Christmas Competition: How can we reduce inequality?

Forget the aroma — LDs must be first, to get up and make the coffee! Manifestos must do more than hope to tweak benevolently. Changing one big thing always changes everything: ravish equatorial forest, you melt icecaps, perhaps drowning Rotterdam and Rye.

After the last ten years, our kingdom hurts– families divided, MPs at odds with constituents – hostility and temper; all is despair and sorrow.

Nonsense! Now is our chance to change everything for the better, to unite, and strengthen all that’s best. Improbable? Which of the countries ravaged and overwhelmed by WW2 does the best today, and has done for decades?

Now, in the imminent aftermath of Brexit, the urgent thing is to heal our internal and national strains. Moreover, the best way to work the healing is to succour those most damaged, and aggrieved, victims of Tory “Austerity” — the poor, and the ones who have ‘had enough of experts’. We need a Universal Basic Income.

“Oh, that old fantasy!” I hear you sniff? No fantasy – think on . . .

First, rename the GDP, and call it what it is (give or take): the Total National Income (‘TONI’). In 2015/16 that amounted to about £2,000 billion paid to a population of c50m aged over 16. If that TONI were evenly distributed to everyone over 16, each would get £40,000 for the year! Perhaps not even a Marxist or a Corbyn would suggest that. However, between that extreme, and what the Tories have contrived, there must be a better way of sharing out that Income, and somewhat rewarding all the vital work done unpaid and disregarded?

There are 27m ‘Households’ (ONS term) in the UK, averaging roughly two people each, and the average household income in the poorest 20% is £7,000 before Tax and Benefits, and £17,000 after, an increase of 143%. The corresponding figures for the wealthiest 20% show a fall in disposable income of 39%, leaving them with £63,000: their Tax contribution has helped their most impoverished compatriots. This levelling mechanism could be applied in giving everyone a uniform boost, which would then pay income tax in the usual way, at rates revised to suit.

Giving everyone the same Basic Income makes it a right, and everyone is equal in that, whatever their other means. It would not support a lavish lifestyle, of course. One’s instant response to the notion that it’s crazy is natural and not daft or discreditable — but it is wrong, because of the boost in communal morale. Current “Benefits” come erratically, after toil and anguish for those who have to make invidious and strenuous application for it. A Basic Personal Income of about £8,000 (more would be better!) for all aged over 16 would provide a poor Household of two adults with about what such a Household gets now from a grudging State (or nation?). The rich would get it too, of course, but then taxed according to their total income, as now. Still, very well off, the Joneses will still outshine their neighbours. The gap between rich and poor will have been narrowed, and the poorest will have an enhanced sense of being participants in the commonwealth of their country, by right and not by sufferance.

* Roger Lake is a retired academic who voted Liberal in 1959, and every General Election since, with a fair mileage leafletting this Spring.

Read more by or more about .
This entry was posted in News and Op-eds.
Advert

12 Comments

  • Peter Hirst 20th Dec '18 - 2:56pm

    As my contribution, one sure way of reducing inequality is to improve our democracy. Making each vote count would reduce inequality and making each equal would do even more. At least the referendum allowed each vote to be equal. Wasted votes is a symptom of an unequal society, at least in voting terms.

  • Simon. Thanks for asking an important question. Short answer, No, I can’t this week say how much extra tax it would cost. I will try to essay an estimate very early in the new year. Two reasons for the delay. I did not overlook it, though I believe it could be less than one might expect — it depends largely, of course, on what figure the nation chose for the UBI. (It would be easier to discuss if we could share a blackboard!). The other reason is that getting my basic idea into the 550 words, and double checking my figures, took longer than I allowed for. And a third is that so far I’ve posted no Christmas cards!

    But I think one important thing I’ld like to say is that we all have tendency to pour cold water on new ideas instead of fanning the smoke till it flames, while standing by with a bucket in case! (Not that that is what you’ve done, Simon: I say it now because I shall forget to otherwise.)

