by Citizens' Income Trust | Nov 4, 2013 | Opinion
The President of Cyprus has announced the establishment of a ‘Guaranteed Minimum Income’. ‘Beneficiaries will be all of our fellow citizens who have an income below that which can assure them a dignified living.’ 4 That is, it will be a means-tested benefit. It will also be work-tested, which of course it will have to be, because means-tested benefits are withdrawn as earned income rises and so fail to provide the employment and enterprise incentives that an economy and a labour market need if they are to recover.
The benefit will do what it says: it will guarantee to all citizens a minimum income; but because it will go to some and not to others, it will not provide the social cohesion that Cyprus needs, and it will come with a substantial administrative price tag attached.
The President says that ‘the troika had accepted the government’s proposal “for a modern conceptualization on the policy of social welfare and prosperity”’. 4 The troika (the European Commission, the European Central Bank, and the International Monetary Fund) will have accepted the scheme because it matches the means-tested systems that other countries involved operate, and particularly those operating in the USA and the UK.
There are two lessons to be drawn here. One is that means-testing is an intuitive default position even though it is inefficient, costly, socially divisive, and entirely unnecessary in the context of a progressive income tax system. This default position means that it will not be easy for a social security system based on universal benefits to rise to the top of governments’ policy agendas, even though universal benefits are efficient, are cheap to administer, incentivize employment, self-employment and enterprise generally, are financially feasible, and are conducive to social cohesion.
The second lesson is that the word ‘guarantee’ is so ambiguous that advocates of universal benefits should stop using it. ‘Basic Income Guarantee’ is generally intended to mean the guarantee of a universal benefit, a concept that is at the opposite end of the spectrum from the means-tested ‘guaranteed minimum income’ proposed in Cyprus. The former means a Citizen’s Income; the latter a minimum net income guaranteed to a household by a means-tested benefits system. The previous Labour Government’s ‘Minimum Income Guarantee’ for pensioners was of the latter variety, and so particularly in the UK context we should be especially careful to reserve ‘guarantee’ language for a minimum net income to be reached by means of means-tested benefits, and never to use the word in the context of a discussion of universal benefits.
We would be content to forgive the President of Cyprus his use of the word ‘guarantee’ if he had meant by it a Citizen’s Income. But he did not.
1 www.labour.org.uk/one-nation-social-security-reform-miliband-speech#
2 www.schoolfoodplan.com/plan/
3 Kate Bell, ‘Investing in childhood’, Fabian Review, vol. 125, no.2, Summer 2013, p.19.
4 https://cyprus-mail.com/2013/07/26/president-announces-guaranteed-minimum-income-for-all-citizens/
by Citizens' Income Trust | Aug 9, 2013 | Opinion
Anne B. Ryan, Enough is Plenty: Public and Private Policies for the 21st Century, O Books, 2010, x + 215 pp, pbk, 1 84694 239 6, £11.99
‘The concept of enough is developed throughout this book … enough is relevant to public policies and personal resources … enough is not uniform throughout the world; it can take different forms and expressions for individuals and for cultures.’ (pp.1,2)
The author explores the ecological, aesthetic, moral and spiritual aspects of ‘enough’; discusses the limitations of monetarization of the economy and of GDP measurement; and describes industrialised agriculture as ‘suicidal’ (p.50). Solutions are suggested: individualised carbon trading, a Citizen’s Income, locally-traded food: and the principles underlying these proposals are explored.
There is much here that echoes E. F. Schumacher’s Small is Beautiful (HarperCollins, latest printing 2001) and John V. Taylor’s Enough is Enough (SCM Press, 1975: sadly now out of print), and there is a rather rigorous treatment of many of the areas of interest in Tony Fitzpatrick and Michael Cahill, eds., Environment and Welfare (Palgrave Macmillan, 2002). Discussions of these three books would have enhanced the book under review. There is no bibliography and no index, which is a pity.
