by Citizens' Income Trust | Jan 28, 2012 | Opinion
Policy and Politics, volume 39, number 1, January 2011, Special issue: Basic Income, Policy Press, 2011, 144 pp, pbk, ISSN 0305 5736, online ISSN 1470 8442
This substantial collection of articles rehearses a plethora of arguments for a Citizen’s income (here termed a Basic Income), arguments both pragmatic and visionary; and an important byproduct for the reader is a distinct sense that the pragmatic and the visionary are related in a way more complex than we might at first have thought.
Guy Standing calls a Citizen’s Income an ‘economic stabilisation grant’ because it would boost aggregate demand, more efficiently allocate resources, and tackle uncertainty and rising inequality. As he suggests, times of crisis can lead to major change, and a failing paradigm can find itself displaced – but only if a new paradigm is ready to take its place (p.21):
One modest recommendation is that the emerging generation of economists and social policy students should urge their peers, and particularly the new political leaders, to match their rhetoric about being ‘radical’ by assessing genuinely radical ideas. Economics is a constantly unfolding body of thought, and those charged with implementing economic and social policy should face demands to think afresh and evaluate alternatives with open minds. (p.22)
Almaz Zelleke suggests that a feminist theory of justice requires a Citizen’s Income, and that such a universal unconditional income would promote a more gender-inclusive citizenship. ‘Most importantly, basic income indirectly compensates care and society’s other unpaid work without reinforcing the existing gendered distribution of labour or the primacy of the public sphere by equating care with work’ (p.38). Louise Haagh’s following article notes the correlation between a country’s level of equality and its citizens’ control over their time, and seeks a balance between employment and non-employment which she believes would be best served by a Citizen’s Income in a social insurance context.
Stuart White discusses two different ‘citizen’s endowments’: a Citizen’s Income, and universal capital grant. ‘Freedom’ and ‘entitlement’ arguments fail to separate the two options, and the way in which different ‘freedom’ arguments lead in different directions suggests that a combination of a Citizen’s Income and a universal capital grant might be the best option. Leading to the same conclusion, Tony Fitzpatrick discusses the concept of paternalism, distinguishes between a variety of types, recommends a ‘social paternalism’ that prioritises autonomy but doesn’t exclude other values, and suggests that a Citizen’s Income and a universal grant together will best promote such a social paternalism.
Bill Jordan recognises that the UK Government’s current benefit reforms as a useful step along the way to a Citizen’s Income, and raises the question: Will a small Citizen’s Income, established to make labour markets more flexible, then be increased in order to create a new basis for citizenship, or will it remain small and fulfil only its initial purpose? ‘The first steps towards basic income may become politically feasible for a variety of reasons, at a number of different developmental stages, all of which will also be perilous for the principle in various ways’ (p.112) – but those steps should not for that reason be rejected: ‘Social policy can seldom deal in pure principles or utopian solutions, and basic income is no exception. It cannot resolve all the challenges of globalisation … in a single reform, but these measures may be a step in the right direction’ (p.112).
Finally, Jürgen De Wispelaere and Lindsay Stirton study ‘the administrative efficiency of basic income’. Identifying those people entitled to a Citizen’s Income would be a necessary administrative task, and a variety of payment methods might be needed in order to reach the maximum number of payees, so administration of a Citizen’s Income would not be as simple as some might think. The authors discuss a dilemma: ‘Proponents can claim important administrative savings for basic income, provided they restrict those arguments to the most radical paradigmatic form, while simultaneously having to face up to the reality that this radical version of basic income may face insurmountable political obstacles’ (p.121: their italics). De Wispelaere and Stirton also quite properly suggest that a Citizen’s Income isn’t the only way to make administrative savings: other forms of administrative simplification are possible, such as the sharing of information between tax and benefits authorities and aligning tax and benefits rules with each other.
