I spent yesterday afternoon at the Institute of Chartered Accountants in England and Wales discussing Citizen's Income. This is not the time to note the details of the discussion. The concept can be summarised as a right to be paid an income as of right subject to the following conditions:
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‘Unconditional': A Citizen's Income would vary with age, but there would be no other conditions: so everyone of the same age would receive the same Citizen's Income, whatever their gender, employment status, family structure, contribution to society, housing costs, or anything else.
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‘Automatic': Someone's Citizen's Income would be paid weekly or monthly, automatically.
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‘Nonwithdrawable': Citizen's Incomes would not be means-tested. If someone's earnings or wealth increased, then their Citizen's Income would not change.
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‘Individual': Citizen's Incomes would be paid on an individual basis, and not on the basis of a couple or household.
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‘As a right of citizenship': Everybody legally resident in the UK would receive a Citizen's Income, subject to a minimum period of legal residency in the UK, and continuing residency for most of the year.
This would, then, replace almost all benefits and the state pension. It's a concept I have argued for in The Joy of Tax because it resolves very large numbers of problems with our existing benefits systems, including poor take up (vastly more benefits are unclaimed than are subject to fraudulent claim), the poverty trap when people transition to work and many issues relating to child poverty.
An issue raised is affordability. I am convinced it is affordable; it just requires a change of mindset. An issue I raised yesterday was that most modelling is static: behavioural changes are hard to predict. Some say many would choose not to work: they would rather sit at home. Candidly, I greatly doubt that because most people seem to have a strong social desire to work. Others say it may force changes in the labour market by creating demands for better jobs tat employers could not meet. Actually, I think that would solve many of the UK's productivity issues.
But the one behavioural response rarely considered is on tax compliance. If a universal basic income of significant amount was payable the incentive to be in the tax system would be high. The wholly unknown taxpayer would be much smaller in number. Yields are likely to grow as a result. I believe that this factor alone may considerably help the process of paying for a citizen's income. It's an idea needing more investigation by those who really work in this area, I suggest.
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When the state provides universal social services, and I count the citizen’s income as type of a public service that puts a floor on income in every context,this also builds a greater trust between the citizen and the state – and such trust is really needed when taxpayers are filling their tax returns, many areas are empty boxes that are quite difficult to check afterwards. It might even make companies and the self-employed to pay their taxes more fairly. In Nordic welfare states, you basically know that the state is there from cradle to grave, that if you fall in poverty there is income support (it’s currently conditional to being a job seeker unless you’re disabled, or paid upon expenses as poor relief), that there is free nurseries, schools, health – all of which create a type of citizenship where people know that the state is for everyone (for the poor and the rich), and everybody gets quality services from it. So yes, a citizen’s income would boost the tax morale and trust in state I think, it’s being experimented in a number of places, and such experiments are worth watching.
Thanks
I agree with this view from Matti but I se it from what we are losing in our lives.
All I hear and experience at the moment is the State withdrawing from my life.
It does not want to fund my pension (even though I have to part fund it too and it now seems to want me to make voluntary contributions into the private sector of all places rather than the fund it uses for my pension).
It does not want to pay for some expensive dentistry treatment I need (no fault of mine by the way) even though I do not smoke and I’m not grossly overweight.
And it withdrew the service that I needed without telling anyone or with any consultation. The treatment costs £700 and I have seen my wages drop in real terms since 2010. And it has to be done.
It’s making it harder for me to access services for my mother in law who is in the early stages of dementia.
The State wants to get rid of me in order to cut costs and around 100,000 other hard working people.
And as I talk to other people they all feel the same thing is happening but they tend to blame those they are told to blame by the Daily Mail, The Sun etc.
No-one seems to think that paying taxes benefits them anymore. And this is because the Tories have just stopped spending money. But this also means that people are more anti-tax than I can ever recall.
So a reinvestment in services and a BCI would alter this trend in the country to increasingly become like a America where the people are scared of the Government. It would be a way of sharing the economy with others and would benefit just about everyone.
As Paul Krugman has said “Everyone’s wages is someone else’s wages”. It’s true.
Apologies if this has been covered already but how high would the income need to be?
