Fairer Society Part 2: Goodbye Mr Beveridge

William BeveridgeIn my article on Saturday, I talked about how Ed Miliband’s ‘youth tax’ shows that Labour have abandoned any claim they ever had to be a party that cared about social justice or a fairer society. And the Conservatives have never even cared about a fairer society as they are ably demonstrating with their plan to cut £20 billion from the £79 billion (e.g. not including pensions) welfare budget if they are in government in the next parliament.

Therefore the Liberal Democrats, the party of Beveridge, are now the only party capable of claiming to stand for fairness. And if we really care about a fairer society then it is up to us to prove it.

At Autumn conference in Glasgow this year we’ll decide our manifesto for the general election. It is our one and only chance, o stake our claim to the social justice agenda which Labour has abandoned and which the Conservatives have never cared about.

Given that the party’s Federal Policy Committee failed to set up a working group on welfare, it is rather too late for the party to come up with a fully costed plan of welfare reform. However,  there will be a welfare policy paper written by Lord Mike German’s office to debate and what we can and must do is use this opportunity to decide the principles which will guide our approach to welfare.

And, ironically, perhaps the best principle we could adopt would be to reject the defining principle of Beveridge’s welfare state – that of using it as a tool to end “idleness” by limiting support only to those deemed “deserving”.

It’s the issue of how to define deserving that has caused the bureaucratic, unfair mess which our welfare system has become. Whether it is restricting unemployment benefit to those who can “prove” they are doing “enough” to look for work or restricting long term sickness benefits to those who are “sufficiently” terminally ill, the welfare system is a morass of assessments which are costly to administer, confusing for claimants and which allow far too many vulnerable people to fall through the cracks.

Instead, we should simplify the welfare system around fulfilling two core, liberal, principles:

  1. The role of the welfare state is to guarantee for every person the minimum standard of living needed to be enabled to have and achieve their human rights
  2. This should be done in a manner which provides a financial incentive to work for all those who are able to

This would be a radical break with every fundamental of the welfare debate in the UK for the past century. But, with 18 million people unable to afford adequate housing and 4 million adults and children not being properly fed by modern standards, it is clear that the current model has comprehensively failed and can no longer be defended convincingly.

Arguably the only way to ever achieve a society where no one is enslaved by poverty would be to make this radical break with the thinking of the past and adopt new principles as the foundation of an entirely new model of welfare.

In the third, and final, article in this series, I will suggest a model which might be able to achieve this.

 

* George Potter is a Vice-Chair of the Social Liberal Forum and a campaigner for Guildford Liberal Democrats, writing in a personal capacity.

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55 Comments

  • Charles Rothwell 23rd Jun '14 - 11:40am

    No problem with the general principles at all but it is the word “minimum” in Number 1 which is going to be the crunch. In present day terms, does it cover Sky TV Sports subscriptions, smoking, eating processed junk food etc. while pre-the Poor Law it was baccy and beer etc. If people are going to be driven “off benefits and into work”, then the latter has REALLY got to be better for them and that entails either driving benefits down to the level literally to keep people (and (this is always the real killer) their kids) alive (if they have not contributed to the system) or to make work (not subsidised a la Gordon Brown with tax, housing, this and that credits paid for by everyone else – and we should all remember that now over one million people on benefits are not ‘stars’ of Channel 5 programmes but actually IN work) much more attractive and that means looking at minimum wage enforcement/enhancement etc (and, it has to be admitted, the impact of immigration on LOW-paid work (as opposed to moderately- and well-paid work where the consensus is that immigration is overwhelmingly beneficial) and the means of driving up wage levels in a non-inflationary manner (collective bargaining, responsible trade union involvement in company decision making etc (unlike the poor 2,600 middle managers at Morrison’s who learnt in the media a few days ago that their jobs are going (albeit with the implied suggestion they can apply for new jobs in the ‘M local’ branches the company is aiming to open; from finance control to stacking the bananas at 43+; great!)
    Look forward to your third input with interest.

  • No problems with this article but one of things that seems wrong to me with the current Lib Dem leadership is they consider the Tories’ weakness to be ‘fairness’. In other words, the Tories are competent, capable of running the economy successfully,it’s just they don’t get ‘fairness’. The problem with the Tories runs far deeper. As their position on issues like the environment shows they’re actually a rather anti-enligthenment party. The problem with peoplelike IDS, Pickles, Osborne, Hunt isn’t that they’re a bit hard headed and lack compassion (that may be true) it’s that they and they’re free market ideology aren’t very good.

    I hate this ‘the problem with the Tories is that they’re hard headed and the problem with Labour is that they’re oft headed’. There’s lot more too it than that. But the current leadership seems to be in that position – stuck in the 1980s.

  • “In other words, the Tories are competent, capable of running the economy successfully”

    I don’t think anyone in the Lib Dems is saying that.

    The problem is, voters seem to be ready to believe it, and we are not making it clear why it is untrue.

    It’s time we did so.

