I recently wrote a piece for Lib Dem Voice about “Mending the Safety Net”, the policy paper on social security which will be discussed at conference in Brighton. One of the issues raised in the comment on the piece was, understandably, why the group ended up not supporting a move to a Citizen’s Income. Rather than a long comment on the original piece, I thought it would be helpful to explain the groups view in a separate post.
In a nutshell, the Citizen’s Income pays the same amount to every resident, regardless of whether they are in work or not. There is no means testing and no conditions apply to those receiving the payment. Every citizen receives the same amount, although in some schemes there are different amounts for children, working age adults and pensioners. There are a number of different monikers and different ways of doing similar things, such as Negative Income Tax and Universal Basic Income, most of which we looked into, but for simplicity I’m just going to refer to ‘Citizen’s Income’ throughout.
At first glance it seems simple and easy to administer, and could help put an end to the divisive ‘them versus us’ narrative that has infected the debate on welfare.
That is why I and many others on the social security group were initially very attracted to the idea. We read a lot about it and invited a number of people who have advocated the policy to give evidence to the group.
Like a lot of people who responded to the survey produced by the working group, many of us still find the theory of Citizens’ Income attractive, but once we started investigating the details, however, it quickly became clear that the Citizen’s Income simply wouldn’t work in practice. One of the great things about the Party’s system of working groups, is that it allows us to really dig down into the detail of a policy, rather than our initial reactions. I’ve always believed that the fact that Lib Dems work to develop policy that can work in real life sets us apart from so many other parties.
The main problem is that different people have very different needs, which a single rate of benefit can’t support. Housing costs differ significantly across the country, family sizes vary, and those will disabilities need more to live on than those without. This means it is effectively impossible to set a level of Citizen’s Income that ensures everyone has enough to survive.
Most proposals for a Citizen’s Income set the amount at about the same rate as currently paid in Jobseeker’s Allowance – around £70 a week. But that’s just not enough to support the many disabled people who face higher living costs as a result of their condition. The highest rate of Disability Living Allowance is currently set at £139.75 per week – far above where most proposals for a Citizen’s Income are set. Those currently receiving disability benefits would therefore lose out hugely, even though they are precisely the people who most need support, and who can least afford have it reduced.
Similarly, our housing market means there are huge differences in housing costs from area to area. If you are in inner South East London, a three-bedroom house costs £330.72 a week, whereas in Merthyr Tydfil the equivalent property is £87.75 a week. The UK has far more variety in the cost of housing than those countries where Citizens’ Income has been tried.
If you want to keep the simplicity of a flat rate benefit, then it either has to be set high enough to ensure people can afford to live in more highly priced areas, which becomes extremely expensive, or it is set at a more affordable level, in which case no-one who is living just on the Citizen’s Income could afford to live in London and the South East, or in a number of other cities around the UK.
There are also challenges relating to different types of family. With a flat rate per adult, a couple does better than a single parent, which could have worrying implications for child poverty.
The system can be made more complex to reflect differing housing costs across the UK, and different family make-up, and disability, but it then loses the simplicity which is the whole point of the Citizen’s Income. Complexity also makes the scheme much more expensive to operate.
And the overall cost of a Citizen’s Income is another serious problem with the policy.
The UK currently spends about £214 billion on benefits. Divided equally, that’s a Citizen’s Income of just £3,300 per person each year.
If the entire cost of delivering the current system was abolished this would allow each person to receive only £13 more – giving a total Citizen’s Income of £64 per week. This is compared to the average amount paid to households in receipt of tax credits and benefits of £7,500 in 2010.
The only way that amount could be increased to a level on which people could survive would be through tax increases or cuts to other services.
Even the biggest supporters of Citizen’s Income accept that significant tax hikes across the board would be required to provide a decent level of Citizen’s Income. As a result, those on lower incomes could actually lose out under the system. The most fully formed model that was presented to us, from the Citizen’s Income Trust, proposes a rate of £71.70 per week for adults, £56.80 for children and £145.40 for pensioners as well as retaining separate Housing Benefit, Council Tax benefit, DLA, PIP, Carer’s Allowance and maternity pay.
Such as system would require a 5p increase in all income tax levels, the abolition of personal tax and National Insurance allowances entirely, and a hike in National Insurance for middle and higher earners. Even after all this, and assuming huge administrative savings within DWP, the system would still be short by £2 billion, which would have to be found from other public services.
These tax increases would hit ordinary people, not just the best off. In the modelling given to us, almost 1 in 3 of the poorest households would actually lose over 10% of their income. On this model, a single mother in Kettering with 2 children, one of whom is disabled and for whom she acts as a full time carer, would lose around £6,000 a year.
A single father with two children in Eastbourne who earns £15,000 before tax would lose almost £2,000 under the same system.
That can’t be an outcome Lib Dems want to see.
The aim of a Citizen’s Income is good: we all want a system that supports everybody’s ability to choose what they do with their life. But we are a political party who have a responsibility not just to accept good aims, but to see how they would work in practice for the people we want to represent.
The simple fact is that in every model for Citizen’s Income that we examined, the choice was between a Citizen’s Income that is affordable but set at a level so low that vulnerable households would see their income fall, or set so high as to require huge tax rises for everyone – including the lowest earners.
So ultimately the Working Group decided we couldn’t support the policy. We didn’t all agree, but almost everyone who started out supporting a Citizen’s Income ended up believing that having seen the evidence, it just wasn’t workable. The idea is noble, I like it a lot in principle, but I just don’t believe it would do what we want it to do in the UK in 2016.
* Jenny Willott was the Lib Dem MP for Cardiff Central and chaired the working group on working age social security policy in 2016.