Enough to live from? Enough to live from in London?
If the latter, would it not be the case that for many people they would be receiving more from the state than they would contribute back in tax?
There are a whole host of proposals covering a wide range
I want £16,000 pa
Some talk sums vastly lower: I see little benefit to them except as ways of teasing the systems into play
There’s is no issue of affordability in essence, Richard, unless we buy into the myths that ‘there is no magic money tree’ when we (on this site know there is). It is more of a question of assessing the macroeconomic and behavioural effects.
MMT’s critique (via Bill Mitchell) is that the basic income (even though it appears to create a ‘price floor’ for labour_ may not enhance employment or even worsen it:
‘Given that mass unemployment is the result of inadequate aggregate spending, this means that the basic income proposal solidifies or locks the nation into entrenched states of capacity wastage and merely replaces the income support for unemployment with the basic income.
It is also highly unlikely that labour participation rates would fall significantly with the introduction of a modest BIG, given the rising participation by women in part-time work (desiring higher family incomes) and the strong commitment to find work among the unemployed (see Widerquist and Lewis, 1997).
So the suppression of net government spending that would accompany the introduction of a basic income would likely increase not reduce unemployment.
[Reference: Widerquist, K. and Lewis, M. (1997) ‘An Efficiency Argument for the Guaranteed Income’, Working Paper No. 212, The Jerome Levy Economics Institute.]’
He goes on to say:
‘ there could be an increase in the supply of part-time labour via full-timers reducing work hours and combining BIG with earned income.
In that context, employers in the secondary (casualised, part-time) labour market will probably utilise this increase in part-time labour supply to exploit the large implicit BIG subsidy by reducing the already low wages and insecure working conditions.
Even basic income advocates have acknowledged this probability (for example, Van der Veen, 1998).’
I’ve not reached any conclusions on this though I veer a little towards the Job Guarantee approach which guarantees the price floor and provides training and opens up skill developments in areas the ‘market’ will not invest in (i.e most of the things that are really important!).
Also, as I’ve often mentioned, the results of our now 40 year, unrestrained, housing bubble throws a huge spanner into the works due to the increased level of basic income required to fund it. Housing benefit would be an add on I suspect so you would still have politically exploitable ‘resentment’ (we’ve seen how that works!) on who gets housing expense covered.
It’s very trick stuff indeed.
A CI provides choice
I can’t see how a JG does that: it removes it as I see it
I know which society I would prefer to live in
It would be very interesting indeed to do the sums on this properly. Upfront, there’s obviously the substantial cost of providing citizens income. However there will be many quite substantial gains. Everybody receiving it would automatically have to be within the tax system. A wide range of automatic benefits (child allowance right through to winter fuel allowance for pensioners and free TV licences) would presumably evaporate to be contained within the age -related payments. Many of the discretionary benefits that are means tested and/or assessed at regular intervals would be irrelevant. Jobseekers allowance and the whole ghastly process of managing that would be greatly changed, and jobseekers centres actually able to concentrate on helping people to find real jobs.
The consequence of all this is that not only would many of the existing relatively expensive benefits be downgraded or eliminated but the staff needed to administer all this would also be substantially reduced. I don’t know what fraction of the current benefit bills actually go to their recipients as distinct to the fraction that pays for the management and administration of the benefits.
It would also need to go along with fairly radical changes to income tax, with no tax-free income level, but a guarantee that every increment would substantially go to the employee. As every payment for work would be taxable one could even consider requiring the payer to be responsible for remitting the tax at least at the basic level.
The only substantial problem I can see is that such a change would be a radical revolution and probably have to be done properly from the beginning. There’s a great love in the UK of any change being brought in gradually and I don’t think that would be possible here. The other major problem I suppose is that the UK is almost allergic to radical change! However the UK has been faced with newly radicalised world so perhaps a bit more would be possible?
Howard Reed and I modlled it in 2013 for Class (well, Howard did mostly)
Google it
I do agree with the concept of a universal basic income. The vital issue will revolve around the level at which it is set. There could be much simplification of benefits claims – housing benefit, council tax, also state pensions.
In the new Brexit environment in which we find ourselves, it will also give the population as a whole a feeling of more security and self-confidence.
