In the CLASS think tank paper that Howard Reed and I have written that reconsideres Beveridge's concept of idleness in a 21st century frameowrk we argue that:
Tax is, indisputably, the most important way in which any government intervenes in an economy. This inevitably means that when considering how a government is to tackle idleness, as is its duty, tax has to be taken into account. In our opinion there are two ways in which this has to be done. One is a macroeconomic consideration which relates to how the tax system as a whole, the balance between tax and spending, and the relationship between taxes, can be adjusted to tackle idleness.
Secondly, there is a micro-economic consideration of tax issues which looks at the detailed design of the tax system to ensure that it does not, by itself, put obstacles in the path of people working.
Our recommendations here are radical: we are committed to strong, progressive taxation. That means we believe that as income rises the proportion of the total income that a person pays in tax should rise as well. It is a principle of tax justice, usually described as vertical equity, that few would wish to dispute. However, the UK tax system does not deliver vertical equity in a great many cases. It is our opinion that this is best addressed by a complete redesign of the Income Tax, National Insurance and benefits systems: nothing less will do if we are to tackle institutional impediments to idleness.
Our proposed system is based around two simple components:
1. Basic income payment — Minimum Income Standard . All families would receive an unconditional, tax-free basic income payment that would be set at levels sufficient to alleviate poverty.
2. Unified Income Tax (UIT). The current Income Tax system and the entire National Insurance Contributions system would be replaced by a single Income Tax structure which would be clear and progressive.
In 1942 Beveridge said the war provided a revolutionary moment and as he noted “a revolutionary moment in the world's history is a time for revolutions, not for patching”. We agree. The global recession is now providing another revolutionary moment in which new thinking is required and that is what we have sought to offer in this paper.
The macro-economic arguments for reform are well known to readers of this blog. As we argue in the paper:
[Beveridge was quite sure that it was] not the role of the government to keep people in a state of idleness. He did not see that as responsible from a social viewpoint. Nor did he see it as affordable. He saw it as the role of the state to ensure that there was opportunity for gainful employment for those who wanted it. The cure to idleness was work, and Beveridge believed that the role of the state was to make sure that work was available for all who wanted it.
We agree with that. We continue, arguing that Beveridge was a man of his time, that:
Keynes' logic was simple: he argued that if people were in work then, assuming the economy was otherwise in a state where people would be unemployed, if the government were to provide work for these people (either directly or through enabling their employment in the private sector, for example via subsidies to employers) this would generate enough income to pay the taxes that would justify the spending required to ensure they were put to work in the first place. In effect, he argued that there was a beneficial and virtuous circle where borrowing to put people to work in turn created income on which tax was paid sufficient to repay the borrowing undertaken. This was the core of his argument that there was a multiplier effect in the economy.
We most especially agree when:
Idleness is caused by a lack of demand in the economy. Put straightforwardly there are resources available in the UK in the form of people who are trained and willing to work that employers do not wish to put to use in any gainful way. We have a low minimum wage, and whilst just 4% of employees in the UK as a whole are on that minimum wage over 20% earn less than a living wage (defined as £8.30 an hour in London and £7.20 elsewhere). There is no evidence that the introduction of the National Minimum Wage in 1999, and subsequent increases in its value over the next thirteen years, increased unemployment. Given that this is the case, it seems clear that in the vast majority of cases, people are not unemployed because they want to be; they are unemployed because there is insufficient work. In that case a Social State for 2015 has to defeat idleness by creating work.
And it's for that reason that we argue for macroeconomic intervention to create work, and a reform of the tax and benefits system to ensure it's attractive to all who want it, with progressive tax built in, which it isn't now.
That tax reform will be the subject of another blog.
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The fact that 20% of employees don’t earn a living wage, is not due to too low a minimum wage (given the UK already has one of the highest in the world), but due to the cost of living (specifically housing and transport) being too high. With a daily travelcard costing almost two hours work at minimum wage (and about 50% more than a similar ticket in Berlin or Paris) and lunch probably another hours work, over a third of earnings are consumed in just being at work in London. And the cost of accommodation is even more of an issue, for which radical steps need to be taken – restriction of foreign purchases, taxation of empty homes, targeting of landlords evading tax (come on HMRC how hard can it be to compare land registry records with tax records), freeing up planning restrictions.
What a bizarre claim
A century ago Ford realised if he did not pay enough for his employees to buy his product there was no market
Are you saying he was wrong?
Are you saying the minimum wage should not reflect the cost of living?
And how are you going to tackle land prices which are at the copre of the issue you raise from a wholly Londoncentric view, I note?
It is not a bizarre claim. We operate in a global economy that has seen many unskilled jobs migrate to low cost economies. Constantly driving salaries up may not be the long term answer. When you have a minimum wage that is up to 5x that of other EU states (and double the salary of a junior doctor in some) and yet still doesn’t provide a living wage, then your problem is the other side of the equation i.e. cost of living.