  • While I totally agree with George Potter’s two key principles, they raise more questions than they solve:

    1) What is this minimum standard of living that needs to be ensured and is this different for short term unemployed, who are merely between jobs, those who are permanently unable to work?
    2) We are supposed to be offering this minimum standard already, so why is it that food bank usage is rocketing?
    3) What happens to those who could work but refuse to do so? When is it reasonable to deny benefits?
    4) How do we assess fairly who is able to work and who is not?
    5) How do we ensure that benefits are received in a timely, efficient and fair manner when work is increasingly casualised and unpredictable for many people?
    6) How do we create a practical system that integrates all benefits and preserves work incentives while maintaining the minimum standard of living?

    Maybe George will give us some answers the next time he writes, but there is no way we can slice through complex issues like these simply by restating general principles. The devil, as always, is in the detail.

  • Richard Dean 23rd Jun '14 - 1:50pm

    “the party’s Federal Policy Committee failed to set up a working group on welfare, it is rather too late for the party to come up with a fully costed plan of welfare reform”

    What use is an FPC that doesn’t consider the major items of government expenditure? In 2015 we aim to spend about …

    £410 million per day on pensions
    £360 million per day on health care
    £300 million per day on welfare
    £240 million per day on education
    £120 million per day on defence

    If LibDems don’t have well-thought-out, costed polices on these issues, then LibDems have no business putting themselves up for election in 2015, and will have no idea at all how to form an effective coalition if it comes to one.

    Figures from http://www.ukpublicspending.co.uk/government_expenditure.html.

  • Richard Dean 23rd Jun '14 - 2:14pm

    I think the first core principle is too strong and the second too weak.

    The first is too strong because other organs of state are there to guarantee some rights, for example the rights to liberty, security, and a fair trial are matters for the justice and defence budgets, not the welfare budget. The second is too weak because it ignores the right that a population has to not do more that their fair share of the work required to make a society.

    I suggest the following single purpose of the welfare state: to guarantee that every person can reach a state of being able to contribute sufficiently to society and so receive rewards sufficient to achieve his or her human rights.

  • The post-war National Insurance system was based on the assumption that there would be full employment, and that wages for men would be sufficient to maintain a wife at home raising children. National Insurance (NI) benefits have not been maintained at a level sufficient to meet the needs for which they were designed. A social assistance ‘safety net’ of means-tested benefits (MTBs) was set up, initially for those who were not eligible for NI benefits, but now it takes in all those for whom NI benefits are inadequate.

    Lloyd George introduced the People’s budget in 1909 and the first National Insurance Act in 1911 saying ‘We will draw a line below which we will not allow people to live and labour’. However, to get the legislation through the House of Lords, the costs had to be paid by workers own contributions and not come from general income tax or a Land tax on the landed gentry or merchants. In the 100 years since, that principle has gradually eroded as National Insurance has become a general tax and is now called earnings tax. Increases in NI have been favoured by governments to maintain the illusion that they are not increasing basic income tax. The next Labour government may campaign on an increase in NI to fund extra spending in the NHS.

    I think the priority is to develop an integrated approach to welfare reform that addresses the factors that drive higher welfare spending – low pay, insufficient housing, high childcare costs and long-term unemployment.

    • An approach to management of the economy that targets full employment i.e. a balanced budget at a 5% unemployment rate and a greater tolerance for inflation within a nominal GDP target.
    • A local area planning system that prioritises the development of adequate affordable housing to meet the needs of the population and provides for the necessary local transport, schools and health facilities infrastructure required for sustainable community living.
    • A safety net that provides a self-financing employment guarantee and skills training at a minimum wage, that acts as an effective automatic stabilizer during economic downturns.
    • A revenue neutral universal basic income, as advocated by Citizen’s Income Trust, that largely replaces means tested benefits, supplemented by disability benefits.
    • An integrated system of income tax and national insurance contributions together with the introduction of land value tax that brings into use land for housing development.
    • A strategic focus on investment and productivity as a means of raising median wages in the economy and containing both the direct costs of housing benefit and indirect societal costs of inequality.

    Many of these issues may cross-over to areas of policy that are outside the remit of a working group on welfare. As regards the specific benefits system, I would say that the top five priorities should lie with the following:

    1. Non-means tested Citizens Income supplemented by disability benefits to replace JSA, ESA, Incapacity benefit, Personal tax allowance & employee NI threshold.
    2. Minimum wage Job-guarantee for the unemployed – ideally in partnership with social enterprise sector and to include childcare provision for working mums.
    3. Concurrent with job guarantee – Introduction of habitual employment test as qualifying condition for social housing/housing benefit for able-bodied. Voluntary unemployment would exclude access to longer-term housing support to free resources for the needy.
    4. The existing childcare offer should be expanded to guarantee a place for two, three and four-year olds.
    5. Work capability/disability assessments should be undertaken by General Practitioners/District Nurses with access to medical history.

  • George,

    I agree with your view that we need to stake our claim to the social justice agenda in our 2015 manifesto.

