A Manifesto for Stagflation

Next month’s conference in Brighton will include a consultative session on the Libdem manifesto and the Towards a fairer society policy motion. The motion addresses some immediate issues around welfare reform in proposing the restoration of the £20 uplift to Universal Credit, introducing emergency grants (not loans) and stopping deducting debt repayments at unaffordable rates. There are three options put forward with respect to party policy on a basic income.

OPTION 1:
replacing tax and national insurance allowances with a Universal Basic Income for working age adults, set at a level which would compensate for the loss of allowances (while retaining most of the existing benefits structure including universal credit).

OPTION 2:
introducing a Guaranteed Basic Income by increasing Universal Credit to the level required to end deep poverty within the decade and removing sanctions.

OPTION 3:
conducting large scale trials of UBI and GBI, keeping our strategic options open until the outcome of such trials is known.

I would suggest the severity of the cost of living squeeze that is upon us eliminates the option of trials and ending deep poverty within a decade.

The simplest way to deliver the immediate relief that is required is a minimum income guarantee of £100 per week to all working age adults who are either taxpayers or benefit claimants based on replacing income tax at 20% and NI at 13.25% with a single tax reducer to taxpayers. A guaranteed minimum income would replace the personal tax allowance & NI threshold of £12,570, unemployment benefits and/or Universal credit basic allowance (inclusive of £20 uplift). These elements of benefit would no longer be means tested.

The manifesto will need to set out the costings for the policy. It is paid for by a reduction in the value of personal tax allowances for higher rate tax payers from 40% to 20%; limiting tax relief on pension payments to basic rate; reinstating Petroleum revenue tax for North Sea oil producers; unfreezing the fuel price stabiliser as oil prices fall back below £90 per barrel; and removing the starting NI threshold for employers national insurance for larger employers (The NI employment allowance of £5k per year keeps most smaller employers free of paying employers NI).

A further redistributive measure required is the reform of the highly regressive council tax. The ALTER fringe at conference will present research conducted around a distributional analysis of council tax and three proposals for introducing a greater level of progressivity while remaining revenue neutral.

Equally important to making provision for those worst affected by stagflation will be the introduction of a  local authority administered job guarantee program (particularly in insulation of social housing and child and social care) to shore-up employment prospects as recession bites.

A report by the NIESR forecasts “that real incomes will be permanently lower, dropping 2.5% in 2022 alone, and by 2026 they are expected to be 7% below where they were headed before Covid. Around 3% to 5% ofthis hit will come from Brexit, 1% to 3% from energy price rises and the remainder from government policy.” Stagflation: What is it, and what can be done to tackle it? | Evening Standard

 

* Joe is a member of Hounslow Liberal Democrats and Chair of ALTER.

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54 Comments

  • Peter Davies 7th Aug '22 - 9:36pm

    Even without sanctions, Universal credit does not guarantee a minimum income. There are plenty of other reasons why those most in need may not be eligible. It is inevitably bureaucratic and intrusive.

    Universal Basic cannot be the only support for those in need because it doesn’t test need. If you set the level high enough for those with the greatest needs the minimum income would exceed the average which is mathematically impossible. It’s good to see that option one recognises this and keeps the Universal Credit system in place to top up the Universal Basic Income for those that need it. It will still have most of its existing faults but fewer people will suffer from them.

    We will be trying to sell a new system against opponents who lie unless they have a very good reason to tell the truth so “Most people will be better off” will come over a s “You will be worse off”. We need a plan where we can say clearly and repeatedly “Nobody on less than average wages and no couple with less than two average wages will be worse off”.

  • Joe Bourke,

    A Minimum Income Guarantee is normally considered as being paid to households. From what you have posted it seems you are not suggesting this but you are suggesting paying it to most working-age adults. Please clarify?

    In the second UBI consultation document a UBI of £71 was suggested and there was a £30 billion shortfall towards covering all the costs after the changes to Income Tax Personal Allowance and National Insurance thresholds we proposed. What is your shortfall?

    What do you mean by “a reduction in the value of personal tax allowances for higher rate tax payers from 40% to 20%”?

    I am not aware that the UK has a fuel price stabiliser. It would be a good thing if it did as I have suggested in https://www.libdemvoice.org/lib-dems-comment-on-dire-economic-news-but-we-need-to-say-more-71155.html#comments at 12.07am yesterday. It should not be used as a means to increase government revenue during a cost of living crisis. Do you have any estimates on how much income each of your suggestions will generate?

    Are you planning on submitting an amendment to the motion?

    I think it is interesting that in option 1 of the motion there is no mention of the amount of the UBI or when it will be fully implemented. Hopefully, it will be clearer in the policy paper that the UBI of about £78 a week will be fully implemented sometime during a second term of a government with Liberal Democrats in it.

  • David Garlick 8th Aug '22 - 10:02am

    Whatever we decide to adopt as Policy will be key in our ellectoral fortunes over the next few months and possibly longer. We need to get it right and it needs to be seen to be fair to all sections of the community. It will be closer to one Tory contender than the other…

  • David Warren 8th Aug '22 - 11:03am

    The party really needs to get it right on this. UBI is a flagship policy and its introduction if set at the right level would help a lot of people.

    Ed has rightly talked about the need to do more for Britains unpaid carers. There are at least six million of them. Having a UBI would have been a real boost to me when I was caring.

    The Lib Dems need desperately need to come up with something that captures the imagination of voters. This is it!

  • Katharine Pindar 8th Aug '22 - 11:53am

    Joe, I am entirely of your opinion, that trials would be inappropriate now in these critical economic times. I favour Option 2, a Guaranteed Basic Income for every household. And on the working group, we agreed to aim for abolishing deep poverty in Britain within ten years, or two terms of a progressive government. We took the Joseph Rowntree definition of deep poverty, as 50 per cent of median income, and that is what we shall be aiming at.

