by Peter Knight | Nov 30, 2022 | News
The Richer, the Poorer charts the rollercoaster history of both rich and poor and the mechanisms that link wealth and impoverishment. This landmark book shows how, for 200 years, Britain’s most powerful elites have enriched themselves at the expense of surging inequality, mass poverty and weakened social resilience. It reveals how Britain’s model of ‘extractive capitalism’ – with a small elite securing an excessive slice of the economic cake – has created a two-century-long ‘high-inequality, high-poverty’ cycle, one broken for only a brief period after the Second World War.
Why, he asks, are rich and poor citizens judged by very different standards? Why has social progress been so narrowly shared? With growing calls for a fairer post-COVID-19 society, what needs to be done to break Britain’s destructive poverty/inequality cycle? The book has two chapters on the way forward and this includes adopting a guaranteed income floor through a modified basic income along with a top-up social dividend paid through a citizen’s wealth fund.
For a review, click here.
by Andre Coelho | Aug 12, 2019 | News
In this video from MSNBC, Democratic candidate for the United States presidency Andrew Yang answers some direct questions about racial issues and economic inequality.
According to him, racial issues get diluted if communities are economically better off, of course with the Freedom Dividend which is central to Yang’s candidacy. That would be because poverty is one of the greatest causes for racial exclusion, while also a consequence of it, in a social degrading feedback loop. So, the rationale is that with less poverty, people respect each other more, irrespective of their skin colour.
On economic inequality, Yang reminds us that 1000 $/month for someone like Jeff Bezos is irrelevant, while crucially significant for millions of people living on the lower end of the income scale. That means that, according to him, the distribution of a Freedom Dividend immediately reduces inequality. Moreover, financing the Dividend might also further reduce inequality, by imposing a 10% Value Added Tax which naturally will weight more on relatively richer people, due to their higher levels of consumption.
by Andre Coelho | Jan 17, 2019 | News
Philip Alston. Picture credit to: BBC News
Philip Alston, UN Special Rapporteur on extreme poverty and human rights, was in the UK last November 2018, presenting his findings on this press conference. It seems that the UK, the 5th world economy in terms of GDP, drags on the 55th position as far as inequality is concerned, in a list of 160 countries (Gini coefficient measurements from the year 2000 onward, mostly). He refers that, although many think tanks, civic organizations and even parliamentary groups speak of poverty as a crucial challenge in the UK, government ministers consider that “things are going well”, in an obvious attitude of denial.
Alton’s visit to the UK has spurred the House of Commons Work and Pensions Committee to conduct an inquiry on UK’s welfare system, along with rising evidence of debt, hunger and homelessness across the country. In fact, a recent (June 2018), deep study on British welfare had already demonstrated that the attribution of conditional benefits has more drawbacks than positive outcomes, which turns the present system counterproductive. So, it seems that poverty, social stigma and arbitrary sanctions are not only the product of some filmmaker’s imagination (e.g.: I, Daniel Blake), but real, verifiable facts.
Among the cited evidence can be found the contribution of the Citizen’s Income Trust (CIT). Given the grim scenario of UK’s poorest or most financially insecure social layers – wages below the poverty line, high unemployment, high insecurity within the job market, increasing conditional welfare – the CIT, headed by Malcolm Torry, recommends that UK’s welfare system should be covered with a new level of unconditional income security. Therefore, it has recommended to the House of Commons Work and Pensions Committee the adoption of basic income, in the following terms:
Research at the Institute for Social and Economic Research at the University of Essex has shown that such a new layer of unconditional incomes would be entirely feasible. By reducing to zero the Income Tax Personal Allowance and the National Insurance Contributions Primary Earnings Threshold, levelling out National Insurance Contributions across the earnings range, and raising Income Tax rates by just three percentage points, it would be possible to pay an unconditional income of £63 per week to every working age adult, with different amounts for different age groups. No additional public expenditure would be required; poverty and inequality would be substantially reduced; almost no losses would be imposed on low income households at the point of implementation, and only manageable losses on any household; a significant number of households would be taken off means-tested benefits; and a much larger number would be brought within striking distance of coming off them. For every household that came off means-tested benefits, employment incentives would rise substantially. Most importantly: every household in the country would experience a substantial increase in its financial security.