I too agree strongly with the concept.
I believe it needs to be set at a level that enables people to live with a reasonable degree of dignity, but not so high that large numbers of people simply opt out of making any sort of contribution to society. I hate to say it, but I think the phrase ‘just about managing’ might be appropriate.
In the longer term the rate should be inversely proportional to the number of unfilled job vacancies on offer – high numbers of vacancies = people ‘free riding’, low numbers of vacancies = people wanting to work but unable to do so. This will prepare us for the job losses that technology will deliver in the future.
Of course the details of the ‘citizen’ part need to be finely judged too.
This kind of payment would create a sense of solidarity, interdependence and collective well being. It would stop the hostile divides that currently exist – it would help rid us as citizens from the concept of benefits are for some which leads to division, divide and rule abd insecurity.
Certaintly it may be help with the small business, self employed side. I guess you are also assuming that you would clamp down on tax abuse by corporations, trusts etc using other mechanisms. No good closing one leak if it spills out somewhere else.
This is a bit off topic but would you be in favour of making voting compulsory in order to receive your citizens income? Or other civil duties, for the young and able bodied (like training or volunteering) as part of the contract with the state?
I approve of compulsory voting. Australia has this right
But I do not see how volunteering can be enforced. Any attempt to do so has rather nasty connotations of forced labour to me
Just a thought – if someone is recorded as having voted they could get a bonus payment in their citizens income the following week?
Richard
I heartily agree with your last sentence. I think this is an idea worth very serious consideration and, as Matti points out, it is actively being experimented-with in some places so the further investigation you call for will be taking place. The fact that the ICA mounted the discussion you attended strikes me as an encouraging development too.
However, the idea does have its critics and by no means all of them are to be found on the loony right. One (extremely seriously-minded) critique comes from the MMT camp in the shape of a 5-part mini-series by Bill Mitchell “Is there a case for a basic income guarantee?” in his blog:-
http://bilbo.economicoutlook.net/blog/?p=34448#more-34448
Given that MMT steadfastly advocates a job guarantee it’s predictable that he should come out against the case for a BIG, which he duly does, resoundingly. I wouldn’t dream of suggesting you read the whole of Bill’s (characteristically verbose) mini-series but have you any thoughts on the JG as a viable alternative?
The JG is a fantasy
It also denies choice which the CI empowers
I have absolutely no time for this aspect of MMT: no one can guarantee jobs and it’s absurd to pretend it can be done
Richard, could you expand on “JG is a fantasy”
Tell me how it will work in practice
Does the Jobs Guarantee see the state impose workers on businesses? Didn’t the Soviets try bossing the bosses like this?
I agree with you Richard. The level would need to be perhaps £15000pa. Most of this would be spent back into the economy triggering more taxation, VAT etc. Yes, as now, there will be some who would not work but they are unlikely to save it.
It would be much simpler to rent homes or for young couples to obtain mortgages.
Some money will disappear overseas with holidays and the purchase of imported goods but this happens now anyway and can be balanced with exports and overseas tourists spending in the UK.
The nest question is “do we abolish student loans?”
Yes
They can be QE’d out of existence
That and the abolition of tuition fees would win a lot of votes (if ppl could overcome the Clegg deception, that is)
Would need to also have something that would appeal to non university educated folk to counter balance it
Do you think GBP 16 k a year for free would not spur the destitute of the Horn of Africa or similarly disadvantaged regions to even greater motivation to beg steal kidnap or borrow in order to make their way in capacities legal or otherwise to avail of this Manna from UK Heaven. ?
After all the premises you have outlined predicate the UBI to be available to everybody within the UK borders regardkess of their legal/ illegal status.
Will prisoners and sectioned persons also qualify?
Didn’t you notice the residence clause?
Yes I did. ” Legal residence” needs to be more strictly defined.
A person who fetches up on the “right” side of the Chunnel or falls off the back of a Dover customs cleared lorry with no papers cannot be ” sent back” as he /she refuses to state their provenance.
.
So UK in their doe eyed magnanimity grant them ” asylum” ( political or otherwise) .