To round off the substantive articles section of this focused and comprehensive edition of Policy and Politics with De Wispelaere’s and Stirton’s article, which concludes that ‘administrative efficiency … is … political’ (p.128), seems really quite appropriate.
by Citizens' Income Trust | Jan 27, 2012 | Opinion
James Alm (ed.), The Economics of Taxation: The International Library of Critical Writings in Economics 251, Edward Elgar, 2011, 2 volume set, xxxvii + 592 pp, and x + 695 pp, hbk, 1 84844 829 2, £435
The title of the series to which these volumes belong contains an important ambiguity. A critique is a careful examination of a subject, so a critical writing is a careful study of the subject under review; but in common parlance ‘critical’ also means ‘significant’. (We might say that the title of the series contains a critical ambiguity.) It is in this double sense that the writings contained in these volumes are ‘critical’. They are careful studies of aspects of taxation, and they are also significant, in relation to the study of taxation, in relation to the social policy field as a whole, and because they have been seminal in their field. The book James Alm (ed.), The Economics of Taxation and these accounting career tips were fantastic resources for me when I was studying to become a tax accountant.
As the editor’s introduction states, taxation policy has multiple goals: adequacy (to collect enough revenue – we see the consequences of not doing so in the current plights of a number of Eurozone countries), equity, and efficiency (in the sense that taxation should interfere as little as possible with firms’ and individuals’ decisions in markets for labour and other commodities).
The papers collected in these two volumes fall into sections on the effects of taxation (equity, income distribution, efficiency, revenue collection, economic growth, and politics), optimal taxation, tax reform, individuals’ decisions (in relation to incentives, labour supply, saving, portfolio choice, capital gains, estate taxes, tax evasion, and income reporting) and business decisions (in relation to capital taxation, investment, and financial structure). Many of the papers, and the collection as a whole, offer a good balance between theory and practice. A good example of such balance is Fullerton’s paper ‘On the possibility of an inverse relationship between tax rates and government revenue’ – and it is in this paper that we find a clue to an important problem related to any attempt at a collection of papers on taxation. ‘Welfare programs that make recipients ineligible at a given income level imply effective marginal tax rates of 100 percent or higher’ (p.20 of Fullerton’s article, p.272 of volume I of the collection). For UK residents in receipt of the means-tested ‘Tax Credits’, the rate of withdrawal of the benefit is at least as important a determinant of labour market decisions as is the income tax rate. Similarly, Slemrod’s conclusions about behavioural responses to changing tax rates and changing tax avoidance possibilities apply as much to benefit rates and income non-declaration as they do to tax rates and tax avoidance, which wouldn’t happen if people decided to seek out tax-resolution-services to help them manage their own personal financial situation.
Hausmann’s paper on labour supply correctly identifies transfer payments’ effects on net income as an important factor (p.37 of his article, p.27 of volume II of the collection). All this is to say that many of the conclusions drawn in the papers are generalizable to the characteristics and effects of means-tested and other benefits, and to the combinations of benefits and taxes that many people experience. To incorporate consideration of household-based means-tested benefits into the theoretical models employed by many of the papers (and particularly in papers such as Atkinson’s and Stiglitz’s on the design of tax structures) would considerably complicate the mathematics, but it is surely essential to attempt this, which suggests that many of the papers here really are, as they themselves suggest, starting-points still awaiting further development.
It is a pity that this two volume collection contains no index. To have included one would have considerably enhanced usefulness of the set to researchers. But that is the only problem. This collection, which will be consulted mainly in libraries, will give to students of taxation a valuable source of critical writings to aid their studies. What we need now is a similar collection of papers which study tax and benefits systems together, which study their combined behavioural effects, and which discuss the policy consequences of those effects. Atkinson’s work on a flat tax and a Citizen’s Income would surely find an honoured place in such a collection.
Policy-makers need to integrate tax and benefits policies, and preferably tax and benefits. A collection on the economics of tax and benefits as good as Alm’s on the economics of taxation would be of considerable assistance.
by Citizens' Income Trust | Jan 23, 2012 | Opinion
Passported benefits
The Government’s Social Security Advisory Committee’s press release of 15 June 2011 heralded a ‘Public Consultation: Passported Benefits under Universal Credit – review and advice.’ In a footnote, the press release stated:
By Passported Benefits we mean those benefits to which working-age claimants of certain means-tested benefits are automatically entitled. For example, free school meals, free prescriptions, free dental treatment, etc.. We will consider the range of Passported Benefits available to working-age claimants but the recommendations will focus on the main Passported Benefits. We are particularly interested in receiving views about benefits in kind but welcome responses relating to cash benefits and discounts as well.
In this short article, I briefly examine the concept of Passported Benefits (PBs) as presented in the consultation document of the Social Security Advisory Committee (SSAC) (https://ssac.independent.gov.uk). Then I examine whether these needs would be met already within a CI scheme, or whether special arrangements would have to be made.