It is worth noting that the House of Commons Work and Pensions Committee had already run a formal Oral Evidence Hearing about basic income, on January 12th 2017. At this session were presenting evidence and informed opinions for basic income Louise Haagh (University of York and Basic Income Earth Network), Annie Miller (Citizen’s Income Trust) and Becca Kirkpatrick (UNISON West Midlands Community Branch). On the official summary of that formal hearing, the Committee judged the possibility of introducing a basic income type of policy in the UK as risking “being a distraction from workable welfare reform”, urging “the incoming government not to spend any energy on it”.
Overall, social degradation is happening in the UK, no matter how much governmental officials try to deny it. And that is in the midst of great transformations in the British welfare system, which may raise concerns about what “workable welfare reforms” the House of Commons Work and Pensions Committee had in mind in early 2017. Accepting evidence from the CIT, naturally supporting a thought-through basic income scheme for the UK, it remains unclear whether the appeal for the government to avoid basic income is to be given any credence.
More information at:
Hannah Trippier, “United Kingdom: Study suggests that welfare conditionality does more harm than good”, Basic Income News, July 31st 2018
Genevieve Shanahan, “UK: Parliament releases summary of Oral Evidence Hearing on UBI”, Basic Income News, May 9th 2017
André Coelho, “VIDEO: UK’s Work and Pensions Committee oral evidence on basic income (summary of content)”, Basic Income News, February 18th 2017
Michael Buchanan, “Poverty causing ‘misery’ in the UK, and ministers are in denial, says UN official”, BBC News, November 16th 2018
by Daniele Fabbri | Nov 9, 2018 | News
Picture credit: David Pacey
In an article on Left Foot Forward, Karen Buck MP and Declan Gaffney argue for a partial Basic Income as a more practical option than Universal Basic Income (UBI).
With all the different expectations pinned to UBI, arising from its promise to address a wide range of problems going from technological drive unemployment to the income instability typical of precarious jobs, UBI risks to become a divisive topic. Sceptics argue that it ignores the problems of rising tax rates to unprecedented rates and ask if those most in need are the actual beneficiaries.
The idea of an unconditional, universal flat-rate payment could have wide appeal, the authors say: child benefit was not far from it before being taken away from high earners, and also the income personal allowance and the threshold for national insurance can be thought of as universal flat rate payments for those earning enough to benefit from them in full –“So we have UBI-like elements in the tax and benefit system already”.
The problem in the feasibility of UBI, the authors argue, arises when it is pitched at a too high level, has the ambition to replace existing social security and to provide enough to live on. But a less ambitious partial basic income could have a role in the reformation of the tax and benefit system.
The authors suggest as an option to replace income tax allowance with a flat-rate payment (of the same value) of a bit less than £50 per week going to everybody regardless of the income level, this way also those with no earnings would benefit from it.
This kind of partial basic income would not have the same scope of more generous UBI proposals, but it could nonetheless help getting more people off means-testing benefits, addressing the gender imbalance in the benefit system and in dampening income fluctuations.
“… as there continues to be disagreement on ultimate aims and objectives, we need to move the debate on to practicalities. A partial basic income, working with rather than replacing the social security system, is a good place to start”.
More information at:
Declan Gaffney and Karen Buck, “The practical response to our society’s widening inequality? A partial basic income”, Left Foot Forward, September 3rd 2018
by Patrick Hoare | Nov 4, 2017 | News, Research
In a paper released in October 2017, the International Monetary Fund (IMF) has analysed the feasibility and effects of introducing a Universal Basic Income (UBI) in various economies, looking at how it might help ease destructive levels of inequality present in many societies around the globe.
The ‘IMF Fiscal Monitor: Tackling Inequality’ focused on how fiscal policy can help governments address high levels of income inequality (from here simply ‘inequality’) while minimizing potential trade-offs between efficiency and equity. As part of the second half of the discussion, the UBI was considered as a mechanism of fiscal redistribution currently being widely debated.
Underpinning the analysis of UBI were a number of premises. The first of these was the assumption that some inequality was inevitable within a market-based economic system. Even though data reveals a decline in the global levels of inequality over the last three decades, the increased inequality within certain economies has had adverse effects, not only in terms of social corrosion and political polarisation but also in terms of economic prosperity. As such, the inequality the report sought to address was the type that was specifically having a negative impact.