Of particular interest to readers of this Newsletter will be chapter 5 on a Citizen’s Income. A Citizen’s Income’s effects on employment patterns are discussed, as are possible objections to the policy and options for paying for a Citizen’s Income. The author concludes: ‘The principles informing a Citizen’s Income help us to ask radically new questions about the nature of work and security.’ (p.115)
This wideranging book addresses us with the questions: ‘Do all of these problems and proposed solutions hang together?’ ‘Could they hang together?’ The answer to the first is ‘Not necessarily’, and the answer to the second ‘Possibly’. There might be little in this book that is really original, but for the positive answers which it gives to these questions the book is worth reading.
by Citizens' Income Trust | Aug 2, 2013 | Opinion
Alberto Brugnoli and Alessandro Colombo (eds), Government, Governance and Welfare Reform: Structural Changes and Subsidiarity in Italy and Britain, Edward Elgar, 2012, 1 84844 477 5, hbk, xii + 183 pp, £65
Fundamental to the argument of this book are two different varieties of subsidiarity: what the authors call ‘vertical subsidiarity’: the idea that authority should be exercised at the lowest possible level in a hierarchy of authorities; and ‘horizontal subsidiarity’: the requirement that higher authorities should resource lower-level authorities to pursue the activity over which they have authority, including the resourcing of individuals and households to pursue their own chosen goals. ‘Network accountability and resourcing’, whilst being more of a mouthful, might be a more accurate expression of what the authors intend by ‘horizontal subsidiarity’: a multi-directional distribution of competences and resources across individuals, households, local communities, private sector companies, voluntary organisations, and public authorities.
The book’s first section is more theoretical in nature, and studies concepts relating to governance and subsidiarity; the second section charts the increasing relevance of regions within countries as opposed to nation states; and the third section studies recent changes in welfare state governance – and here UK readers will be particularly interested in Helen Haugh’s study of social enterprise involvement in health service delivery, and Martin Powell’s comparison of sometimes quite radical vertical and horizontal subsidiarity in Lombardy and the increasing involvement of private sector and voluntary sector organisations in welfare provision in the UK.
The fourth section of the book studies ways in which national governments have resourced households and individuals to take responsibility for their own welfare. Of particular interest will be Julian Le Grand’s chapter, in which he discusses the design of quasi-markets in welfare delivery, how to ensure equity of provision in a quasi-market context, and why such asset-based welfare instruments as child trust funds should be universal.
Tax and benefits were not on the agenda of the group of scholars convened by the Institute for Research, Statistics and Training in Lombardy to research and write this volume. If a further volume tackles this subject then a chapter might usefully be given to an impending experiment in the UK. Since the nineteenth century, social security benefits have been a nation state competence ( – as in most countries, although sometimes aspects of schemes will be devolved to the next layer down, as in the US). Policy and regulations are set at national level even when administration is managed locally, as with Housing Benefit. The UK government has now decided to localise Council Tax Benefit policy and regulations at the same time as it combines national in-work and out-of-work means-tested benefits in order to enhance employment incentives. It will be interesting, and perhaps painful, to watch the consequences of the interaction of a nationally regulated Universal Credit and a locally regulated Council Tax Benefit.
If the Institute does publish a volume on tax and benefits, then the editors might conclude that there are some aspects of welfare provision ripe for greater subsidiarity, and some that require policy and regulations to be determined at the highest possible level of authority. We have seen trade rules becoming more continental and global, and we are seeing calls for greater European involvement in such fields as food safety; and it might be that at the same time as the governance of such functions as social care and social housing become more local, taxation and benefits policy and regulation should become increasingly global. The editors might also decide that greater subsidiarity and increasing globalisation might in some circumstances benefit each other, and that in particular the best way to promote the ability of households and individuals to fulfil their own chosen goals might be a European or global universal Citizen’s Income.
by Citizens' Income Trust | Jul 26, 2013 | Opinion
Åsa Lundqvist, Family Policy Paradoxes: Gender equality and labour market regulation in Sweden, 1930-2010, Policy Press, 2011, viii + 155 pp, hbk, 1 847 42455 6, £65
The Nordic countries provide generous gender-neutral parental leave and benefits and also publicly-funded childcare, and the result is an unusual combination of high fertility and high female labour market participation. This book is a detailed study of family policy in Sweden, particularly in relation to two paradoxes: that policy promotes both mothers as carers in the home and as workers in the labour market, and that men and women are regarded as both different and equal.