  • Peter Davies,

    the minimum income guarantee is not a UBI. It replaces UC basic allowance only and redistributes taxes from lower income to higher income taxpayers. The monthly minimum is £433.33. That compares with a UC standard allowance of £334.91 for a single person (£265.31 for under 25s). Currently, a couple receives a standard allowance of £525.72. Under an individual minimum income guarantee they would receive £867 (433.33 each)
    Most of the existing benefits structure would be retained including universal credit but without the standard allowance element. Means testing would continue to be required for the supplementary elements of UC
    Basic rate taxpayers earning average wages (or below) will be no worse off. Higher rate tax payers lose the benefit of 40% relief on the income tax personal allowance and the upper threshold on National insurance. Similarly, relief for pension contributions reduces from 40% to 33.25% for higher rate taxpayers.
    The minimum income guarantee is paid in one of two ways. Either as a tax reducer or as a UC benefit. Anyone with income below £15,639 would automatically be entitled to the UC basic allowance without means testing, but would not be eligible for a tax reduction i.e. they would pay 33.25% on their taxable income through PAYE or self-assessment for self-employed. Those with income above £15,639 would pay combined tax and NI at 33.25% (53.25 for higher rate taxpayers) and receive a tax reducer of £5,200 per year through PAYE or self-assessment.
    Someone earning £10k a year would take home £6675 + receive £5200 UC and any current supplementary benefits to which they were entitled i.e £1875 per year better off.
    Someone on £30k would take home £25,225 against £24,205 now plus any supplementary benefits to which they were entitled. i.e. £1020 better off.
    A higher rate taxpayer on £60k would take home £40,790 against £43,257 now i.e £2467 less. . A taxpayer on 90k would take home £54,815 against £60,325 before any relief for pension deductions i.e. £5510 less.
    I agree entirely with your point about bureaucracy and intrusiveness. The minimum income guarantee should be administered by HMRC (not DWP), be non-means tested, applied on an individual basis (not household) and be disregarded for UC clawback/work allowances.

  • Michael BG,

    The MIG is not a UBI. It is a tax reducer or minimum benefit level. Consequently, the costs of implementation are much lower. A micro-simulation of tax and benefit changes would need to be prepared to get precise costs. If you input the tax and NI changes together with a £100 per week Universal basic income to PolicyEngine UK you get a net cost of £55 billion. However, this proposal is a tax reducer and not a UBI. Consequently. for taxpayers as a whole the tax and NI changes are largely revenue neutral at £80 per week although there is significant redistribution of the tax burden from lower to higher income taxpayers. What has to be funded is the additional tax reduction of £20 per week and uplift of the UC standard allowance (from £335 to £433 per month for a single claimant and from £526 to £867 for couples).
    This is funded by limiting tax relief on pension payments to basic rate; reinstating Petroleum revenue tax for North Sea oil producers; unfreezing the fuel price stabiliser as oil prices fall back below £90 per barrel; and removing the starting NI threshold for employers national insurance for larger employers

    The fuel duty stabiliser was proposed by George Osborne in his 2011 budget Budget 2011: Fuel duty cut plan earns oil industry ire – BBC News when Petroluem Revenue tax was increased.
    “if the oil price sustains a fall below $75 – and we will consult on the precise figure – we will reintroduce the escalator and reduce the new oil tax in proportion”.
    In other words, there would be no fuel duty escalator when oil prices are high, and no additional oil tax when oil prices are low, he explained.

    Previous LibDem proposals have estimated the savings from restricting Pensiontax relief to basic rate at £7 billion Pensions tax relief: How much can be saved? – BBC News. Eliminating the NI threshold starting threshold for large employers brings £12,570 per employee of previously untaxed earnings into charge at the employers NI rate of 15.05%. The basic rate for all sources taxable income (not just employment income) becomes 33.25% for taxpayers below pension age. Pensioners continue to receive an age related tax allowances of £12,570, a 20% basic rate and a triple lock on pensions to counter inflation i.e, the status quo.

    I am not planning on submitting a motion. I think the above can be encompassed under motion 2 and will leave it to Katharine and the working group to determine the wishes of conference in finalising their proposals for the manifesto.

  • Joe Bourke,

    As I stated a Minimum Income Guarantee is normally paid to households, but you are proposing paying £100 a week to individual tax payers and those on benefits. In the second UBI Consultation paper we stated that there were 25.2 million working-age tax players ad 16.2 working-age non-taxpayers. With our proposed UBI all of these working-age people would receive the UBI. We say that a UBI of £95 would have a shortfall in costs of £77 billion. Therefore with the increase in the National Insurance rate and threshold increase I think the likely shortfall to be in the region of £75 billion for a UBI of £100.

    Who of the 16.2 million are you excluding from receiving your MIG? How many do you assume there will be? Nine million? Seven million?

    Are you proposing extending the 13.25% NI to all forms of income? In our party’s paper “Giving Everyone a Stake” (autumn 2018) we estimated that £6 billion could be raised from this but the NI rate was 12% then.

    A petrol price stabiliser will not raise any income at the moment. You haven’t estimated how much reinstating a petroleum revenue tax for North Sea oil producers would raise.

    You haven’t estimated the revenue from getting large employers to pay NI on all employee’s wages, not the amount from all wages being subject to 15.05% employers NI except for a few employed in small businesses.

  • Peter Martin 8th Aug '22 - 8:29pm

    Is what we have really stagflation? What is the definition of inflation? Is it just a rise in prices or is there a bit more to it than that?

    Let us suppose, by way of a thought experiment, we had another Krakatoa style volcanic explosion somewhere in the world. We would have several years of worldwide bad harvests leading to a steep rise in prices. It isn’t beyond the realms of possibility that it could be very much worse than Krakatoa, if, say the Yellowstone volcano in the USA erupted. Crops would fail disastrously and prices would soar. It would certainly feel like inflation but would it be really?

    In such circumstances would it do any good to put on the fiscal and monetary brakes?

    The present combination of events ie Covid, war, climate disruption, may not be anywhere near as bad as a Yellowstone eruption but the principle is the same even if the magnitude isn’t.