    Welfare reform is a big area and we need to be more aware of the work that is being done by others. There is a fully costed proposal at the Citizens Income Trust Citizen’s Income Trust based on weekly incomes in 2012- 2013 figures as follows:

    Age 0 to 15 – £56.25
    Age 16 to 24 £56.25
    Age 25 to 64 £71.00
    Age 65+ £142.70

    Citizens Income was abandoned as a policy in 1994 on the same flawed thinking or inaccuracies that it would “in practice would cost so much if used as a system of welfare that it would be impossible to implement” or that it would be a nice extra source of income for the wealthiest http://www.independent.co.uk/news/uk/liberal-democrats-conference-citizens-income-plan-dropped-1450315.html. Even then studies by the London School of Economics and others had shown that a partial scheme, as proposed by the Citizens Income Trust, would be revenue-neutral and would be a significant redistribution of income from the top decile incomes to the lower decile. We need costed and evidenced based policy to campaign on, not lazy rhetoric.

    We along with Labour and the Tories have committed to an annual welfare cap from 2015-16 of £119.5bn rising with inflation thereafter, excluding the state pension and some unemployment benefits. Our proposals will therefore need to be revenue neutral in line with this commitment.

  • George,

    with all due respect the paper has been prepared by a qualified accountant with a law degree and qualification in advanced taxation. By all means criticise the assumptions in their paper, but al least give them the credit of having done their sums.

    The proposed Citizens Income replaces the following £272 billion of benefits, tax and national insurance allowances:
    Child Benefit £ 12 bn
    Child Tax Credits £ 22 bn
    Key benefits (Income support etc) £ 27 bn
    Working Tax Credits £ 7 bn
    Personal Allowances (Income Tax) £ 68 bn
    National Insurance £ 23 bn
    Higher rate tax relief on pension contributions £ 10 bn
    Student grants and student loan write offs £ 3 bn
    State Retirement Pension and SERPS, S2P etc. £ 82 bn
    Pensions Credit and MIG £ 8 bn
    DWP administration costs £ 8 bn
    HMRC – Tax Credit administration and
    Tax Credits written off £ 2 b

    £58 billion of Benefits and allowances unaffected by the scheme include:
    Disability related benefits:
    Severe Disablement £ 1 bn
    Industrial Injuries £ 1 bn
    Attendance Allowance £ 6 bn
    Disability Living Allowance £ 14 bn
    Incapacity Benefit £ 1 bn

    Housing-related:
    Housing Benefit £ 18 bn
    Council Tax Benefit £ 5 bn
    Rent Rebates £ 6 bn

    Oher old-age benefits
    Over 75s TV licence and Winter Fuel Allowance £ 3 bn
    Age-related personal allowances £ 3 bn

    The cost of personal tax allowances, NI thresholds and pensions relief (so called tax expenditures) are published by HMRC https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/302317/20140109_expenditure_reliefs_v0.4published.pdf

    The partial citizens income proposed is based on current levels of income support or JSA and as noted excludes disability and housing benefits that would continue to be needs based.

  • Richard Dean 23rd Jun '14 - 6:25pm

    In what ways would a citizens income be fairer than other systems? In what ways might it be cheaper, or easier to manage than the present system? In what way would it not be “a nice source of extra income for the wealthiest”?

  • Richard,

    As per the paper: The Citizen’s Income attack on poverty is three pronged. Such a scheme would
    • end the poverty and unemployment traps, hence boosting paid employment
    • provide a safety net from which no citizen would be excluded
    • create a platform on which all citizens are free to build

    A Citizen’s Income scheme would encourage individual freedom and responsibility and help to
    • bring about social cohesion. Everybody is entitled to a Citizen’s Income and everybody pays tax on all other income
    • end perverse incentives that discourage work and savings.

    A Citizen’s Income would be simple and efficient and would be:
    • affordable within current revenue and expenditure constraints
    • easy to understand. It would be a universal entitlement based on citizenship that is non-contributory, non-means-tested and non-taxable
    • cheap to administer and to automate

    A Citizen’s Income varies only with age. Separate benefits for disability would continue.

    There is an FAQ’s on the CI site http://citizensincome.org/FAQs.htm. Eliminating means testing for most benefits represents a very significant administrative cost saving.

    Currently a 40% taxpayer gets a personal allowance of £10,000 worth £4000 annually in tax savings and a NI insurance threshold of £7,956 worth £955 in NI savings. These total allowances/savings of £4,955 would be eliminated and replaced with a CI of circa £3700 paid by way of tax credit and phased out for 45% taxpayers as at present.

  • Richard Dean 23rd Jun '14 - 7:04pm

    @Joe Bourke
    That sounds like a politician’s answer … i.e.no answer at all.
    Let’s take it step by step.
    Why exactly would it be the only way to “end the poverty trap”, and how exactly would it do that?
    http://www.businessdictionary.com/definition/poverty-trap.html

  • Richard,

    Eligibility for most current benefits depends on work status. Claimants must be out of work but available for work, or out of work and unable to work. Lower-paid people, especially families with children, can claim tax credits. Otherwise, with the notable exceptions of Retirement Pensions and Child Benefit, working and at the same time claiming many kinds of benefit is a criminal offence. It is possible for people on Job Seeker’s Allowance to study, train, and do voluntary work, but the system imposes significant constraints on the kinds and extents of such activities.
    Even if they can claim Tax Credits, the unemployed can still find it difficult to find a job that pays more than Job Seeker’s Allowance PLUS Income Tax, National Insurance contributions, increased Council Tax, travel expenses, and childcare costs. This is the unemployment trap.