The book is a study of how Swedish social policy relating to the family has arrived at its present state and of more recent developments which have been driven in different directions by a greater individualisation in society (and thus defamiliarisation) and an understanding of women as disadvantaged within the family. Most recently, a reintroduction of a benefit for carers at home, and the introduction of labour market incentives for women, have exacerbated the paradoxicality of the situation.
As the concluding section of the book suggests, the fundamental paradox is between equality and freedom of choice. We might put it like this: How to preserve radical gender freedom in the face of government policies aimed at equality in the labour market? And how to preserve gender equality in the face of government legislation designed to give to carers freedom over how they organise their households and their labour market participation? These are vital questions for any government, and are thus an essential field of debate for anyone promoting debate on social policy reform.
This is a well-researched and thought-provoking book.
by Citizens' Income Trust | Jul 19, 2013 | Opinion
Sophia Parker (ed.), The Squeezed Middle: The pressure on ordinary workers in America and Britain, Policy Press, 2013, 1 4473 0894 2, hbk, xii + 169 pp, £65, 1 4473 0893 5, pbk, xii + 169 pp, £21.99
This collection of essays tackles a major issue: the declining living standards of households on low to middle incomes (defined as households in income deciles 2 to 5). Both causes and partial solutions are explored. One major cause of declining living standards is the failure to maintain the value of national minimum wages, but another is the gravitation of the proceeds of economic growth towards households in the upper earning deciles, leaving lower earners struggling to afford mortgages, social care, and, in the US, health care. Partial solutions might be focused training, in-work benefits, more affordable housing, higher national minimum wages, employers paying a ‘living wage’, and jobs of better quality ( – the UK has a better record than the US here, particularly in relation to employment rights for agency and part-time workers). The authors suggest that attending to the politics of the situation is essential, and that an important direction of travel might be asset-based welfare provision such as child trust funds, although some of the current attempts at incentivising asset accumulation tend to privilege the already wealthy.
The volume’s concluding chapter finds the US experience to be worse than the UK’s, and warns the UK to avoid policies that have led the US towards ever greater inequality. A particular lesson to take to heart is that the welfare state, and particularly free health care, has protected lower and middle earners in the UK from some of the worst effects of the economic downturn suffered in the United States: so if the UK wishes to avoid the plummeting living standards of the US then maintaining a strong welfare state is essential.
However, as Lane Kenworthy explains, some elements of the welfare state might be more of a problem than a solution. Tax Credits (and Universal Credit) weaken employment incentives, particularly for second earners, ‘and may in fact make things worse for many families’ (p.40). Daniel Gitterman contributes a detailed study of the United States’ Earned Income Tax Credit, in the course of which he makes a few comparisons with the UK’s Tax Credits. He might have added that the US Tax Credits are close to being genuine (annual) tax credits, whereas the UK’s ‘Tax Credits’ are in fact means-tested benefits, with all the problems usually consequent upon means-testing. In their introduction, the editors write that households with net incomes in the second, third, fourth and fifth income deciles are ‘not heavily reliant on means-tested benefits’ (p.xi). This might be true in the US, but it is not true in the UK, where a high proportion of earners in the second and third income deciles will be heavily reliant on means-tested ‘Tax Credits’.
The book covers a lot of ground, in terms of both diagnosis and prescription. However, diagnosis of the employment disincentives imposed by means-tested Tax Credits is not followed up with any prescription for reform. A benefits system based more on universal benefits would not impose anything like the same level of employment disincentives as the UK’s current system. Child Benefit gets a mention (on p.95: a reference unfortunately not indexed), but only as part of an argument that higher out-of-work benefits reduce employment incentives: a highly misleading suggestion, because Child Benefit is paid at the same rate to households both in and out of employment, and so in no way contributes to employment disincentives. It is the deduction rates related to means-tested benefits that cause such disincentives, not unconditional benefits such as Child Benefit.
The declining living standards faced by households with below median incomes are not likely to see much improvement in the near future, and the volume under review will be a valuable tool as policy-makers consider the reforms that might improve living standards for households in income deciles two to five. Policy makers might also wish to consider the possibility that this section of the population would benefit substantially from the implementation of a Citizen’s Income.