Passported benefits in the consultation document
The SSAC’s consultation document’s Annex B gives the consultation’s Terms of Reference:
The purpose of the advisory report is to analyse the range of passported benefits (“benefits”) which currently exist in order to:
- classify the target audience(s) for these benefits;
- identify the needs which those benefits address, and the wider policy objectives served by them now and in the future;
- identify and analyse the mechanisms that are currently employed to determine entitlement;
- consider the potential impact of changes in eligibility rules.(The document’s annex A comprises the table below)
The target audience (recipients) for PBs comprises working-age claimants who are in receipt of certain means-tested benefits (MTBs), such as Jobseeker’s Allowance and certain Tax Credits. It can, therefore, be assumed that the recipients are poor and that many of them will be living in poverty. Residents are likely using a payday loan to pay their bills. The payday loans are probably one of the main reasons they can afford to keep the lights on and have food in their fridges, keeping them afloat.
The purpose of the benefits appears to be to support low-income households, whether out-of-work or in-work, in specific ways. Some are designed specifically to help low income people meet the ordinary costs of raising children (Healthy Start Vouchers, free school meals, and school clothing grants).
Some PBs address exceptional circumstances that lead to extra expenditure, such as Exemption from Court Fees, Help with Prison Visiting Costs, and Legal Aid. These are circumstances that most of us do not experience as a matter of course. Educational Grants to enable gifted children to receive special training, for instance, in music and dance, provide another example. The travel costs associated with healthcare, and School Transport provision for those in rural areas, also fall into this category.
Many PBs can be seen as part of wider policies, often representing an investment in the future, (eg. our children’s health and education), and in the general health of the population (through free prescriptions, eye and dental care, leisure services and healthcare travel costs), thereby reducing future National Health Service bills. Similar considerations apply to the environment, such as Warm Front, and bus and tram discount schemes. Others represent an attempt to redress failures of public policy.
Benefits-in-kind are often controversial, because they offer no choice compared with cash benefits. Cash benefits permit the consumer the autonomy that most of us enjoy. Sometimes it may be cheaper to give benefits-in-kind rather than cash, but often it is a case of controlling benefit recipients because they are not trusted (rightly or wrongly) to select what others regard as best for them.
An interim statement says this:
The information-gathering phase of the Social Security Advisory Committee’s review has found that more than 25 different passported benefits are provided by government departments and through local authorities. The committee’s findings to date confirm that passported benefits are viewed by many respondents as fulfilling important needs. The consultation found that the value placed by claimants on individual passported benefits differs depending on their personal circumstances; respondents’ views on the withdrawal and delivery of passported benefits were mixed. For example, some respondents supported a tapered withdrawal whilst others favoured a timed withdrawal when a claimant moves into work; and the design of passported benefits should incentivise people to both move into work and stay in work. (Hansard, 5 Oct 2011, Column WS75, Written Statement on Universal Credit)
The final report will be published in the Spring.
The consultation document’s Annex A: A list of main passported benefits and responsibilities
| Benefits in kind |
Cash Benefits |
Discounts on charges or fees |
| Responsibility of Government Departments |
|
|
| Benefits from the Pupil Premium (Department of Education) |
|
|
| Exemption from Court Fees (Ministry of Justice) |
Help with healthcare travel costs (Department of Health) |
|
| Free School meals (Department for Education) |
Help with Prison Visiting Costs (Ministry of Justice) |
|
| Health goods/services, e.g. free prescriptions/eyecare/dental care (Department of Health) |
|
|
| Healthy Start Vouchers (Department of Health) |
|
|
| Legal Aid (Ministry of Justice) |
|
|
| Warm Front (Department of Energy and Climate Change) |
|
|
| Responsibility of local authorities |
|
|
| Help with the costs of school visits |
School clothing grant (cash/cheque) |
Bus and Tram Discount Scheme – London (Transport for London) |
| Leisure services, e.g. free swimming |
|
Leisure discounts |
| School clothing grant (vouchers) |
|
|
| School Transport |
|
|
| Responsibility of other bodies |
|
|
| Leisure services |
|
BT Basic (BT) |
| |
|
Leisure discounts |
| |
|
Warm Home Discount/Voluntary Social tariffs from utility companies e.g. WaterSure |
Citizen’s Income and passported benefits
Our question is, ‘Are the needs addressed by PBs already accounted for in a typical CI scheme, and, if not, should they be, and how?’