    There are three similar traps:

    THE UNEMPLOYMENT TRAP: This is defined as a situation in which someone can be worse off financially when working than when on benefits. The unemployment trap is not as deep as it was fifteen years ago. There is now a national minimum wage, and Tax Credits have boosted the income of many households that previously would have suffered poverty. The problem is now more administrative. People are understandably reluctant to take employment that might not last long, because their Job Seeker’s Allowance (JSA), or Employment and Support Allowance (ESA), will be lost. Tax Credits have to be claimed (a complex process), and if the job doesn’t last then JSA or ESA has to be claimed afresh. Tax Credit overpayments are all too common, plunging poor families into unrelenting debt. Part-time employment, which for many could be the first step out of unemployment, is now particularly difficult to seek and accept because of the Income Tax, Tax Credit and benefits complexities that are involved. For many households, accepting part-time employment of less than 16 hours per week provides almost no financial gain. Whilst there have been improvements in the availability of childcare, fares to work and the costs of childcare continue to pose additional problems to those whose income in employment remains only marginally above income out of employment, and this is particularly a problem in relation to lone parents seeking part time employment. In some ways, the most serious problem is the criminalisation of people who take part time employment of a few hours per week whilst remaining on JSA or ESA.

    THE POVERTY TRAP. Working families with children can claim means-tested Tax Credits, but this replaces the unemployment trap with the poverty trap. By the time they have paid their taxes and lost benefits, some families keep only a few pence out of each extra £1 earned. This makes it very difficult for claimants to work their way out of poverty. Not only is this a disincentive to seek higher paid employment: it also discourages people from seeking qualifications that might lead to higher paid employment.

    THE SAVINGS TRAP. Many pensioners (mostly women) are still not entitled to a full Basic State Pension, because they have not been in full-time work for long enough, if at all: often because they were looking after others. Instead, they are expected to claim Means-Tested Benefits. Other pensioners, who have worked and saved all their lives, find themselves little better off than if they had not saved at all. Whilst their position has improved slightly recently they can still find that their savings or their small occupational or private pensions reduce considerably the amounts of means-tested Pensions Credit that they receive.

    We need a tax and benefits system that matches the changing needs of society in the 2lst century. Some improvements have started to be made with Universal credit and plans for a flat rate pension in the future, but we still have a long way to go – a Citizens Income scheme can get us there.

  • Richard Dean 23rd Jun '14 - 7:41pm

    @Joe Bourke
    Again, a politician’s answer! Is the length of the answer intended to hide the fact that you have no answer? You have not shown either how citizen’s income avoids those traps, nor why citizen’s income is the only way to do it.

  • If we say we are going to give people benefits unconditionally, without sanctions, how do we ensure that they try to find work?

  • Richard,

    It is not rocket science to be able to see that if your Citizens Income is unaffected by any earnings you have ,such that you keep all your net earnings from work the dis- incentive to take work is removed.

    Citizen’s Income has the same objectives as the Beveridge Report, but it uses different and potentially much more effective methods to achieve them. Contribution records, means testing and income tax allowances would be dispensed with, and a Citizen’s Income would be introduced, based on legal residence. Out would go all ‘dependency additions’ (for spouses and children) and in would come automatic Citizen’s Income payments for each man, woman and child. Out would go threats of losing benefits, and in would come an economic incentive to seek employment and new skills, and also the freedom to take whatever jobs are available without fear of prosecution.

    A Citizen’s Income tackles the unemployment trap by removing the link between benefits and work status. Unemployed people, those receiving Incapacity Benefit, lone mothers – anyone entering or re-entering the labour market – would keep their CIs. Students and trainees would have a secure income.

  • RC,

    I think George had addressed that point above – “The fact is that the vast majority of people want to work if they are capable and it will make them better off and there are very few people who’d be willing to exist at a subsistence level if a better option is available to them. After all, millionaires don’t usually stop working just because they have enough money to live comfortably – why should we expect poor people to stop working just because they’re no longer going hungry?”

    Some people believe that, without an availability-for-work test, a benefit such as Citizen’s Income would destroy the work ethic. Paradoxically it is the present system that decreases the incentives to work, train, care for others etc. by paying benefits to people only so long as they do nothing, and by penalising and often criminalising them when they try to help themselves.

    I think that concurrent with job guarantee program – Introduction of habitual employment test as qualifying condition for social housing/housing benefit for the able-bodied would deal with any residual concerns that people might have about people actually choosing a live on a relatively meagre Citizens Income.

  • Richard Dean 23rd Jun '14 - 8:30pm

    @Joe Bourke
    It is also not rocket science to see that your citizen’s income flattens every difference between people, whereas the point of an efficient benefits system is to adjust the benefits that people receive in accordance with their need.

