The benefits system is much in the news, and individuals and organisations on the Left rightly have plenty to say about deductions in Housing Benefit imposed on social housing tenants if they are deemed to have too many bedrooms, and about the benefits cap now experienced by larger families living in areas in which housing is expensive. But isn’t it time that we gave a bit more thought to a recent structural change to the benefits system?
At the 2010 Conservative Party Conference the Chancellor of the Exchequer proposed withdrawing Child Benefit from households in which at least one individual was earning enough to pay higher rate Income Tax. He found that it was impossible to administer his proposed means-test, and so instead decided to withdraw the value of Child Benefit through the tax system. The outcome is the UK’s first ever tax on children.
In a speech on the 6th June Ed Miliband said that a future Labour government would not seek to change this; and he also committed a future Labour government to stop ‘sending a cheque every year for Winter Fuel Allowance to the richest pensioners in the country’. Either the Winter Fuel Allowance will have to be means-tested – that is, claimants will have to declare their income and living arrangements on a claim form, and the higher their household income the less Winter Fuel Allowance they will receive – or its value will have to be withdrawn from pensioners through the tax system.
Our first thought might be ‘Yes: if we’re going to redistribute from the rich to the poor, perhaps the wealthy should have the value of their Child Benefit reduced, and perhaps wealthy pensioners shouldn’t be sent a Winter Fuel Allowance.’ Our second thought must be this: Child Benefit and the Winter Fuel Allowance should remain unconditional for the simple reasons that universal benefits are efficient and cheap to administer; they contribute to social cohesion (because everybody gets them); they do not need to be claimed ( – the poorest are least likely to claim means-tested benefits); they do not stigmatise recipients ( – benefits that are only for the poor do stigmatise); they do not result in unrepayable overpayments (means-tested benefits often do); and whilst it is true that the wealthy do not need either Child Benefit or the Winter Fuel Allowance, they are paying far more in Income Tax than they receive through universal benefits, so it really is no problem that they receive the benefits along with everybody else.
A new book presents us with the opportunity to rethink the Left’s irrational passion for means-testing. Money for Everyone: Why we need a Citizen’s Income, shows how efficient universal benefits are, and how useful they are to the poorest in society; and, in particular, the book shows that a Citizen’s Income – a universal, unconditional and nonwithdrawable income for every individual: sometimes called a Basic Income – is both desirable and feasible. A Citizen’s Income would contribute to social cohesion, it would reduce poverty, it would be simple and cheap to administer, it would incentivize employment, and it would not stigmatise its recipients because we would all receive it. A Citizen’s Income would be paid for by reducing tax allowances and means-tested and contributory benefits and so would not need any additional public expenditure. And just as the NHS and the Winter Fuel Allowance express in our social structures our fundamental human equality, so a Citizen’s Income would express that same fundamental equality. There can be few social policies more attractive to progressives on the Left.
Money for Everyone: Why we need a Citizen’s Income is published by the Policy Press at a price of £19.99. (All royalties will be paid to the Citizen’s Income Trust.)
www.policypress.co.uk/display.asp?K=9781447311256
Dr. Malcolm Torry is hon. Director of the Citizen’s Income Trust
It would appear to be superficially attractive and I agree that the Left has an irrational obsession
with means testing which can do more harm than good.
Universal benefits are on the whole preferable and more efficient. It costs about £4-5 to issue the average regular individual benefit payment and that is surely madness.
But the citizens income idea is meant to solve a number of interlocking problems and it may be expecting too much to expect to resolve such issues in an advanced industrial economy.
It may have a negative effect on marginal rates of pay in the labour market and may make the mimum wage even harder to enforce. Not that it was ever actually ever enforced even under the Labour government
First of all CI will not replace all benefits and cannot accomodate a large number of varying circumstances.
It does not deal with housing and health costs and or dependants.
A variant of CI now exists in 31 different ,mostly developing ,countries either as transfer payments or subsidies or access to subsidised goods. There is not a shred of evidence that CI has unlocked potential or made people strive harder in the labour market or education. In some cases it may have made things worse. It may have made large sections of the population totally dependent on transfers which may not be sustainable in the long run. All rentier states are at the mercy of world commodity markets.
In the main CI is operated by rentier regimes depending on resource extraction.
CI is also the official position of the Green Party which likes simplistic solution to very complex problems
CI was promoted by the late Brandon Rhys-Williams a Tory wet although it has been taken up by some progressive economists and others.
Historically it has had reactionary origins beginning with Distributism in the nineteenth century and leading on to Social Credit
More recently it was championed by Louis Kelso and apparently it was of some interest to Presiden t Nixon who introduced the minimum wage in the US.
Unfortunately for all the arguments in favour of CI there are also downsides. It may lock many into furthe dependency. It may have to be regionally allocated and calculated. IT may create a new more exploitative labour market. So it may entrench certain inequalities rather than deal with them.