  • Michael BG,

    the proposal is not a UBI. It is a tax reducer and minimum income guarantee of £100 per week. The only individuals that would receive a full £100 per week net payment are those on benefits or with income below £15,639. All taxpayers with income below £100k would receive a tax reducer instead of a tax and NI allowance of £5200 (£100 per week). The net benefit of that tax reduction diminishes at the higher rate thershold. Higher rate taxpayers will pay more in extra tax than they receive by way of a tax reducer.
    As per the comment to Peter Davies, someone on median income of £30k would see a net increase in pay of £1020 i.e £20 per week. A lower earner on £10k would see an increase of £1875 i.e. £36 per week. Their weekly income would increase from £192 to £228. A higher rate taxpayer on £60k will see net taxes (after crediting the tax reducer) increase by £2467. This rises to £5510 additional tax at £90k.
    The MIG would be administered by HMRC and paid to individual taxpayers as a tax reducer or paid directly to individuals claiming UC or with income below £15,649.
    At an £80 per week level the tax reducer (not UBI) is broadly revenue neutral. That is the equivalent of tax and NI of 33.25% on £12,570 (£4180/52).
    The tax and NI would be combined and assessed to all sources of taxable income for working age adults.
    Petroleum Revenue Tax is charged on “super-profits” or ‘economic rents’ arising from the exploitation of oil and gas in the UK and the UK’s continental shelf. It was effectively abolished in the 2016 budget Budget 2016: Chancellor George Osborne cuts North Sea taxes
    Ed Davey today said there should be a new, broader windfall tax on oil and gas companies’ profits with fewer exemptions, which he hoped could bring in as much as £20bn.
    The fuel price stabiliser would come into effect when wholesale prices sustainably fall below $90 a barrel. Brent crude is currently trading at $93.92 per barrel Oil prices collapse to February lows amid growing fears of global recession
    There are an estimated 20m+ UK employees working in firms with more than 5 employeesEnterprises in the UK by employee size band. Removing the NI starting threshold potentially generates an additional £1,892 per employee i.e circa 38 billion or 28.5 billion net of the corporation tax deduction for employee costs.

  • Peter Martin,

    one of the former Bank of England governors gave an interview a couple of months ago differentiating between price rises caused by monetary inflation arising from the expansion of the money supply during Covid and supply shocks in energy and food markets Lord King . In essence we have both plus the Brexit effects in the UK.

    Professor Iain Begg at the LSE has a good article on Stagflation

    “Governments can, as many have already demonstrated (see Bruegel data), act to alleviate the negative effects by providing social benefits or by altering taxes to hit those who do best from inflation. Part of the gains from higher energy prices accrues to oil and gas companies, hence the compelling case for windfall taxes.

    But there is not much more governments can do when the inflation is imported. In an expanding economy, policymakers can implement policy changes aimed at slowing the growth rate when there is over-heating. However, in a stagnating or shrinking economy, it is much harder because there are fewer resources. Moreover, the standard response to high inflation – higher interest rates and fiscal tighter policy – while arguably unavoidable, can lead to a prolonged period of economic stress.

    The good news is that high energy prices (oil in the 1970s, gas today), by stimulating a switch to alternative sources of energy, can substantially reduce dependence on producer cartels, and this new competition will ease the pain. The bad news, though, is that it takes time to adjust and until it happens the energy producers will continue to benefit.”

  • Joe Bourke,

    You have repeated yourself but not clearly stated how your version of a Minimum Income Guarantee is different from a UBI. I assume the costs of your MIG are less because fewer people will receive it than a UBI. You have not answered my questions – Who of the 16.2 million are you excluding from receiving your MIG? How many do you assume there will be? Nine million? Seven million?

    If one member of a couple has no income do they receive your MIG? And if they do, how is your MIG different from a UBI except in the way it is given to those with incomes over £15,639.

    I expect we have not advocated abolishing the employees NI threshold because it increases the “tax on jobs”. And you say that this increase on the “tax on jobs” would be £1,892 per employee for large employers. (£28 billion is a substantial amount, but with the pressure on employers from the cost of living crisis I don’t think this is the correct time to do this tax increase.) It might be better to make the case to reduce the new £12,570 threshold back to £9,880, which would cost large employers about £405 per employee.

  • Once the policy motion supporting the policy paper is passed by Conference that policy working group’s job is completed. (Katharine is not on the manifesto working group.) If you do not get Conference to agree to what you want I think the likelihood of it being included in the manifesto is zero. Katharine and I have managed to get Conference to include in policy motions the introduction of a green jobs guarantee, offering a well-paying green job to anyone who wants one and the provision of training courses free to those not in work via a training guarantee scheme. We will keep trying to get them included in policy motions, but I think the likelihood of both being in the manifesto is less than 50% unless we keep up the pressure.

    I hope you re-consider and will submit an amendment to widen the scope of our party’s policy on job guarantees to include local authorities administering job guarantee programs “(particularly in insulation of social housing and child and social care) to shore-up employment prospects as recession bites”.

  • Michael BG,

    the answers are the same as before. The tax reducer of £100 is available to all working age taxpayers. It replaces the £80 per week value of the tax and NI allowances available to these taxpayers now. This is tapered away for those with incomes over £100k as now.
    The UC standard allowance (£77 per week for a single person) and Carers Allowance is abolished and replaced with an HMRC administered MIG of £100 i.e a £23 per week uplift or £39 each extra per week for couples and £30 extra for carers.The £100 per week is paid to all UC claimants. Non-UC Claimants will have a £100 per week tax reducer available, but will pay combined tax and NI at 33.25% on all income. If you are neither a taxpayer with income below 100k or benefit claimant you will not receive a payment e.g non-working spouse with no income not eligible for UC or carers allowance (a fair chunk of the working age population).
    The Radical Association put forward a proposal in May using the PolicyEngine UK simulation and came up with a net cost of £39 billion for a UBI of £319 per month without touching any other UC benefits UBI. As they write “Independent economic modelling suggests that it would cut the rate of poverty by a third and the rate of deep poverty by 60%”. The proposal in this article replaces the current UC standard allowance of £77 per week with a MIG of £100 i.e. broadly what is proposed by restoring the £20 uplift to UC. The cost of a £20 uplift in UC is estimated at £6.2 billion. The cost of increasing the tax and NI relief from £80 to £100 per week is equivalent to increasing the personal allowance and NI thresholds for working age taxpayers by £3K.
    Once UBI/MIG is party policy then the detailed simulation of proposals (such as that of the Radical Association) for the party manifesto can begin in earnest.The 2010 manifesto had an increase in the personal allowance to £10,000 (from £6475) as its headline policy delivering a tax cut of £705 per year during the coalition. The next manifesto should feature a minimum income guarantee for all working age individuals in the UK beginning with Option 1 of the fairer share paper (£80 per week) and adding the £20 uplift to UC to tax allowances as well i.e a £100 MIG or tax reducer to all working age benefit claimants or taxpayers. This is what makes it egalitarian. Everyone who needs it gets the same flat rate benefit as either a MIG or tax reducer and the tax system becomes significantly more progressive.
    I will be focusing on council tax reform (via the ALTER fringe) at conference. I will leave UBI to bodies like the Radical Association to fleshout with amendments. If the employers starting NI threshold is abolished it would be better to increase the NI employment allowance to provide relief for employers as Ed Davey suggested last year Employment Allowance

  • I think Peter is right to question just what exactly is inflation, it is something I’ve been thinking about. It would seem based on the generally accepted understanding of inflation, “levelling up” will cause inflation even before people get upset about differentials being eroded. However, once we have “levelled up” inflation will, because of the way it is calculated fall away. So it would seem we would be well advised to tighten our belts, have “wild ride” whilst we reorganise our society and then in the new calm, do the small adjustments that will always be needed in the cold light of the new day.