    Someone is going to end up worse off under citizens income, and it looks to me likely to be the people who are in receipt of most benefits at present, which translates roughly to the people in most need.

  • jedibeeftrix 23rd Jun '14 - 9:05pm

    how does the citizens income work with non-citizens?

  • John Broggio 23rd Jun '14 - 9:25pm

    @ George Potter

    On p5 of http://www.citizensincome.org/filelibrary/booklet2013.pdf it clearly states in table 2 that all citizens aged 0-24 would get an income as well.

  • Richard Dean 23rd Jun '14 - 9:33pm

    Page 2 of that document …

    “A Citizen’s Income scheme would phase out as many reliefs and allowances against personal Income Tax and as many existing state financed cash benefits as possible”

    Given that reliefs, allowances, and benefits are intended to better target need, it’s clear that the citizens income is a very major step backwards.

    A fact of life is that people are different, circumstances are different. By and large the changes to our benefits systems over the years have been in part to better recognize and respond to those differences in need – and recognizing and taking difference is something that is absolutely fundamental to the LibDem way of looking at things. Citizen’s income appears to fly in the face of all that.

  • jedibeeftrix 23rd Jun '14 - 9:36pm

    @ Joe – Given this:

    “• affordable within current revenue and expenditure constraints”
    and this:
    “• cheap to administer and to automate”

    Produce a saving of £6b/pa

    Do you see this advantage increasing or decreasing in future years?

    i.e. will we only have managed to swap one expensive system of social justice for another in twenty years time?

  • John Broggio 23rd Jun '14 - 10:01pm

    @ Richard

    Can you give a concrete example of someone who would be negatively impacted by a citizens income?

  • Richard Dean 23rd Jun '14 - 10:08pm

    @Joe Broggio
    Yes. In fact your question is a no-brainer. You’re proposing to replace one system that accounts for differences between people’s needs, for another than doesn’t yet doesn’t cost more. It’s obvious then that some people will lose out while others gain, and the people who lose out will be the people whose extra needs presently mean they get extra reliefs, allowances, or benefits.

  • George,

    George – there are several such articles on this site. The most recent one by Michael Berwick-Gooding, five days ago, is here https://www.libdemvoice.org/opinion-a-radical-liberal-vision-2-40974.html.
    Geoff Crocker has written an article on CI a few months ago https://www.libdemvoice.org/book-review-money-for-everyone-37805.html, as have I in 2012 https://www.libdemvoice.org/28016-28016.html

    I think it is good that you and others are drawing attention to the need for welfare reform to feature prominently in our manifesto.

    All through his career the late Professor James Meade of Cambridge University (winner of the Nobel prize for Economics in 1977) advocated the introduction of what we now call a Citizen’s Income.The modern debate about an income paid to individuals and replacing existing cash benefits and income tax reliefs is generally dated to the ‘New Social Contract’ advocated in 1943 by Lady Juliet Rhys Williams as an alternative to the Beveridge Report. Her ‘contract’ was close to a Citizen’s Income but differed from it in that the receipt of benefit depended on a work test. Professor Meade later developed Lady Rhys Williams’ ideas, abandoning her work test, and financing the scheme through income tax. He was particularly concerned to see Citizen’s Income as a method of helping a return to full employment. He argued that a Citizen’s Income served three purposes: ‘(1) It relieves poverty by guaranteeing for every citizen a sufficient Minimum Acceptable Level of income. (2) It does so without destroying incentives to work if it is not withdrawn as the citizen earns other income. (3) It provides a universal supplement to earnings which is aimed at justifying any restriction of rates of pay which is needed to ensure full employment.

    Citizens Income was Liberal/Libdem policy throughout the eighties until 1994 and currently features in the Green Party manifesto as follows:

    Green Party Citizens’ Income Proposals:
    A Citizen’s Income sufficient to cover an individual’s basic needs will be introduced, which will replace tax-free allowances and most social security benefits . A Citizen’s Income is an unconditional, non-withdrawable income payable to each individual as a right of citizenship. It will not be subject to means testing and there will be no requirement to be either working or actively seeking work.

    The Citizens’ Income will eliminate the unemployment and poverty traps, as well as acting as a safety net to enable people to choose their own types and patterns of work. The Citizens’ Income scheme will thus enable the welfare state to develop towards a welfare community, engaging people in personally satisfying and socially useful work.

    When the Citizens’ Income is introduced it is intended that nobody will be in a position that they will receive less through the scheme than they were entitled to under the previous benefits system. Children will be entitled to a reduced amount which will be payable to a parent or legal guardian. People with disabilities or special needs, and single parents will receive a supplement.

    Initially, the housing benefit system will remain in place alongside the Citizens’ Income and will be extended to cover contributions towards mortgage repayments . This will subsequently be reviewed to establish how housing benefit could be incorporated into the Citizen’s Income, taking into account the differences in housing costs between different parts of the country and different types of housing.

  • jedibeeftrix,

    Citizenship becomes the basis of entitlement, subject to a minimum period of legal residency in the UK. Every citizen would have a small independent income, whether or not they are in paid employment. Non-Citizens are not eligible for the basic income, but may be eligible for other forms of aid e.g. asylum seekers.