A Full Citizen’s Income (FCI) would be expected to be adequate to meet the needs of the recipient, including people over pension-entitlement age, people with disabilities, carers of last resort, and the responsible parent of a dependent child. The more generous the scheme, the more likely this is to be true. Thus, if the FCI and Child CI (CCI) are sufficiently generous, then Passported Benefits should not be necessary. If they were necessary, then it would represent a failure of the scheme.
A Partial Citizen’s Income (PCI) would not meet all of the needs of the recipient and would not be enough to live on. With this scheme, where exceptional needs are indicated, the PBs should continue. But, the question arises: ‘Should all those with the exceptional needs receive these benefits, or only the poorest?’ If the latter, how do we identify those on low incomes? – because everybody would be in receipt of a Partial Citizen’s Income, so the benefit would not act as a passport to PBs. As the PCI would not be enough to live on, it would need to be topped up with other income, usually through earnings. There will be some individuals who are unable to obtain even part-time work, and there will be some areas that suffer from multiple deprivations, where opportunities for work are thin on the ground. There will therefore have to be safety-net arrangements, and a simple scheme, possibly in the form of a Housing Benefit, would have to remain. Thus, those receiving a PCI and who are also receiving Housing Benefit or some other safety-net assistance could be eligible to receive PBs.
The largest group in the population with exceptional circumstances are those with a variety of disabilities, and a CI scheme would grant to all of these, without any means test, a costs-of-disabilities package (for constant care, mobility, special diets, etc.) in addition to their CIs. Here, the receipt of the package could act as a passport to other PBs.
Where the PBs are seen to be part of a wider policy, one must question whether the PBs for low-income, working-age adults, and especially benefits-in-kind, are the best way to achieve the objectives. Investment in the early years of childhood is known to pay large dividends to society later, in terms of healthy, well-adjusted adults. Notwithstanding adequate FCIs and CCIs, maybe benefits-in-kind, such as Healthy Start Vouchers, and free school meals, should be universally available to all children. As well as education projects to inform people about healthy diets and lifestyles, other instruments might be necessary, such as subsidies on fresh fruit and vegetables, and taxes on processed food with significant proportions of fat, salt and sugar. A CI is not a panacea for all social ills, and, where other public provision is made, it will usually be better to get the policy right in the first place, rather than to use benefits to paper over the gaps.
Universal schemes, such as the NHS, and universal benefits such as Child Benefit, are popular, inclusive, and redistributive. If a generous CI scheme were to be introduced, one might find that expenditure on other public services, such as health and the criminal justice system, would fall significantly, especially where those systems combat the effects of poverty. As with most things, it is cheaper to prevent poverty than to deal with its fallout later.
by Yannick Vanderborght | Dec 22, 2011 | News
According to the Financial Post (Dec.20, 2011), the Conference Board of Canada – an important not-for-profit applied research organization – is now “calling for a renewed look at the idea of a guaranteed annual income (GAI)” in Canada. In a Commentary, the Senior Vice-President and Chief Economist of the board, Glen Hodgson, writes that “there are three main advantages to a GAI. First, it would address poverty directly, and in a neutral fashion, via transfers provided through a single existing administrative system—the income tax system. (…) Second, a properly-designed GAI could reduce the “welfare wall” of high marginal tax rates on earned income for the working poor. (…) And third, a GAI could reduce health care spending on low-income persons.” Hodgson also refers to the study on MINCOME (a basic income experiment which was conducted in the province of Manitoba in the 1970s) which was recently published by Evelyn Forget (in Canadian Public Policy, September 2011). His conclusion sounds optimistic: “While deeper analysis would be needed to underpin the policy debate, a guaranteed annual income remains an appealing “big idea” whose time has yet to arrive politically. There is no better time than right now to heat up the debate.”