    BTW one of the levers available to government, is the control of immigration. With very low (or even negative) immigration and nearly full employment, we stand a better chance of taking everyone with us and not simply create a new underclass.

  • Peter Martin 9th Aug '22 - 8:13pm

    There is generally considered to be two types. Demand-pull and cost-push, or supply side, inflation. It is important to distinguish between the two but no-one has done that so far.

    It is generally agreed that the inflation we are experiencing is on the lack-of-supply side but nevertheless it is being mistakenly treated as an excess of demand. A reduction of demand is only going to depress the economy further. It isn’t surprising therefore that we are entering a period of stagflation. Putting on the fiscal and monetary brakes will cause the economy to stagnate before the rate of inflation falls.

  • Joe Bourke,

    Just writing the same thing for the third time does not answer my questions. It seems you think people can be put into two groups – income tax payers and those who receive UC. There is a third – they pay no income tax because they have no income and they do not receive UC because the salary of their partner is too high for that. If you are giving everyone either £100 or £100 “tax reducer” then you are proposing a UBI just with a different way of paying it to the majority of people. I don’t think the Working Group rejected the idea of the UBI being paid as a discount from a person’s income tax bill.

    If you are paying your MIG to all working-age adults either directly or as a “tax reducer” the cost will be the same as set out in the UBI consultation paper. You should look at page 13 of the second UBI consultation paper.

    Please you can answer a simple question, are you proposing that every working-age adult including those that are not in work or not claiming benefits would receive your MIG via one of your two methods?

    I do not think the policy after it has been passed by Conference will be developed in the way you think it will. The Fairer Society motion does not even propose a UBI of £71 a week to be introduced in the next Parliament as was being proposed in the second UBI Consultation Paper.

  • Peter Davies 9th Aug '22 - 9:58pm

    If your policy ends poverty and costs very little you have done your sums wrong. Michael has spotted the big hole: single income couples currently receive only one tax allowance and no or greatly reduced benefits. Under a fair system like UBI (and maybe yours depending on the answer you don’t seem prepared to give him) they would receive two payments making them much better off and costing a lot.

    There are a number of other problems caused by having two ways of paying the money and swapping between them based on projected annual income. These days, an increasing number of people have no idea at the beginning of the year whether they will be getting more or less than 16k. As they move in and out of jobs, they will have to re-register based on their new projected income. That involves costs for employers and for the government and inevitably results in errors, emergency loans and fraud: similar problems caused by the current UC and PAYE interaction.

    One great advantage of UBI is that you set it up once and then it just works. The most efficient version would separate income tax into a flat rate (which is paid on all income and deducted at source on all earnings, interest and UK financial instruments) and Super Tax (self assessed and paid in arrears).

  • Michael BG,

    I have to keep correcting your statements because this a minimum income guarantee. It is not (as you keep stating) a Universal basic income for the very reason that those of working age that pay no income tax because they have no income and are not eligible for UC or a carers allowance would not have either a tax reducer or MIG.
    You cannot compare the proposals with a UBI that leaves the standard UC allowance in place and pays an extra £71 per week to all adults on top of existing benefits. That is not the proposal here.
    A 40% tax payer with an allowance of £12,570 benefits from a £5,028 tax reduction. A basic rate tax payer earning above the personal allowance gets a tax reduction of £2,514. Changing the personal allowance to a tax reducer means all taxpayers (with income below £100k) get a flat rate tax reduction of £2,514 and a NI reduction of £1,665 regardless of their tax band. These tax and Ni reliefs equate to £80 per week. The funding for additional tax relief of £20 per week comes from the reduced tax relief for higher rate earners and eliminating the upper threshold for employee NI, so earnings over £50,270 bear an additional 10% of NI. An average earner on £30k will see an increase in take home pay of £20 per week. Someone on £60k will see a reduction in take home of £47.5 per week. This is the redistribution for taxpayers.
    The additional benefits to be funded are an increase of a £23 per week for single UC claimants, an uplift or £39 each extra per week for couples and £30 extra for carers to brig them all up to £100 per week in line with the value of tax and NI relief given to taxpayers.
    I understand the fairer share motion is quite non-committal in its proposals. The argument in this article is that a minimum income guarantee of £100 per week can be delivered largely by making the existing tax system more progressive by shifting more of the burden to higher earners and large companies and away from lower earners and small business.

  • Peter Davies,

    A £100 per week MIG and tax reducer does not end poverty but it is £1200 (£23/week) more per year than what you get from the UC standard allowance at present and £1020 per year more in take home pay for a median wage earner taxed at basic rate. The major problems with benefits are the two child limit; benefit cap; failure to uprate in line with inflation for several years; and unrealistic local housing allowances as well as those mentioned in the fairer share motion – loans and debt repayments. Adequate housing benefit is a particular problem for couples that need a private residence rather than a house share.

    All adults have a tax allowance including many overseas taxpayers. Many non-working spouses do not use their tax allowance and there is no pressing need to offer a tax reducer or MIG in these cases (that would spread the redistribution more thinly) anymore then there is a need to offer a tax reducer or MIG to those with incomes over £100k.

    Couples on benefits would receive two individual MIG payments but higher earners would not receive two tax reducers where only one spouse has a taxable income. Premiership footballers and their wives or executives and others earning £100k plus would not receive either a tax reducer or MIG.

    Having HMRC administer the MIG allows the system to be administered through PAYE codes, quarterly Self-assessment for the self-employed (via Making Tax Digital) and by direct monthly payments for UC Claimants and Carers.

    A flat rate UBI is simple in theory and could cut poverty significantly as the Radical association notes, but the headline costs of introducing a Universal basic income make most political parties balk at the prospect and is why the policy was ditched by the LibDems in 1994.

    The alternative of a guaranteed minimum income can be funded largely through rejigging the benefit of tax reliefs. Isn’t redistribution what a fairer share is supposed to be about?

  • Peter Davies 10th Aug '22 - 6:45am

    I would challenge you to name the wife of a premiership footballer who is not declaring enough income in their own right to use up their tax allowance. This is the myth that opponents of UBI always raise but the reality these days is that high earners tend to marry other high earners and single earner couples are overwhelmingly concentrated in the lower income brackets.