    I think there are some fairly obvious administrative savings to be made in simplifying both the welfare system and the tax and national insurance system. With the introduction of Real Time reporting of Wages and PAYE – the majority of recipients could receive their CI through their tax code, just as they do now with the personal allowance.

    A Citizen’s Income scheme would co-ordinate the Income Tax and benefits systems. A single government agency would credit the Citizen’s Incomes automatically and recoup the cost via Income Tax levied on all income rather than running separate systems of means-testing, benefit withdrawal, and taxation. Instead of different rules for claimants and taxpayers, everybody would be treated alike.

    Each week or each month, every legal resident would automatically be credited with the Citizen’s Income appropriate to his or her age. For most adults this could be done via tax codes or through the banking system, and for children it could be done through the bank accounts of their parents. For adults without bank accounts – post office accounts would be utilised.

    The administrative saving should be permanent and governments seeking to increase CI over and above inflation/earnings growth will need to be able a transparent case of how such increases will be paid for i.e. not Gordon Brown’s stealth taxes and NI insurance increases.

  • Richard Dean 24th Jun '14 - 2:32am

    So a professor at a university, winner or a Nobel prize, had a bee in his bonnet about Citizen’s Income. So what? If the system can’t be explained to ordinary people it’s not going to get implemented. And if the system goes against the historical, popular, socialist and liberal trend of giving most to the most needy and least to the least, the ordinary people aren’t going to accept it or any party that supports it.

    Another professor, Congdon, has produced a flawed argument about the cost of the EU, which UKIP are presently delighted with. The document and an explanation of its major flaws are here:
    http://www.timcongdon4ukip.com/docs/UKIP%20Cost%20of%20the%20EU.pdf
    http://www.eureferendum.com/blogview.aspx?blogno=84342

    Robert Cox Merton is an American economist, Nobel laureate in Economics, and professor at the MIT Sloan School of Management, known for pioneering contributions especially the Black-Scholes-Merton formula for option pricing. His company filed for Chapter 11 bankruptcy in 2009. So much for the wisdom of professors!
    http://www.crainsnewyork.com/article/20090225/free/902259980/nobel-economists-financial-firm-files-for-ch-11

  • The worst aspect of society today is the idea that there are the deserving poor and the undeserving poor. It is illiberal to categorise people in this way. It dehumanises the undeserving poor and it is the attitude of the Poor Law Amendment and the workhouse system where you have to create something that is so terrible people will not want to apply for the help it provides. Also underlying the idea of ending “idleness” is that it is only the rich who have the liberty to be idle.

    So if we are going to say goodbye to Mr Beveridge let us say goodbye to the idea that such a thing as idleness exists. People who are not in work are not necessary idle they just do different things.

    I wonder why this is the first I have heard about a welfare policy paper being prepared by Mike German’s office and why are not members being asked for their suggestions?

    I think it is illiberal to use financial incentives provided by the state to force the poorest in society to work. How does that increase their liberty? As liberals shouldn’t we say here is the minimum you need to live on and then it is your choice what you do to give your life meaning?

    @ Charles Rothwell – I am not sure if you are saying that £71.70 a week is more than a single person needs to live on and if you are really saying that benefits should only provide enough to just stay alive and so you wish to remove from those receiving it any freedom, liberty or well-being? However your assertion that wages need to rise so the amount the government pays out in “in-work” benefits can be reduced is spot on.

    Maybe Richard Dean’s suggestion could be amended to “guarantee that every person can reach a state of being able to contribute sufficiently to society and be sufficient to achieve his or her human rights.”

    @ George Potter – “3) It doesn’t matter if someone’s life choices are what we consider to be immoral, it doesn’t matter if someone refuses to work or if they want to do nothing other than watch telly all day. If we live in a civilised society then no one should be allowed to starve or go homeless through poverty. If we start trying to discern between those who “deserve” help and those who don’t then we end up making subjective moral judgements which both let people in genuine need to fall through the cracks in our definitions and which also open the door to ever more subjective moral judgements which lead to the demonisation of the poor. Either we accept that the price of any welfare system is that some people will take advantage of it or we don’t have one at all. The fact is that the vast majority of people want to work if they are capable and it will make them better off and there are very few people who’d be willing to exist at a subsistence level if a better option is available to them. After all, millionaires don’t usually stop working just because they have enough money to live comfortably – why should we expect poor people to stop working just because they’re no longer going hungry?”

    This does seem to contradict – ‘perhaps the best principle we could adopt would be the defining principle of Beveridge’s welfare state – that of using it as a tool to end “idleness” by limiting support only to those deemed “deserving”.’

    @ George Potter – “Personally I utterly and categorically oppose the idea of a “revenue neutral” citizen’s income. We currently spend £89 billion on working age benefits and tax credits not counting disability and sickness benefits. Redistribute that equally between the 59 million adults in the country and you get a citizens income of £1500 a year which isn’t enough to live on for the poorest but which is a nice extra source of income for the wealthiest.
    It’s an idea that sounds good on paper but in practice would cost so much if used as a system of welfare that it would be impossible to implement.”

