as £160 billion. Such a figure would indicate that UBI systems would be unaffordable…”
I will let Compass and JRF speak for themselves.
In none of our workings has the additional “cost” amounted to anything like that much – and none has required any change or at least any significant change to the rates of income tax and National Insurance (depending which example you choose).
Clearly, most adults are in steady paid employment and earn more than the income tax personal allowance of £12,500. We have always said that the Basic Income would be a straight swap for the personal allowance and the NI lower earnings threshold, so most adults would barely notice a difference – they receive a Basic Income of £70 – £100 per week, but pay extra tax of £70 – £100 per week. This could be dealt with via PAYE (as was the case in Ireland until recently) so this is not an extra “cost”. It would be foolish to consider the £160 billion as a cost and the extra £160 billion as extra tax revenues. (So this step is purely administrative – for the time being, it is easier just to exclude people in steady jobs from Basic Income and keep the personal allowance and lower earnings threshold, but they know that Basic Income is there if they suddenly need it. As the Adam Smith Institute has pointed out, for the majority of people there is no difference between the current system, Basic Income and Negative Income tax).
The cost of paying the Basic Income to existing claimants (group 1 above) would barely change, depending on the precise level and which benefits it replaces.
There will more payments made to group 3 above – those in low paid and irregular work, but at least half of this will be clawed back by the PAYE system (the tax free allowance and lower earnings thresholds would be zero). This clearly obviates the need for a parallel means-testing system.
As you must know, clawing back benefits via the PAYE system is already part of the UK’s overall system – for example student loan repayments and the higher earner child benefit charge. The PAYE system can easily be adapted to claw back all benefits automatically by adjusting each individuals PAYE code. The simpler the benefit system, the easier it is to adjust PAYE codes, they can be uprated each year automatically.
Any residual additional “cost” can be offset against the admin costs incurred by the DWP and HMRC, included losses due to fraud and error and student loan write offs, which are in the order of £20 billion – £30 billion a year. The net cost will be a drop in the ocean when set against UK government spending overall.
And whatever system you choose, the welfare state costs the citizens of this country nothing. Some citizens pay in, others get money out, some pay in and receive similar amounts (people on Working Tax Credits). Workers pay in now and get a state pension when they reach retirement age. No sensible system is “unaffordable”. I pay my children pocket money. That superficially costs me money, but it costs us as a family unit precisely nothing, and clearly improves our overall happiness – £20 a week is not much to me but £10 a week each means a lot to them.
“even when the effect on individual behaviours in the labour market are not considered… Our current welfare system, built around Universal Credit, seeks to incentivise claimants to move off benefits and to provide tailored support to help people find work and increase their earnings”.
That is a major advantage of a Basic Income. There is no poverty trap. If a claimant finds a job, short or long term, low paid or well paid, they know that they will be better off. They can move seamlessly into work without having to wait weeks between their last welfare payment and their first pay cheque. If they lose their job, at least they now that their Basic Income is still coming in to cover essentials. The value of this goes above and beyond the pure cash value. It is good for peace of mind and a general sense of well being. Like home insurance – you hope that nothing ever happens and you will never have to make a claim – but it’s nice to have the reassurance and it’s worth a few hundred pounds a year.
Nearly everybody wants to “increase their earnings”! Most people receiving £100 basic income would prefer to have £100 basic income and another £100 in net wages after tax. Most people earning £20,000 want to do overtime or get pay rises or be promoted and earn £25,000 and so on. Persecuting low and non-earners does not add to this basic human instinct. The minority who do not want to or cannot increase their earnings because of caring duties and disabilities should not be punished. And yes, there is a residual group who live a very modest lifestyle and will stay on welfare. Trying to cajole them into work is pointless, no employer wants them. It’s like expecting wealthy heirs and heiresses to lift a finger.
May I also take you up on this:
“the new Winter Grant Scheme which will deliver £170 million of funding to councils in England to provide vital support to the most vulnerable children and families”
There are nearly thirty million households in the UK. If that £170 million is paid equally to households in the lowest decile, that means about £60 each. Over a ten week winter, that makes £6 per household per week.
[Please note - in all our calculations we have assumed that welfare payments for housing costs and additional payments to people with a disability would continue as they are and be paid in addition to the Basic Income]
I hope this is food for thought
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