    Your proposal appears to have a cliff edge whereby someone whose partner earns over the threshold can lose a lot of money by going over the threshold themselves.

  • Peter Watson 10th Aug '22 - 8:27am

    @Peter Davies “the reality these days is that high earners tend to marry other high earners”
    Also, very high earners are often able to divert some of their income to their spouses to reduce tax liability.

  • Brad Barrows 10th Aug '22 - 9:38am

    @Peter Watson
    There is also a challenge to develop policy that does not financially disadvantage people who choose to marry compared to those who choose to live together. If we are willing to consider taking the second income of a spouse into account in deciding what the other spouse may receive, we should at least be willing to consider that tax allowances should be transferable between partners. (As an aside, our current income tax system, by taxing individual incomes even for ‘partners’ who live together, means that households with identical household incomes pay different amounts of income tax depending on how the income is split between the partners.)

  • Peter Davies,

    anyone earning over a £100k has their tax allowance tapered away. The same applies to the wife of a premiership footballer.

    The issue here is what can be done in the manifesto to meet a cost of living crisis that is here and now. Trials to think about it or promises to work towards reducing poverty a decade in the future are unlikely to stir the blood of voters.

    What is needed are concrete proposals that can be financially delivered right now. That is what the £100 per week minimum income guarantee and tax reducer is. Leave worrying about whether WAGs can claim a basic income to the Sun and Daily Star.

  • Peter Watson,

    if a spouse gets a full tax allowance now (i.e. has taxable income below £100K) he or she will continue to get a tax reducer, but not relief at 40% that would reduce their tax bill by £5028, but relief at 20% i.e £2514.

  • Peter Davies 10th Aug '22 - 1:43pm

    “Leave worrying about whether WAGs can claim a basic income to the Sun and Daily Star”. I wasn’t worried about it. You brought it up. I am worried about the millions of poor couples where one partner is unemployed or an unpaid carer or an unsuccessful entrepreneur and will only get a minimum income for one because you are worried about a largely mythical group of trophy wives getting more than they deserve.

  • Peter Davies,
    The MIG and Tax reducer is paid to taxpayers and benefit claimants. What I have brought up (9/08 at 3.03 pm) is that If you are neither a taxpayer with income below 100k or benefit claimant you will not receive a payment e.g non-working spouse with no income not eligible for UC or carers allowance (a fair chunk of the working age population).

    If a spouse does not need or want to work then they will have no tax allowance and hence no tax reducer. If an individual is not eligible for UC or carers allowance then they will not be eligible for its replacement in the form of a MIG.
    Nothing is being taken away from any of these families. Quite the opposite. The working spouse will see a significant increase in take home pay (£1020 for basic rate taxpayers earning £15,639 or more) and if the non-working spouse is eligible for carers allowance then her income will increase by £1,575 (£30.30 per week).
    If an unemployed partner wants to work part-time or full-time then, as per the article, the local authority administered job guarantee program (particularly in insulation of social housing and child and social care) would be part of the assistance offered.

  • Peter Martin,

    the linked interview with Lord King does indeed distinguish between price rises caused by excess money supply in the economy and external shocks. The extraordinary increases in rents in London has little to do with global food and energy prices and everything to do with the house price inflation resulting from QE and land supply.
    Liz Truss is advocating what you suggest. Tax cuts and increasing deficits in an effort to boost economic growth. Few economists think these plans are credible. Sunak is being a bit more realistic, but offering too little to protect the most vulnerable.
    What is needed in conditions of flat global growth or contraction is redistribution and altering taxes to hit those who do best from inflation (e.g. energy companies and banks) as suggested by Professor Iain Begg at the LSE.
    PS: On the supply side, according to the NIESR, it is not energy prices or government policy that will have the biggest impact on living standards but Brexit accounting for 3% to 5% of lower incomes.

  • Peter Martin 10th Aug '22 - 2:38pm

    @ Joe,

    Neither Liz Truss nor Rishi Sunak nor, indeed any of the economists who you’re likely to claim are credible, are advocating what I suggest. ie Both fiscal and monetary policies should be under the same control.

    This doesn’t mean that it can’t still all go badly wrong, but it does reduce the chances of the Govt and BoE fighting each other with contradictory policies. This will almost certainly certainly result in a crashed economy whoever is in charge.

  • These are the Key points made by the NIESR and what I call credible:

    – The UK economy is likely to enter recession in the third quarter of 2022 and remain there until the first quarter of 2023. Our forecast for year-on-year GDP growth is 3.5 per cent in 2022 and 0.5 per cent in 2023. Unemployment is expected to rise above 5 per cent over the coming twelve months as firms respond to the fall in aggregate demand.
    – CPI inflation is forecast to peak close to 11 per cent in the fourth quarter of 2022, returning to around 3 per cent a year later. This fall results from tighter monetary policy, a slowing in energy price inflation and falls in real incomes. The Bank of England’s Monetary Policy Committee must continue to be cautious as it walks a fine line between tightening policy too quickly, worsening the recession, and too slowly, increasing the risk of high inflation becoming embedded in expectations.
    – Earnings are expected to rise by 6 per cent in 2022 but we do not expect engrained domestic inflation to result from a wage-price spiral. With prices settling indefinitely at a higher level relative to incomes, real household incomes are forecast to fall by 2.5 per cent in 2022 and remain over 7 per cent below their pre-Covid trend beyond 2026.
    – Three shocks have combined to shift real incomes onto a permanently lower path. Brexit has raised the cost of imports from continental Europe and incentivised households to switch towards more expensive domestically-produced goods and services. The recent rise in energy prices has constituted a large terms-of-trade shock for the UK. Finally, discretionary fiscal tightening over the 2021-24 period, following the shock of Covid-19, has reduced the resources available to the private sector.
    – With government budgets set in cash terms, the government’s debt and deficits will be lower as a percentage of GDP, with the deficit forecast to fall to around 5 per cent in 2022-23 and 1 per cent in 2023-24. This means the government has more room to borrow to mitigate the effects of these three shocks, and we suggest some of this extra fiscal space is used to redistribute resources to the most financially vulnerable households (see Chapter 2).
    – If overall government consumption is held fixed in nominal terms, either real public sector wages will fall significantly after a decade of very low growth, or services will be cut, or – as seems likely – both. We suggest that the government use some of its extra fiscal room to allow government employees’ wages to be set according to the requirements of individual sectors, rather than with an eye on inflation, to which they do not directly contribute.
    – Finally, we would advise the government to focus on minimising the negative effects of Brexit by reducing the trade barriers between the UK and the European Union, including the Republic of Ireland. We would certainly advise against risking a trade war with our nearest and largest trading partner, the EU, by overturning the Northern Ireland Protocol, which has supported productivity and output growth in some sectors in Northern Ireland.

