The UK-based Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) has released a report suggesting a Universal Basic Opportunity Fund (UBOF) as a stepping-stone to a full universal basic income (UBI).
The suggested UBOF would consist of £5000 a year for two years, and would be made available to every person in the UK upon request. Although this would fall significantly short of a full, life-long UBI, the study’s authors, Anthony Painter, Jake Thorold and Jamie Cooke, suggest that the UBOF would have a number of potential uses: “A low-skilled worker might reduce their working hours to attain skills enabling career progression. The fund could provide the impetus to turn an entrepreneurial idea into a reality. It could be the support that enables a carer to be there for a loved one without the need to account for one’s caring to the state.”
Noting that the UK’s rate of corporate tax is currently being gradually reduced from 28% to 17%, the study suggests that the UBOF could be funded simply by returning the corporate tax rate to its original level.
The study states that “The UBOF is an ambitious effort to re-envisage the relationship between citizen and state, emphasising trust in people as opposed to a default of suspicion as is the case currently. It also represents a practical step and valuable experiment on the possible road towards a more permanent Universal Basic Income model.”
The RSA states that its mission is “to enrich society through ideas and action.” It regularly publishes research papers on a variety of social issues. Anthony Painter is the Director of its Action and Research Centre, while Jamie Cooke is the head of RSA Scotland, and Jake Thorold is a research assistant.
More information at:
Anthony Painter, Jake Thorold and Jamie Cooke, “Pathways to Universal Basic Income“, RSA Action and Research Center, February 2018
The proposal is certainly ingenious. And the gradualism entailed and appeal to our better angels is attractive. But, reforms of this scale will have to gain a mandate at a general election and all Britons know now, if they didn’t before 23 June 2016, that the electorate likes very simple proposals for measures which promise direct and immediate benefits (and, who knows – because it hasn’t been tried – all the better if they are honest). Moreover, any big-ticket reform will be attacked, if only for the fun of it, by our malicious press and other forces that, especially, automatically resist redistributive reform, and must be able to withstand such. This proposal is neither simple nor attack resistant.
A journalist paid to find fault need go no further than to characterize the proposals as telling the older third of the electorate (those that vote most reliably) that they are written off as valued members of society and must stand silently by as exactly the money they hope to see spent on the health and care services they reluctantly understand they need, or are soon going to, is spent on largess for others, many of whom don’t need it. Not an election winner.
There must be a better way of starting the CBI ball rolling. For instance the following might work. This paper addresses the matter of funding a modest CBI AND the health and care system all want, and adopts the money raising idea, common to most CBI related proposals, of eliminating employment tax allowances. A big difference from most ideas in this space is that it also addresses the question (as much as any short paper could) of how the Chancellor of the Exchequer would get things going immediately after the election that mandates it (and how and why it would get that essential mandate) and the general direction of travel thereafter.
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This is a crude summary of a rather more detailed proposal. The central theme is the gradual reform and simplification of the UK’s employment tax system by the gradual elimination of tax allowances, thresholds, and exemptions, and of most personal income taxation, while both raising money to fund the health and care system all want and rolling out a CBI – starting soon. So:
First, transfer Employee NICs to employers gradually (quarterly?), while gradually also reducing the Secondary Earnings Threshold on Employer NICs, until, after 3(?) years, personal NICs have been abolished and Employers NICs are paid on all of all wages..
Earmark all the revenue from this part of Employer NICs for a world-beating integrated health and care system. This will cost around £170bn (currently £147bn) meaning a tax for employers, including those who employ themselves, (and now on all of all wages) of around 22% of the national wage of about £800bn compared with 13.8% now (on some).
Then, gradually, transfer 20% of personal income tax to employers (by adding it to Employers NICs – now payable on all of all wages) at the rate needed to increase median take-home pay at a bit more than the rate of inflation when keeping nominal wages unchanged. Let’s say 2.5% annually. This will eliminate personal standard rate income tax over about 5 years. Higher wage earners would pay their personal income tax on their higher wages personally (independently of employers) at rates lowered by the 20% that employers pay.
This (in effect, the elimination of personal allowances) will raise around £90bn. It will thus pay for a CBI for the 60 million adult equivalent citizens (one adult equals two minors) of £1500. A good start. (Other sources of money for the CBI can be sought elsewhere.)
Taking it that the first 20% of income tax accounts for (very roughly) half of the take of £170bn, the rise in Employer NICs due to this change would be a half of £170bn plus £90bn or £175bn and so, of the national wage, roughly 22%.
So, in all, Employers NICs (paid on all of all wages) will be at a single rate of about 44% compared with the 13.8% (on part) now. (Note that employers typically pay 20% to job agencies – for workers that taxpayers have paid around £100000 to educate and help raise.)
And collectively the nation will save many billions on tax administration and avoidance and distortions of the labour market.
And (the minimum wage continuing to be increased with inflation plus a little) all will get useful increases in take-home pay for at least the life of a government. What will amount effectively to mandatory pay rises will be the same for all employers. Nothing will prevent them paying more. Moreover, they will play on a flat employment tax playing field.
And personal income taxes on modest wages and all personal NICs will go.
And resentment about personal taxes being spent on the idle and inept will all but evaporate.
And (crucially) it is more than likely that a majority of the electorate would mandate these measures despite the exhortations of those who oppose all redistributive reform.
The money for the benefits will come mainly from businesses who currently profit from state-subsidised cheap labour. Many prices will gradually rise. For nothing, you get nothing (magic money trees and all that).
Note that, under PAYE, employers do most labour tax administration now. So only a radical simplification of this part of their jobs (and increase in productivity) is entailed.
Pay used to go up rather faster than inflation and the economy benefited. Why not again? .
Of course, there are many questions to resolve. What Employment Allowance-like provisions will protect very small employers? As for the CBI: how to define a citizen?; how to treat students?; should immigrants need to accrue entitlement as does, in effect, a UK-born child?; how are income related benefits to be managed?; could basic income be deferred in return for higher state pensions? And so on. But these are secondary issues to be considered when the show is on the road, while the first phase (the transfer of NICs) is under way, and according to prevailing democratic sentiment. All public policy is ever subject to change and it would be both futile and to defer matters for ever to try to draw up a perfect, cast-in-stone system. One has to start somewhere. Soon would be good.