  • Joseph,

    You’re way ahead of me, rather in the way I’ve just mentioned above, I think. I think that regional rent variations are half of a chicken-and-egg problem. A UBI, such as I suggest, might seem to constitute from the outset a change more radical than I’ve made it look. Skewing the distribution of Disposable Incomes would indeed skew everything including rents (rainforests above!). Champagne and beer might both become cheaper — the rich could afford less of the one, so demand would fall; and of the other, increased demand might bring economies of scale! Not to mention the founding of even more Craft brewers.

    So as you point out, it will indeed be complicated. But I think the way to do it is to consider first the subsequent problems, and then try to work back, from the Future and plot a course backwards to next year. Before starting a new railway you survey the whole route, and then decide how to use what you dig from all the tunnels to fill the nearby embankments, and perhaps get them to balance. The whole project would have to begin by engaging the support and even the enthusiasm of most of the population, not just the nutters in one Party: it will undoubtedly be as political as it is economic.

  • Laurence Cox 20th Dec '18 - 3:58pm

    Roger,
    The Social Liberal Forum did some work on this over a year ago. Ask Caron or one of the other mods to let you have my email address and we can discuss it. I produced a spreadsheet with a range of Basic Income options like the CIT and the Green Party proposals and many useful links.

  • Peter,
    Well said indeed: I couldn’t agree more! The present farce would be far less tragic — it it could happen at all — if we had PR, and the Commons represented an accurate picture of the nation as a whole.

  • Roger, you state there are about 50 million people in the UK aged 16 and over and it seems you are proposing each of them receives £8,000 a year in Basic Personal Income. This will cost £400 billion (gross). It is forecast that in 2019-20 the income of the UK government will be only £810 billion.

    You also haven’t stated if housing benefit would continue under your idea. Are you aware that currently the benefit cap is £20,000 for two or more people and £13,400 for a single person outside London and £23,000 for two or more people and £15,410 for a single person for London? These have been reduced from the £26,000 and £18,200 figures set for April 2013.

    In 2016 we passed policy to reform the benefit system. In our 2017 manifesto we costed some of them at about £11 billion.

    We need to increase the current benefit levels so no one is living in relative poverty first. I believe this would cost between £28 billion and £53 billion extra a year. This should be our next priority with regard to benefit changes and only once we have this as our policy should we have as our policy the gradual introduction of a Basic Personal Income. I set out how a Universal Basic Income could be paid for, set at £73.08 per week (£3800.18 a year) for an adult and either £45.70 or £38.70 for a child in my February article – https://www.libdemvoice.org/can-we-afford-a-universal-basic-income-56572.html.

  • Michael, thank you for your comments. I will try to respond to them ‘soon’, by which i may have to mean ‘after Boxing Day”. That is a frustration for me, but Christmas is Christmas. I will do it before the PM consents to a vote on her Brexit.

  • Michael, yesterday 7.58pm

    I realise I ought to have replied to you a bit more fully at once, with one or two basic responses.

    The first thing to say is that I do not envisage the UBI as being on top of the current assortment of Benefits, but as replacing them (and the expense of administering them). Whatever the actual size of it the Govt might decide on, it is not to be in-addition-to, but instead-of almost all of them. As I see it, UBI is intended to be a RADICAL change in relations between People and State, and not mere tweaking to ameliorate a ramshackle welfare bundle.

    And I think that more or less answers the other point, Expense. Because the funds now grudgingly bestowed in the current main Benefits should glide smoothly into the simple banking trick of paying out UBI. Additional funds need not be required — but that would mean an over-niggardly UBI. So more funds will be needed, and I suppose they will have to come from taxes — taxes on Income, certainly; and perhaps on other things like wealth.

    There may even be something gained from Brexit, for I believe the EU insists on VAT at a single rate, chosen by each country. Out of the EU it will be possible to apply VAT at more than one rate. When I were a lad my father brought home oil for my cricket bat. “Did you get the cricket bat oil, Dad?”
    “No, I got linseed oil.” “Don’t be daft, Dad — cricket bat oil is linseed oil!”
    “Oh no it isn’t! [It may have been the panto season]. Cricket Bat Oil is a luxury good, and carries Purchase Tax, whereas linseed oil is a building material, used in putty, and carries no such tax, so it’s cheaper! They told me in the sports shop.”
    I am myself much in favour of a special Purchase Tax on ‘luxury goods’ — it seems to go with the spirit of UBI.