  • Mick Taylor 10th Aug '22 - 4:03pm

    Whenever anyone proposes a way of ending poverty, the party runs away from it. It seems to be some kind of funk in which upsetting Tory inclined voters is a no no.
    What kind of radical party do we belong to if not pushing a just and fair policy is seen to be correct?
    Any decent Liberal society must ensure that no-one is enslaved by poverty. I don’t see any sign from anyone in this debate that that aim, enshrined as it is in our constitution, is being followed.
    I actually don’t care how we do it, but ensuring a liveable basic income for everyone and ensuring that those who have plenty pay a larger share of the burden, is what we should be striving for. If it upsets some Tory voters, then so be it. Putting aside our principles just to gain a few extra votes is neither Liberal nor Democratic.

  • Peter Davies,

    Thank you for listing the problems you see with paying Joe’s MIG via a tax reducer.

    Joe Bourke,

    I am clear of the differences between a UBI and a MIG, but as I had to keep pointing out your descriptions were not clear. You have now made it clear that those people with no income will not receive your MIG and so there must be some sort of conditionality to receiving it as there is to UC and the legacy benefits.

    I don’t know why you wrote that “a 40% tax payer with an allowance of £12,570 benefits from a £5,028 tax reduction”. Later on you have the current correct figures of £2,514 and £1,665 equally £4,179.

    I do like the idea of eliminating the upper threshold for employee NI so the 13.25% has to be paid on all of the salary. Katharine and I suggested this along with other ideas for funding the UBI but the Working Group decided not to consider which tax changes it thought were good ideas. The Manifesto Working Group is likely to have to consider which tax changes to include in the manifesto unless there is a specific Working Group created to do so.

  • Reading the comments, it does seem that Joe’s MIG is unnecessarily adding further complexity to the benefits system and UB specifically.

    A big hurdle we have is having two separate but weirdly intertwined systems for benefits and tax. I suggest MIG should be paid as part of the tax system as a form of negative individual tax, ie. do away with the couple/household link which only exists in the benefits system as a means to deny payout. This makes the hurdle for payment very simple: submit an annual tax return, if your earnings were less than the guarantee you get a rebate.
    In the grand scheme of things, it doesn’t really matter if the non-working partner of a high-earner receives MIG, as it probably also means that the unknown, unpaid partner of someone who is earning significantly less is also receiving MIG, without having to get the explicit consent of their partner…

  • Michael BG,

    Any individual eligible for UC or carers allowance will receive the MIG. Spouses that have no independent taxable income themselves will not receive a MIG or carers allowance unless they are eligible for these benefits, but the working spouse will benefit from a tax reduction if a basic rate taxpayer on median or lower earnings.

    40% of £12,570 is £5028. This is why a 40% tax payer with a personal allowance of £12,570 benefits from a £5,028 tax reduction as a consequence of the allowance. The NI threshold is now £12,570 and this saves £1665 NI at 13.25%.
    Under the Tax reducer scheme proposed, a higher rate tax payer will have an income tax deduction of £2,514 only (20% of £12,570). The NI reduction remains at £1,665 in the tax reducer. However, there is no upper threshold for employee NI, so the rate for earnings over £50,270 increases from 3.25% to 13.25%. Additionally, there is an extra £1020 of annual tax relief to bring the tax reducer up to £100 per week.
    Currently, take home pay on £60k is £43,257. Replacing allowances with a tax reducer, the take home pay reduces by £2,467 to £40,790 as follows:
    Gross pay £60,000
    Tax and NI @ 33.25% on 37,700 – 12535
    Tax and NI @ 53.25£ on 22,300 – 11, 875
    Less: tax reducer @ £100 Pw – (5200)
    Total deductions £18,210
    Net Pay £40,790

    The reduction in net pay comes from:
    Reduction is higher rate tax relief on PA – 2,514
    Additional NI @ 10% on 9730 – 973
    Less: increase in tax reducer (1020)
    Total £2,467

    These comments are about the manifesto debate where funding of proposed policies is to be debated.

  • Mick Taylor,

    the only way any of these policies are likely to be enacted is via a coalition or supply agreement, just as was the case with increasing the personal allowance in 2010. There are always going to be objectors to any policy. To be adopted it has to be practical and financially feasible, otherwise you are wasting your time.
    A £100 per week minimum income guarantee is deliverable now (not in ten years time) just as a £10k personal allowance was deliverable in the 2010 election and agreed by the then Conservative government in the coalition negotiations.
    Once you have a minimum income guarantee you can start to make progress in addressing the multi-faceted causes of deep poverty, as was the case with the introduction of the minimum wage.

  • Mick Taylor 11th Aug '22 - 6:21am

    You can’t be a radical party if before you even fight an election you water down your policy the hope that one of the other parties may deliver it via some kind of agreement. You fight for what you want and maybe, just maybe you have to concede some of it AFTER an election as part of an agreement. [Just in passing, how did that go in 2010-2015?]

  • Mick Taylor,

    the 2010 Manifesto saw 57 LibDem MPs elected on the back of a well received policy for taking many of the lower paid out of the tax net and providing tax relief across the board. The next manifesto can do something similar with a minimum income and jobs guarantee that encompasses not only basic rate taxpayers with taxable income but benefit claimants and carers as well.
    The purpose of the manifesto is to present the views of the party (as expressed in conference) to the voting public and ask for their support in sending LIbDem MPs to Parliament.
    What Ed Davey has been calling for represents these views:
    – the restoration of the £20 uplift to Universal Credit
    – a Citizens basic income for Carers including the raising of the carers allowance by £1000 per year-
    – tax relief in the form of VAT cuts to address cost of living pressures (to be debated)
    – taxes on excess profits of energy companies to subsidise energy costs
    – allocation of funding for home insulation

    These objectives can be encompassed in the manifesto with a minimum income guarantee and the introduction of a local authority administered job guarantee program (particularly in insulation of social housing and child and social care) to shore-up employment prospects as recession bites.

