Saturday, January 18, 2020

‘Citizen’s Income’ would require ‘unthinkable tax rises’, say MPs

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A cross-party group of MPs have rejected the idea of a ‘Citizen’s Income, or ‘Basic Income’, as a replacement for the existing welfare system, claiming that such a system would require “unthinkable tax rises” and would not help to alleviate poverty.

Citizen’s Income is an unconditional payment made to every person regardless of age, gender, wealth, or employment status, and cannot be altered or removed if a persons financial circumstances change or improve.

It would be topped up with additional amounts in certain circumstances. For example, to address the extra costs associated with disability and housing support.

Supporters of the Citizen’s Income claim it would help to remove the stigma attached to claiming social security benefits, because it would be payable to every person with the right to reside in the UK.

Louise Haagh, Reader in Politics at the University of York, told MPs on the Work and Pensions Committee that she saw Citizen’s Income as one part of a solution for “implementing a more humane form of basic security at the bottom of the welfare state”.

Annie Miller, Chair of the Citizen’s Income Trust, said: “One of the problems with the current system is the structure. It is not based on the individual, it is not universal, it is targeted on poor people.

“It is much easier to stigmatise them, humiliate them and reject them leading to low take-up. So targeting does not protect poor people. Universal systems protect both rich and poor.”

Becca Kirkpatrick, Chair of the West Midlands Branch of UNISON, said Citizen’s Income would ease many of the fears and anxieties felt by people trying to navigate an increasingly conditional welfare system, where claimants face the possibility of financial sanctions if they fail to comply with strict conditions.

The Adam Smith Institute supports a form of Citizen’s Income that it refers to as “free market welfare”. This would replace the UK’s existing welfare system which, it argues, is “costly to administer, complicated to navigate, and designed for a postwar-style labour market that no longer exists”.

MPs also heard from witnesses who believe an unconditional system, such as that provided by a Citizen’s Income, would mitigate developments in the modern labour market. For example: the rise in zero hours contracts, an increasingly automated workplace environment (think robots), and the so-called “gig economy”.

However, opponents claim the costs of an unconditional Citizen’s Income would lead to significant tax rises, disincentivise work, and would still require some means-testing to ensure the needs of older and disabled people are met.

David Piachaud, Professor of Social Policy at the LSE, explained that such complexities are common with Citizen’s Income and may actually undermine the case for simplicity cited by advocates.

Declan Gaffney, a political consultant, explained: “As a practical proposition, what tends to happen is that [Citizen’s Income] is sold under the brand of universality and flat rate payments and then one finds that as you move from that abstract idea of a single flat rate income going to everybody to some kind of practical implementation, the elements on which it is sold – lack of conditionality, the flat rate base and so on – begin to fall away and it starts to gradually become more and more like an adaptation of existing social security systems.”

Peter Alcock, Emeritus Professor of Social Policy at the University of Birmingham, told MPs: “I think it is a political distraction. There are all sorts of problems with the benefit system and there are all sorts of issues there.

“We need to look at what the role of the state is to support employment, to improve the provision of care, to give better incentives to people to take certain kinds of jobs. They can be dealt with, and should be dealt with, within the existing structures that we operate.”

He added: “Either you have a very high level of basic income, in which case you are going to have to have massively increased levels of taxation because there is nowhere else for their money to come from, or you do it on the revenue neutral basis that people have been talking about.

“But if you do it on a revenue neutral basis you do not solve any of the problems because you need to retain all of the means testing and all of the other elements of the benefit system that currently may or may not be causing problems.

“The problem is you don’t solve them like this. It is either too expensive or it isn’t worth having.”

The Work and Pensions Committee concluded: “As there is no prospect of introducing a fully-fledged CI, a more affordable system would need to be layered on top of the existing benefit system to ensure that additional needs such as disability or housing support were accounted for.

“This would not reduce complexity, and it is difficult to see how it would substantially alleviate poverty or provide income security. Indeed, it would create a system that is scarcely distinguishable from Universal Credit.

“There are many problems with the existing benefit system, but CI is an unhelpful distraction from finding workable solutions to them. We urge the incoming government not to expend any energy on CI.”

Commenting, Frank Field MP, Chair of the Work and Pensions Committee, said: “A universal Citizen’s Income would either require unthinkable tax rises or fail to deliver its objectives of simplification and a guaranteed standard of living.

“There are problems in the welfare system, but CI is not the solution to them. Rather it is a distraction from finding workable solutions.”

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