The second premise clarified that measures aiming to alleviate inequality should not come at the expense of achieving economic GDP growth. Supporting this, data was presented showing that between 1988 and 2008, across all types of economies, there had been an average growth of real income per capita across every income bracket, even if the increases had been greater for those earning more. It was also shown that an increase in overall growth between 1985 and 2015, in particular in East and South Asia and the Pacific Region, had coincided with huge reductions in relative poverty and absolute poverty, and, therefore, with increases in social welfare. With no clear trend between increased inequality and growth, and with various studies suggesting, contrarily, either that redistributive policies may slow growth or that redistributive policies may help growth (given that the marginal propensity to consume among the poor is higher), it was determined that, on balance, growth should not be unduly undermined.
The third condition stipulated that, given the limited fiscal space most economies operate within, simulations measuring the impact of a UBI should be performed under the assumption of budget neutrality. The vast drop in progressivity among the tax systems of the OECD member states, in particular the drop in the average top rate of personal income tax (PIT) from 62% to 35% between 1980 and 2015, does not seem to have been economically motivated, since during this period there was no evidence of: increased income tax elasticity; proportionally less income going to the top earners (the opposite was the case); increased support for the social welfare of the rich; decreased support for redistribution (the opposite was the case); or, a more progressive tax system being harmful to growth (there was some evidence to suggest the opposite could be the case). It was therefore accepted that this lower progressivity must be the consequence of political preference. As such, in order to control for various political perspectives, the funding for a UBI would have to come from a combination of spending cuts and increased taxes.
Following the establishment of such conditions, the central examination of the UBI was based around simulations of implementation within eight economies: Brazil, Egypt, France, Mexico, Poland, South Africa, the UK and the US. The choice of countries controlled for heterogeneity in geographical area, developmental stage (emerging market and advanced economies), and the generosity and progressivity of the countries’ current noncontributory transfers. The analysis of a UBI was then judged on whether it could increase coverage (the number of beneficiaries) and progressivity (those most in need benefiting proportionally more) of current redistributive programs, without impeding growth.
In almost all cases coverage increased, given the universality of UBI, however improvements in progressivity very much depended on the financing method and the existing level of progressivity within a particular economy. Where UBI was seen as a replacement for current benefit systems, countries with low progressivity but high coverage, such as South Africa, saw larger swathes of their lower earners suffer at the expense of a smaller percentage of beneficiaries within the same income category. In this circumstance, where consumption inequality is higher as a consequence of income inequality, progressivity as well as coverage could be improved if a UBI was financed by increased indirect taxation (consumption tax) rather than through cuts to the current system. In economies where both coverage and progressivity are already relatively high, such as the UK and France, replacing the current system with a UBI would be regressive. Similarly, even in a country where progressivity is high but coverage low, such as Brazil, the introduction of a UBI as a replacement would likely trade one off against the other, ultimately negatively affecting lower income households. In the situation where PIT among the top-earners is increased as a way of financing a UBI (altering the economic behaviour of these payers), the model calibrated to the US economy (moderate coverage and progressivity) found that, although efficiency, in terms of output forgone, was lower than against a system with indirect taxes, the PIT increase yielded greater overall welfare, especially where aversion to inequality was high. The final scenario, where simulations focused on comparing a UBI funded either directly, indirectly or through cuts, against the expansion of a benefit – the Earned Income Tax Credit (EITC) in the US – at the same fiscal cost, found that, due to the targeted nature of the EITC subsidy, welfare improvements were higher than would experienced under the implementation of a UBI.
In summary, The Fiscal Monitor concluded that a perfectly implemented means-tested system would always be superior to a UBI, since it would ensure the necessary coverage and provide the greatest level of progressivity within the bounds, constraints and conditions assumed. Therefore, in countries where there is a ‘good’ transfer program, the finance necessary to fund a UBI would be better used on improving the current system. That said, in reality, given the existence of imperfections in such systems, a UBI could be a powerful means of combating poverty and extreme poverty, especially in countries where both progressivity and coverage is poor. It was also noted that a UBI could be implemented for other reasons, such as in combatting job market disruptions associated with technological progress.
More information at:
IMF Publications, ‘IMF Fiscal Monitor: Tackling Inequality, October 2017’, International Monetary Fund website, October 2017