  • Roland,

    Integration of the tax and benefit system has so far proved beyond the reach of any government, including Labour when Gordon Brown was Chancellor.
    I agree we should endeavour to do away with the couple/household link which only exists in the benefits system as a means to deny payout.
    The tax reducer acts in a similar way to negative income tax but has the advantage that it can be administered through the existing PAYE code based system and self-assessment. There is no need or justification for making PAYE employees or benefit claimants file tax returns. Taxes can be adjusted automatically based on real time reporting by employers and making tax digital for the self-employed with automatic refunds processed by HMRC when taxes are overpaid, as is the case now.
    It is true, in the grand scheme of things, it doesn’t really matter if the non-working partner of a high-earner receives MIG, but this is likely to be a point of attack by political opponents and even those within our own party who object to what they see as unnecessary payments being made to middle-income families, while issues like the benefit cap, two child limit, inadequate housing benefits, work allowances and withdrawal rates need addressing.
    Combining tax and NI was recommended in the Mirrlees review of the UK tax system in 2010. Ed Davey’s proposal to quadruple the NI employment allowance to cover the cost of NI for small employers with less than 5 employees is a good one. I would also think we could reduce the employer NI rate back to equal the employee rate (i.e. reduce from 15.05% to 13.25%) while taking out the starting NI threshold to make this element of tax more equitable between larger and smaller employees. There are 6m public service employees amonng the larger employers. So in this case, employer NI is largely an internal bookkeeping exercise within public finances.

  • @Joe – Thanks for the detailed response.
    To me automatic PAYE reporting is equivalent to the submission of a tax return for basic rate taxpayers. I used the tax return to illustrate the ease with which this can implemented with no real additional form filling. Having helped people deal with the complexity of the tax credits system which was run as a benefit but should have been integrated into the tax system, made things more complicated than they needed to be.

    I get your point about the “point of attack” – we saw this with the once universal child benefit, with the nutters adding unnecessary complexity to a simple system. Personally, I would take a leaf out of Rishi’s book and in addition to suggesting people who don’t need the payment to donate it, to provide a simple means to facilitate people doing exactly this along with some incentive like treating the donation as GiftAid.

    With respect to the NI rate, remember Rishi’s changes do revert the rate in 2023/24, when the 2022/23 increase is split out as a separate NHS contribution.

    I suspect combining NI and PAYE is something that will need to be done as one of the first acts of taking office, before people get excited about being able to claim they haven’t raised “Income Tax” (a manifesto commitment) whilst ignoring they have increased NI (which wasn’t mentioned in the manifesto).

  • Joe Bourke,

    I wrote, “The Manifesto Working Group is likely to have to consider which tax changes to include in the manifesto unless there is a specific Working Group created to do so”. I am concerned that the Manifesto Working Group might be too conservative and will not include many tax changes to fund our welfare reform. We will need to put pressure on them at this Conference, both via amendments to F41 and in the consultative session on Saturday at lunchtime.

    With a single person aged over 24 receiving Universal Credit £334.91 a month which is £77.29 a week and us promising to increase this by £20 a week now (up to £97.29), a £100 a week or more for those on Universal Credit from the next April is well within possibilities. A 9% increase on £97.29 takes it to £106.05 a week. This is a stepping stone to increasing the level of benefit to 50% of average earnings per household type. The decade aim is to get to those levels; for a single person this is £138 a week. Increasing £106.05 by 5.5% a year would get there in 6 years.

  • Peter Martin 12th Aug '22 - 8:55am

    @ Joe,

    “..the 2010 Manifesto saw 57 LibDem MPs elected on the back of a well received policy for taking many of the lower paid out of the tax net

    It was actually all of the lowest paid. It was probably the best thing to have come out of the Coalition government.

    So why do many Lib Dems now want to put the lowest paid back into the net? If there is a problem of low pay or a lack of jobs, then the minimum wage and/or the number of jobs needs to be increased.

  • Peter Martin,

    Indeed, it was a Lib Dem policy to increase the Income Tax personal allowance above inflation each year to remove those on the lowest pay from paying Income Tax. After 2015 the Conservatives continued this policy for a while. I have the idea that we wanted to increase the personal allowance so that someone earning the National Living Wage working full time would pay no income tax. I make that £18,278.

    I assume when you talk of putting the lowest paid back into the net you mean the accompanying policy of abolishing the Income Tax personal allowance and the National Insurance threshold if we decided on the UBI option in the Fairer Society motion. However, a person earning £18,278 a year would not be worse off if their Income Tax personal allowance and the NI threshold were turned into a UBI. The amount of extra deductions from their wages would at least equal the amount of UBI they receive. However those earning less than £12,570 a year would be better off and they are the lowest paid.

    I don’t think anyone knows how the vote will go between option 1 – a UBI and option 2 – a Guaranteed Basic Income (a Guaranteed Minimum Income with a new name).

  • Peter Watson 12th Aug '22 - 3:48pm

    @Michael BG “I don’t think anyone knows how the vote will go between option 1 … and option 2”
    I fear that the long grass of Option 3 will prove to be an appealing compromise or cop out, but I hope not.

  • Conference voted to back a Universal Basic Income at Autumn Conference 2020. We first had a specific UBI working group, but this was then rolled into the broader Fairer Society working group last autumn. The fairer society policy motion proposes to end deep poverty, including a radical overhaul of the welfare system, so no family ever has to use a food bank in Britain, by:
    Taking immediate steps to repair the safety net, including restoring the £20 uplift to Universal Credit, introducing emergency grants (not loans) and stopping deducting debt repayments at unaffordable rates; and following this up in the longer term with fundamental reforms to the welfare system for which options are proposed in the form of:
    – a UBI (while retaining most of the existing benefits structure including universal credit);
    – a Guaranteed Basic Income by increasing Universal Credit to the level required to end deep poverty within the decade and removing sanctions;
    – large scale trials of UBI and GBI.
    Only Option 1 addresses what conference voted for in 2020 and the paper is not explicit on what parts/benefits of the Universal Credit System might be jettisoned
    Option 2 of increasing UC benefits to the level of 50% of median income over a decade is a good long-term aspiration, but it offers very little to the low and middle-income earners not eligible for UC.
    As Peter Watson comments, Option 3 puts the proposals into the too difficult to deal with box.
    Option 1 is the only one that addresses directly what was voted for in 2020, but will require a working group to model the costs, conduct a distributional analysis and be explicit about its interaction with the benefit system, so that it can be incorporated in the manifesto and matched with tax and borrowing policies.
    Option 1 and 2 could be combined into a workable Minimum Income Guarantee and Tax Reducer as discussed in this article.