Ergo they are ” resident” … probably for all time ….with the guarantee of £16 k p a adjusted for inflation probably tax free….for them a king s ransom given they wil be able to buttress that with small time criminality / black market employment within their indigenous cohort….. meaning half if not more (of that UBI ) will be transferred by mobile phone back to their families in country of provenance thus draining UK coffers further.
Post Brexit there will be no requirement to give a beenfit straight away
Nothing says that in the suggestion
1. Could it turn the black economy white?
Couple it with your transaction tax which merges at least PAYE and VAT. If you have a guaranteed income in return for declaring your work, as well as access to arbitration and small claims court, how many cash in hand jobs would become declared to the tax authorities? I would be tempted to offer other perks to declaring jobs so that the Payee has plenty of incentive to declare. With a tax number for each job, and restrictions on access to public liability insurance (etc – could be a long list), the Payee has incentives to declare. Plus the Payer has re-assurances in case the job goes wrong.
2. Inflation.
I am broadly in favour of Basic Income but this scenario is my major sticking point. Landlords will increase rents because they know more money is out there. Shops will increase prices for the same reason. Workers will demand more pay if the choice between working or starving becomes history. All this inflationary pressure pushes up costs and the Basic Income cancels itself out.
I will muse on your second point
But remember it us intended to be redistributive but revenue neutral
I think the inflation issue is one of the main MMT critiques of Basic Income.
Mitchell writes:
“It is inescapable that the basic income proposal lacks what I call an inflation anchor. That is, to provide an adequate stipend and generate full employment (ensure there are enough jobs for all who want to work), the basic income guarantee is inherently inflationary and sets in place destructive macroeconomic dynamics which make it unsustainable. To suppress the inherent inflationary bias of the proposal, the stipend has to be so low that the recipients are freed from work but not poverty. The Job Guarantee, by way of contrast, is designed to provide an explicit inflation anchor and allows the government to continuously maintain full employment and provide a decent wage to those who from time to time will be in the Job Guarantee pool. It does not rely on poverty wages or unemployment to maintain price stability. That alone is a fundamental advantage of the Job Guarantee over the basic income guarantee — it is sustainable.’
he goes on to say:
‘n economy reliant on the basic income guarantee to solve the problems of income insecurity brought about by the tendency of capitalist economies to mass unemployment is inherently inflationary.
Even though the introduction of a basic income guarantee can engineer a state of full employment if the fiscal stimulus associated with its introduction is sufficient, it does so by promoting an artificial reduction in the supply of labour and the resulting shrinkage in the productive capacity of the economy renders such a nation vulnerable to accelerating inflation.
In other words, an economy built on a basic income guarantee does not have the capacity to deliver both sustained full employment and price stability.’
Worth reading the whole thing: http://bilbo.economicoutlook.net/blog/?p=34462
This is just typical Mitchell nonsense
Of course there is an inflation anchor. It’s tax. But Mitchell can’t get his head around tax
He really is not a reliable source
I don’t want an answer today, just because communication is instant these days, it doesn’t mean answers should be instant too. I would like to be 100% enthusiastic about basic income but the inflation problem holds me back. I’ve searched for some answers to the problem by scrolling through the posts of Basic Income UK on Facebook. Found this:
https://medium.com/basic-income/wouldnt-unconditional-basic-income-just-cause-massive-inflation-fe71d69f15e7#.grfdl67e1
I also belong to the Positive Money Facebook group – I don’t think we can have basic income without democratic money reform. I learned some time ago about the Worgl Experiment with stamp scrip, and that money creation does not have to be inflationary. It blew my mind at the time. So perhaps we could have non-inflationary money and stop blaming workers fair wage demands for runaway inflation?
I’ll finish with this excerpt from an article on Neoliberalism.
“…through a combination of indirect economic and direct political pressure, they began to impose the set of policies we now call neoliberalism. Inflation would be kept down by high unemployment, low wages, and busted unions. The radical Left would be violently suppressed, the welfare state would be sold off…”
http://www.thenorthstar.info/?p=12952
If the basic income injected was matched by tax take (and there is not reason why it should not be) there is no chance of inflation as a result
That is the role of tax: it is an anti-inflation tool
All others uses are secondary
I have solved your problem
Re: “Workers will demand more pay if the choice between working or starving becomes history.”