Unfortunately London drives prices across most of the UK. You only need to look at the price differential between the US and the UK, to see there is something seriously wrong with our housing esp outside of London. As for the land shortage, only 6.8% of land is developed, it is not like land can’t be found to create low-cost housing. With one million odd working people getting housing benefit, then it is clear there is a problem with accommodation costs
Oh don’t be silly
Junior doctors are not paid £7,000 anywhere equivalent to the UK
Your comments are just straightforward time wasting
Please don’t bother again
Czech Republic – €650/month junior doctor (Source: the Lancet)
Baltic states – €800/month surgeons (Source: the Lancet)
Bulgaria – €400/month junior doctor (various press articles)
But don’t let facts get in the way of your biases. You really aren’t open to any views or even facts that conflict with your view of the world. For someone who claims to be a democrat, you certainly don’t like hearing the opinion of others.
And average wages are?
Shall we contextualise your claims?
At present they’re about as relevant as saying the answer is 42
Comparing UK wages and Bulgarian wages is facile without context
If they’re being given free and for nothing an income sufficient to keep them from poverty, won’t a fair number of people elect to to work? If they so choose, won’t the withdrawal from the market of their labour cause prices of some staples to rise, perhaps enough to make their basic income insufficient to keep them from poverty? Putting it another way, if enough of the people who put food on our tables decide not to work, isn’t that going to raise the price of food potentially making the proposed basic income insufficient? Perhaps it might have to be routinely adjusted to reflect changing attitudes to work. There’s more to this but I’ll leave it at that for now.
I don’t believe most people choose not to work
That’s not the way the world works
People enjoy work – overall
It’s highly sociable activity
And gives a lot of people meaning
There would be behavioural response – but let’s not buy the shirkers myth
And we’re not suggesting riches
I agree Richard. I think most people want to work. The problem is partly remuneration but also the sense of having a ‘worthwhile’ job is important. A job that has a palpable social value is significant. When I worked as a teacher, pay was low when I started, but the job felt worthwhile and inherently satisfying and you could pay the rent. However, with rent/fuel costs so high, the level of pay is an issue. Government has to intervene in the property price scandal ( I’m not knowledgeable enough to know how) otherwise the value of work is blighted. The sacred cow of the ‘Englishman’s castle’ must be challenged.
Agreed
But one aim of this is to beging to do such things
There’ll be more on Monday
They might enjoy the social aspects of the regimented world of work in a society which denies them any practical alternative but given the choice many would prefer to pursue, say, a cherished hobby than work in some dead-end job. They can’t because they have neither the money nor the time. I think you’d find a lot of people wanted to work part-time at best and that only to provide sufficient funds to better pursue their interests. However, that may not be any bad thing as many would no doubt eventually devise ways of making those interests pay. People would perhaps end up being busy for many more hours than in any normal job so I doubt ‘idleness’ would present itself as any problem, even to those whose inclination might be to perceive it as such.
A land value tax is the obvious way to bring property prices down. That would financially wipe out most of the Establishment so obviously it’ll be an immense struggle getting it through but it’s a must if we want to see adequate housing with reasonable land attached. It would probably result in lots of work being available too for those that wanted it.
Mr. Murphy
A quick query on the paper (which is an interesting read by the way) and I like the idea of combining Income tax and National insurance (which should have been done long ago.) My question is the status of people who are here as, for example, refugees awaiting processing or indeed economic migrant whose legality is in question under current ever-changing regulations – would they be eligible for the ‘citizen’s income’ under the proposal(as they are not citizens in effect?) I emphasize this is not a comment designed to allow subsequent hostile respondents to engage in ‘dog whistle’ racism but framed as a legitimate one on an issue I am seeking to clarify.
Thanks in advance for your assistance
We are clear that availability for work is a criteria for claiming unless there is clear disability
We would expect this to be enforced
Mr Van_Patten
You raise an important issue which we didn’t have time or space to address in the CLASS paper – the question of whether economic migrants should be entitled to the Citizens Income. My view is that EU nationals should, provided that similar arrangements are in place for UK nationals in the relevant EU countries and subject to availability for work. Ideally it would make sense to run this scheme at an EU level (although I appreciate that level of European integration is some way off!)
Best
Howard
That was the purpose of the question – obviously for public acceptance of the scheme, I think you’d need to clarify eligibility for it, especially in what is an increasingly globalized market, which you have done – I see no reason it couldn’t be extended to EEA countries as well, (Switzerland, Norway) or indeed any country even outside Europe that set up a reciprocal arrangement – perhaps a question that will be seized on by the Rabid Right wing press is, what about countries, in , say the Indian subcontinent or Sub Saharan Africa, many of whose residents have been here for many years – would they be entitled to it?
Again, I stress I am at pains to adhere to the comments policy (having violated it before) outlined here – I hope it hits points 2,3 and 6 of that policy, if not the other three. Otherwise, there are some comments I have on the paper but as Mr. Murphy has outlined, I imagine there’ll be more comments relating to and excerpts from it, so they may be best tackled there.