    But I will try to suggest answers to your very important question, soon. I confess that I haven’t yet followed up your piece in LDV, but Iwill do. Meanwhile, thank you for it.

  • Roger, after reading your 20th December post I didn’t look for another post until today. If your UBI is going to replace all current benefits then it needs to be set at a higher level than £8000 a year – £153.85 a week. However, if you kept the extras (or even just most of them) then £153.85 would be a good figure for a single person just £2.36 a week more that the poverty level for April 2018 if inflation is added to the Joseph Rowntree Foundation 2015/16 figures.

    I think it is important that any UBI does not make anyone worse off. Disabled and those not able to work due to an illness often have extra expenses and our current benefit system attempts to provide the funds for these extra costs.

    Setting your UBI at this level should allow you to abolish the Income Tax Personal Allowance and Employee National Insurance threshold. According to the government (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/714482/SS18_Direct_effects_of_illustrative_tax_changes_bulletinFinal_v1.1.pdf) a £100 increase to the Personal Allowance will cost £680 million in 2020-21, so abolishing the £12,500 level should raise £85 billion; a £2 a week increase to the employee National Insurance threshold will cost £300 million, so abolishing the £166 level should raise £24.9 billion.

    In 2017 it was reported (https://www.nao.org.uk/wp-content/uploads/2017/09/11559-001-DWP-SG_6DP_final.pdf) that £15.2 billion was paid out in Employment and Support Allowance, £1.9 billion in Job Seekers Allowance and £1.4 billion in Income Support. So you should have these savings of £18.5 billion.

    As your UBI is less than the Pension Guarantee of £163 a week we can exclude pensioners from the number of people who will receive your UBI. According to the ONS there are 41.2 million people aged between 16 and 64. Therefore we can reduce the gross cost down to £329.6 billion of which I have identified £128.4 billion.

  • A person earning £26,000 would gain your £8000 and pay £2500 extra in income tax and £1035.84 extra in national insurance. If you increased their income tax rate by 15 pence this would generate a further £3900 leaving them £564.16 a year better off. Increasing the basic rate of Income Tax by 1p with generate £4.85 billion, so 15 pence will generate £72.75 billion. If you increased the 40% rate by 15 pence this would generate £19.5 billion and the 45% rate hopefully £3 billion. You could add in the £26.1 billion of tax changes I identified in my article.

    So there is only £79.85 billion now to find. If you increased the standard rate of VAT by 12% you could raise £78.6 billion (based on 2021-22 figures). I think this would make many people worse off.

    I remember Denis Healey’s luxury VAT of 25% (1974-76). What would you make luxuries and how many will you need to raise £79.85 billion?

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

If you are a member of the party, you can have the Lib Dem Logo appear next to your comments to show this. You must be registered for our forum and can then login on this public site with the same username and password.

To have your photo next to your comment please signup your email address with Gravatar.

Your email is never published. Required fields are marked *

*
*
Please complete the name of this site, Liberal Democrat ...?

Advert



Recent Comments

  • User AvatarDavid Raw 20th Jun - 5:03pm
    Sorry Bernard, but if you knew anything about cricket you wouldn't call it a ball park.
  • User AvatarDavid Raw 20th Jun - 5:01pm
    Bernard Aris. Your comments about our former Prime Minister Harold Wilson are a right wing tabloid caricature and far removed from the truth...... especially your...
  • User AvatarMichael BG 20th Jun - 4:52pm
    Peter, “After a just a few there wouldn’t be much left in the economy and so the Govt’s deficit would hardly be any different than...
  • User AvatarRichard Underhill 20th Jun - 4:12pm
    GWYN WILLIAMS: During a war between Egypt and Israel Time magazine reported that a fighter jet had been hit over the Med. and landed on...
  • User AvatarJoseph Bourke 20th Jun - 4:09pm
    Peter Martin, I think when Simon-Wren Lewis says “First, we need a monetary policy that is very relaxed about raising interest rates.” he is suggesting...
  • User AvatarChristopher Haigh 20th Jun - 4:07pm
    @BernardAris- Harold Wilson was an extremely well respected academic and wartime civil servant. He was also extremely personable. The common market entry was a Tory...