To be honest, I don’t want to live in a society where there is a work-or-starve ethic. Slavery was allegedly abolished in the 19th century, but seems to be still with us, only nicely repackaged and sanitised. As I read on a separate discussion on this topic, “But who will clean the toilets?”
It’s as Richard says, behavioural changes are hard to predict. It is quite possible that people will accept low pay, zero hours contracts, etc. more readily given that their basic living costs are covered. I suspect many people will choose to live on their citizens income but take low paid, casual work to pay for holidays and other luxuries. Hence no inflation.
Or they will hold out for high quality jobs and employers will not be able to offer rubbish as people will have an alternative to it
Which could result in really big productivity gains
I think that naybe there would be an increase in handicrafts both in teaching and learning. More than likely people would seek to enhance their levels of skill and lnowledge with some form of education even education of a selflearning sort. there does seem to be a need for self expression that is denied by the sort of lives we lead now when ‘entertainment’ is drip fed and paid work is demanded and expected to be all-consuming to the exclusion of family life.
I think that maybe there would be an increase in handicrafts both in teaching and learning. More than likely people would seek to enhance their levels of skill and lnowledge with some form of education even education of a selflearning sort. there does seem to be a need for self expression that is denied by the sort of lives we lead now when ‘entertainment’ is drip fed and paid work is demanded and expected to be all-consuming to the exclusion of family life.
I like the idea of a Citizens Income even if it is a bung to the set of choices available to the middle and upper classes who currently don’t get any welfare. People on benefits already to the value of a CI would not initially have an increase in their options, unless the tax system made it worthwhile to take work which they are otherwise avoiding or work which doesn’t currently exist due to regulations like the minimum wage.
What I don’t like is prejudiced research, where people clearly state the expected outcome of their research findings before the research has begun. That is not worthy of someone labelling himself as an academic.
Everyone does prejudiced research
From the moment you choose to study a subject to the methods you choose there is always prejudice
Some bad academics pretend oitherwise
That reads like a celebration of your naked prejudice.
Prejudice indeed exists on a spectrum with everyone having a little, some a lot. There are established methods in academia to keep it as low as possible. Your rejection ( or perhaps ignorance ) of these methods is troubling.
I am well aware of the charade almost entirely played by academic economists (and few other disciplines) to hide their blatant political prejudice behind an utterly false mask of supposed objectivity
Precisely because I am well aware of it I do condemn it
Richard-what do you make of countries, like Finland, with right wing, austerity obsessed Governments trialing Basic Income? It is clearly a concept that can attract the Right as well as left.
I accept that
The same is also true of income tax
Coming late to this topic. Agree totally with you Richard. While I like much about MMT’s macroeconomics, I too believe they’re well off the mark with JG. Completely coincidentally this afternoon I listened to this inaugural speech (2013) by Guy Standing who, as you know, has been a militant advocate of UBI for a long time. Here he speaks passionately and eloquently about his rationale for it which I’m guessing you’d concur with. It’s long (1h 18m) but for anyone who needs convincing, it’s definitely worth listening to (IMHO)- https://www.youtube.com/watch?v=LTudjB4T7Xw.
I think we know it will (must) happen in due course, inevitably by politicians kicking and screaming. I like his ending quote from Barbara Wootton: “It is from the champions of the impossible rather than from the slaves of the possible that evolution draws its creative force.”
I will try to find the time
After years of banging on about this I’m greatly encouraged by how often the UBI/UCI c0oncept is getting aired.
For those querying it vs JG, inflation, idleness, etc…have a think, read around on the subject and use your imagination. If the UBI is set up correctly, I think the £16k number Richard uses is a good mark. It also has to be free of tax and outside the finance system so cannot be counted for loan purposes, including repayment. The dual appeal of this is:-
The Right – simplification, removes a costly and complex benefits system and makes any and all work pay. It would even bring some truth to the description of zero hours being empowering. There would also be no need for a minimum wage as people would actually have real choices.
The Left – Dignity
I could list loads of benefits, the tweaks to existing structures to make this work or enhance it, but I think those interested will read up and those not won’t listen.