    A Citizens Income and the abolition of the Income Tax Allowance have to come in together. It is the abolition of the Income Tax Allowance that pays for the Citizens Income to be paid to those in full time work. This is why the Citizens Income can be set at the current benefit and pension levels.

    @ Richard Dean – “You’re proposing to replace one system that accounts for differences between people’s needs, for another than doesn’t yet doesn’t cost more. It’s obvious then that some people will lose out while others gain, and the people who lose out will be the people whose extra needs presently mean they get extra reliefs, allowances, or benefits.”

    A Citizens Income for those on benefits has no effect at all. Instead of getting say Jobseekers Allowance they receive Citizens Income at the same level. Instead of receiving a state pension and pension credits they receive Citizens Income. Instead of receiving child benefit the parent will receive that child’s Citizens Income at the same level. Those who receive extra benefits because they are sick or disabled will receive the same amount – one part will be Citizens Income and the other part will be their current benefit minus the Citizens Income. If a person is receiving housing benefit or council tax support the introduction of Citizens income will make no difference they will continue to receive it at the same rate. However if there are any people who lose out then there will be transitional arrangements to protect them. The point is no one gains financially accept the government because a Citizens Income will mean there will be no need for those civil servants involved in the sanction regime and there are likely to be other staff savings. People would gain freedom and liberty and a Citizens Income would empower the worse off in society.

  • Richard Dean 24th Jun '14 - 4:39am

    1. Even if there are transitional arrangements for those who would lose out, those people would lose out eventually, after the transitional arrangements had finished. So would people who are later in the same situation.

    2. If nothing else changes, why change the system, and how will the absence of change remove the traps Joe is so keen on? The major system cost is not the cost of administration, is it?

    3. It is not illiberal to object to slavery. If I am asked to pay someone’s benefit, that’s ok if it’s fair and necessary, but if it’s not then I work to pay for that unnecessary benefit, and I am not getting paid for that work – I am being enslaved!

  • Jenny Barnes 24th Jun '14 - 9:18am

    @ richard dean
    Do you benefit at all from the society you live in? Or is your present situation entirely the result of your own native skill and abilities?

  • Jenny Barnes 24th Jun '14 - 10:12am
  • Neil Sandison 24th Jun '14 - 10:50am

    Much as i am enjoying the debate between George and Joe can i bring you back to reality .The tories will be focusing on welfare reform(cuts)at the next general election dressing it up in the laguage of is it fair .Well it plainly has not been fair with many households either penalised for having a disability or a young family .In my ward the avarage rent arrears are running at around £400 .with council tax arrears on a simular level.indebtedness accrued since changes to housing benifit and council tax were implimented.Liberal Democrats must insist upon a review of the current legislation because local government just does not have sufficient alternative accomedation to allow low income households to trasfer to smaller or eqaully affordable housing. We should not go into an election with a welfare reform package that is too obscure for the average tax payer to understand .Lifting the tax threashold has been easy for the electorate to understand but we need to continue to be ambitious for that policy lifting the threashold from it current level to £15,000 over a life time of a parliament.We also need to review the working tax credit system too many households have ended up in debt either due to maladmistration or fraud due to overpayment.Remember Ed Millband imported this system from America .Its expensive and slow and needs an army of HMRC staff to manage it and this is probable where i part company with George no adding to the system by taking wage slips into the job center to create more civil servants is a really bad idea.The tax credit system only relly works for those on incomes above £15,000 and does discourage low income households from doing any over time because of loss of tax credits .The arguement of moving to a minimuim citizens income above the poverty line is worth exploring in principle but could only be introduced incrementally as the wealth of the nation grows .Tackle todays ineqaulities first but there is nothing wronge with having the long term ambition of a fair citizens income as a medium to long term objective.

  • Richard Dean 24th Jun '14 - 12:42pm

    @Jenny Barnes
    We all benefit. Which is why none of us owes each other anything for that particular thing.

  • A lot of very god points from Michael BG. While the primary objective of CI is to remove the unemployment and poverty traps that exists within the current sysytem, it does also act as a redistribution of income to those on the lowest incomes i.e. below the personal allowance/NI thresholds.

    One of the key problems with increasing personal tax allowances is it is an expensive option and there is no benefit to those earning below the personal allowance (currently £10k, £10.5k from next year). It is this section of the population where limited resources need to be directed.

    As Michael notes, changing the personal allowance and NI thresholds to a direct tax credit makes no difference to a basic rate tax payer. However, there will be an increase in net tax payments of perhaps £25 per week for 40% tax payers and circa £95 per week for 45% taxpayers. This redistribution goes directly towards funding CI in the lower deciles of income i.e. to those with incomes below £10k per year.

    This is important as it addresses the point made by Neil Sandeson that “the tax credit system only really works for those on incomes above £15,000 and does discourage low income households from doing any over time because of loss of tax credits.”