  • Michael BG,

    I an hoping to attend the consultative session for the Manifesto on Saturday, but plan on leaving conference on Sunday evening so will not be present for Tuesday’s debate on F41. I certainly agree that adequate levels of tax raising are fundamental to repair of the safety net and putting public service provision and local authority finances back on a stable footing.

  • On the Towards a fairer society motion, unless there is a request for separate votes, then presumably the vote will be on the motion in its entirety. Consequently, all 3 options will be preserved going forward for follow up in the longer term with fundamental reforms to the welfare system. The immediate actions proposed being the restoration of the £20 uplift to Universal Credit, introducing emergency grants (not loans) and stopping deducting debt repayments at unaffordable rates.

  • Peter Martin 13th Aug '22 - 9:16am

    @ Michael BG,

    The advantage of a relatively high income tax free threshold such as the Lib Dems rightly pushed for in the coalition is that it keeps people in the system. There’s less incentive to work cash-in-hand. There’s plenty of scope for doing that in our economy. It’s not that hard to find work house cleaning, painting and decorating, mowing lawns, walking dogs, cleaning windows, servicing cars etc.

    Relying on everyone to declare that income for tax purposes to ‘pay for’ any UBI, MIG, or whatever you might want to call it, they might receive is putting slightly too much faith in human nature. IMO. Maybe I should confess that many years ago when the family finances were tight, I used to make a bit extra on the side teaching maths and I don’t remember including it in my tax return!

    So was I being atypical in this respect? If there are to be any meaningful trials then this factor needs to be tested on real people without any assumptions being made.

  • Peter Davies 13th Aug '22 - 10:01am

    In most cases, those people were not taken out of the system because they were eligible for UC and their income needed to be assessed for the taper. The rate of withdrawal was much higher than income tax and its subjects were poorer so there was a strong incentive to not declare side-hustles.

  • Peter Martin,

    a tax reducer works in the same way as a personal allowance and operates through PAYE coding and self-assessment. The main difference between tax reducer and personal allowance is that tax relief is given at the basic of 20% and not the higher rate of 40% for higher earners.
    Tax reducers are currently used for interest rate relief on rental property Tax reducer and the marriage allowance. They are also used for married couples allowance and certain
    alimony or maintenance payments for people born before 6 April 1935 as well as in interest on home secured loans used to purchase an annuity taken out before 9 March 1999.
    Under a tax reducer of £100 per week, basic rate taxpayers would have a code of 1570L given them £15,700 tax free. Higher rate tax payers would have a lower code to restrict tax relief to 20%.
    Tax evasion via non-declaration of taxable income is illegal now. A tax reducer versus a personal allowance does not change that or the incentives to declare cash income.
    Benefit fraud is miniscule in comparison with illegal tax evasion in cash businesses (including VAT) and aggressive tax avoidance at the corporate level. Most of the tax gap (loss of tax receipts) comes from non-payment of assessed liabilities.

  • Joe Bourke,

    I expect Conference to vote on the three options and only one will be agreed. This is also the view of a member of FPC who I have contacted about the policy paper. I hope it will be by Alternative Vote. Conference has been given options to vote on in the past, so it isn’t anything new. I expect the immediate actions are more than the ones in the motion. Motions accompanying policy papers only include some of the policies in the paper and I expect this is the case here, with policies in four areas (numbered 1 to 4 in the motion). Hopefully, the policy paper will be published soon; perhaps it will be this coming week.

    Peter Martin,

    I don’t see what difference an Income Tax personal allowance would have on people who don’t declare some of their income for tax. If your main job is where you are employed by one employer then that employer is likely to deduct your Income Tax and National Insurance from your wages, and you are likely to be paid directly into a bank account. This would not change if you had no Income Tax personal allowance. However, if a person has a second job and they are paid cash they are tempted not to tell HMRC about it. Having an Income Tax personal allowance of even £13,000 is not likely to make any difference.

    Joe Bourke’s idea of paying a UBI or MIG via a tax reducer would deal with your concerns.

  • Peter Davies,

    If everyone on Universal Credit had a work allowance this would stop most low level benefit fraud. For someone without any children I think this should be £50 a week or when rounded up £220 a month. For those with children who receive the housing element it is £344 a month. I prefer having higher work allowances rather than lower tapers, because I am concerned about how much someone can earn and still receive Universal Credit. I think it is possible to earning over £40,000 and still receive it.

  • Peter Martin 13th Aug '22 - 6:55pm

    @ Michael BG,

    “I don’t see what difference an Income Tax personal allowance would have on people who don’t declare some of their income for tax.”

    We can all earn up to £12,570 p.a. without having to pay any income tax. This is the personal allowance. Therefore, it doesn’t matter if someone who earns less than this does or doesn’t declare their full income. It would matter if the personal allowance was abolished or substantially reduced.

  • Peter Davies 14th Aug '22 - 10:06am

    @MichaelBG Higher basic allowances, higher work allowances and lower tapers all increase the level at which UC runs out and it is already too high. There are two ways to reduce that maximum.

    Replacing a substantial portion of the basic allowance with UBI. A simple conversion of allowances to UBI would reduce it by about 10k.

    The other thing we need to do is reverse some of the subsidies on property ownership and obstructions to home building. This would allow property prices and rents to drift downwards relative to inflation and hence make housing allowance a smaller part of UC payments. If people are getting UC on 40K, that is largely down to sky-high rents.

  • Peter Davies

    According the Joseph Rowntree Foundation a single person needs an income of £166 a week to be living at the poverty level. Universal Credit is £77.29 a week. In the party’s second UBI consultation paper we proposed a UBI of £71 a week but counted this as income and so the taper would be applied to the Universal Credit reducing it to £34.78. £77.29 plus £34.78 equals £112.07, which is £53.93 short of the poverty level. Therefore reducing Universal Credit when a UBI is introduced would not help the poorest in society.

    According the Joseph Rowntree Foundation a couple with two children need £462 a week to be living at the poverty level. That is £24,024 a year. This does not include any rent. Universal Credit for them if they are aged over 24 is £824.07 a month, which is only £9888.84 a year.

    The amount people receive to pay their rent is often lower than their actual rent and if they are not working and the benefit cap is applied then the difference between how much they receive to pay their rent and their actual rent is even greater.

    Our policies to scrap the benefit cap and restore the link between the Local Housing Allowance and local rents are a start. We should go further and restore the LHA to the 50th percentile of local rents.

    I agree long term more homes for rent are needed to reduce rent levels, but this will take a long time.

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