    Our policies have to be realistic, evidenced-based (See Malcolm Torry’s Why we need a Citizen’s Income and affordable. In the present circumstances that means revenue-neutral, backed by solid research (such as Hermione Parker’s Instead of the dole and real life examples – such as the Alaska Citizen’s Dividend or the Manitoba experiment.

  • George,

    look forward to reading it. Neil Sandison’s comments above are echoed in the PSE press release http://www.poverty.ac.uk/sites/default/files/attachments/17Jun14%20Poverty%20in%20the%20UK%20press%20release_PSE%20conference_0.pdf

    “The Coalition Government aimed to eradicate poverty by tackling the causes of poverty. Their strategy has clearly failed. The available high quality scientific evidence shows that poverty and deprivation have increased since 2010, the poor are suffering from deeper poverty and the gap between the rich and poor is widening. Far more households are in arrears on their household bills in 2012 (21 per cent) than in 1999 (14 per cent). The most common bills in arrears now are utility bills, council tax and mortgage/rent.”

    Borrowing on credit cards is currently growing by 5.5% annually, levels which were last seen in 2008. I am not sure if that should be seen as a sign of growing confidence in the economy or a danger signal of the kind Vince Cable was warning of prior to the financial crash.

  • @ Richard Dean
    I would expect the transitional arrangements to continue until the Citizens Income has increased to make them not necessary. It is expected that the Citizens Income would increase faster than benefits do today.

    Perhaps an example would help. Assuming someone is getting £71.70 a week. If that person is on Jobseekers Allowance and works for a four hours one week and is paid £25.24. They can keep £5 and so lose £20.24 from their benefit. In total they receive £76.70. If that person instead received £71.70 Citizen Income and was paid £25.24, they would only have to pay tax on £25.24 say 32% (assuming NI and Tax have been combined) £8.08 and this is taken from the Citizens Income and so the person ends up with £88.86. What this means is for someone on Jobseekers Allowance to receive more than the £5 extra they have to earn more than £76.70. If we take the example of someone earning £80 they receive the £80 currently but with a Citizens Income that person receives £126.10. My point was that the change to Citizens Income doesn’t affect those on benefit as the levels are the same. However it does affect them if they work. It ensure that working pays.

    Unfortunately I don’t understand your last point. You would also be receiving the Citizens Income and it would be reduced in line with the Income Tax you needed to pay.

    @ jedibeefrix – “How compatible is the CI with the Universal Credit, given that it seems to encompass some benefits but not others?”

    I am not an expert on Universal Credit but I think it includes Housing Benefit the amount someone is allowed to keep if they work is I think £20 a week so it doesn’t empower in the same way as the Citizens Income would.

    @ Neil Sandison
    Do you really think people understand Tax Credits and the Universal Credit? I don’t. But I can clearly explain Citizens Income (and if I looked at my Council Tax Benefit calculations I would under them). I expect Housing Benefit works in the same way. I think the Citizens Income is a better system than either Tax Credits (which you say needs reforming) or Universal Credit (which, I think if we were to keep it, needs radical reform to make it fairer). Shouldn’t we use the best method to tackle poverty and empower the poor?

  • Richard Dean 25th Jun '14 - 5:29am

    There are no free lunches. The £20.24 is £20.24 that the government won’t get, so either the government will need to cut its budget for something else, or the shortfall has to made up by taking it from a taxpayer. In both options, someone else is going to lose out.

    You may feel that the poorer person is somehow entitled to the £20.24, but in that case it might be better to make an honest, open argument about that, rather than try to sneak extra money in by stealth. For instance you might want to argue for a less abrupt curtailment of benefits, perhaps tailing off more gradually until they disappear at either the minimum or the living wage. That would resolve the poverty trap paradox, would it not?

    The taxpayer has entitlements too, and perhaps more importantly has more power – exercised through numbers and voting. So taxpayers have to be persuaded to stay on side. The more people try to trick money out of them, the less likely they are to vote for you.

  • Richard Dean 25th Jun '14 - 5:35am

    One of the interesting potential undesired consequences of citizen’s income may be that the government may be tempted to reduce its support for investment in jobs for people at the low end of the income scale. At the moment, such investment need cost the government only £5 for the £25.24 worth of GDP that it generates. Under citizen’s income, the same investment for the same amount of GDP would cost the government the full £25.24.

  • @ Richard Dean

    Often the government would not get the reduction in benefit because the unemployed person decides it is not worth taking the work that pays so little. Who would work for 4 hours to gain £5? However there is also a fairness argument. At a time when there is a discussion about the fairness of income tax rate of 45% and total government marginal take rate of 52% how it is fair that someone has a withdrawal rate of 100%. I don’t consider the Universal Credit rate of 65% plus income tax and National Insurance of 97% fair. The Citizens Income has a withdrawal rate of 32% for everyone.

    If the government was investing to create job I don’t think it would stop because of a Citizens Income because once a person is earning more than about £11,500 the government is a net gainer through tax and NI.

    If lots of people who currently don’t work did work a few hours a week then the government would gain the tax on the wages being paid. I don’t know if that would balance out or not, but the argument is that more people would work if they kept more of their earnings which is the argument for Universal Credit.

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