Financial Post article: click here
To read the Commentary by Glen Hodgson: click here
by Yannick Vanderborght | Oct 3, 2011 | Opinion
Almost a half year has passed after the Great Earth Quake and Tsunami on March 11 in East Japan which jointly victimized nearly 16,000 people’s lives, made around 4,600 people missing, destroyed a large number of houses and facilities, and induced the nuclear power-plant accidents in Fukushima. The 3 prefectures (Iwate, Miyagi and Fukushima) in the Pacific coast district of Tohoku [North East] Japan were severely double-devastated by the earth quake and tsunami. In addition, people living in areas surrounding the nuclear-power plant were forced to evacuate from the caution zones. For families which lost their members and houses, a lot of funds were raised by the private sector domestically and internationally, and the funds have been concentrated to the Red Cross Japan and others and distributed to the prefectures in the disaster districts. However, the distribution of consolation money to the sufferers is slumbering because many municipal governments have lost their offices and staff members. Prefecture governments in the disaster districts have built about 100,000 provisional housings (free of rent), accommodating many evacuees. Although many households intend to rebuild their own houses, they cannot get refinance of mortgages unless they refund their previous mortgage on the block. Still today, more than 6000 people are living in shelters.
What is the most serious problem is that most sufferers lost their income sources.
Employed workers lost their jobs because their work places were destroyed or swept away, and even survived firms are in difficulty to purchase parts and materials and to restore customers, and many of the firms suspended their businesses and eventually got into bankrupt. Thus a lot of workers lost their employment.
According to Asahi Shimbun [newspaper] (2011.9.6), 63,352 people in the 3 prefectures (Iwate, Miyagi and Fukushima) were registered as disaster-affected job seekers at public employment security offices from March to July. Among them only 13,017 people (20.5 %) got jobs by the end of July. It is estimated that 30 % of job seekers got jobs through public employment secure offices nationwide in the same period. The lowliness of re-employment rate of job seekers in the devastated zones is notable. Asahi said “It is sure that more than a half of the disaster-affected job seekers have not been reemployed yet.” Among the job seekers 60,221 people were provided unemployment allowance from April to July (the first period of payment). For most of them the covering period of the insurance is 2 months. They can get an extension period of 2 months under the existing scheme, and 2 months under the extra rule for the disaster-affected job seekers. In any case, there will be a sharply increasing number of job seekers outside of the unemployment insurance starting in coming October.
The Pacific coast of Tohoku Japan has an industrial concentration of fishery and fish processing. However, many of the fishing boats were destroyed or swept away, fishing harbors and fish markets lost their function, and many of the processing factories were destroyed. Fishermen and fishery-related employees lost their job. Farmland in this area (mainly rice fields) was flooded by seawater and the soil got a high level of saline. It may need a couple of years to resume rice cultivation. Shipping regulations on and consumer avoidance of the agriculture, meat and fishery products from these areas in the concern about the radioactivity contamination due to the diffusion of radio-active matters caused by the nuclear power plant accidents are giving further sufferings to the farmers and fishermen.
In response to this situation, the government is trying to expand financing and subsidizing for reconstruction of these industries respectively. However, these programs are operated within the framework of existing schemes; therefore, they entail minute conditions and cumbersome procedures. They are not easily available for the people in hurry. Under the circumstances, it will take a long time to recover production and employment. Therefore, it is desirable to ensure income for the sufferers, i.e. paying basic income by the government on a temporary basis.
The activists and researchers concerned, centering on BIJP (Basic Income Japan Pursuers), have been campaigning for establishment of a Basic Income scheme for the sufferers. They organized 2 meetings in the Parliament House (to impress politicians) after April. They insist as follows:
1) The government should pay 150,000 JPY (2,700 USD) per month to all of the sufferers unconditionally and individually for 5 years.
The un-conditionality and individuality can enable the beneficiaries to flexibly plan living and get through situations responding to each condition of work, production and living.
Along with the basic income, the government and local municipal governments should enhance in-kind services such as care for elderly citizens, disabled citizens and children, job training, employment placement and so on.
2) If the scheme is targeted within people in the 3 Tohoku prefectures (Iwate, Miyagi and Fukushima), the estimated number of beneficiaries are 5,670,000. The necessary budget is around 10 trillion JPY (180 billion USD) per year.
The government estimates the funds necessary for rehabilitation as a whole at between 20 to 30 trillion JPY. In addition, 10 trillion JPY may necessary for compensation for damages by the nuclear plant accidents. It is impossible to cover such a huge budget by usual measures such as tax increasing, budge cut down and issue of usual government bonds. A simple and effective measure is that the government issues extra government bonds and the Bank of Japan (the central bank of Japan) buys all of the bonds. The fund from the bank of Japan will be all used by the government. This means in effect that the government itself issues currency on security of its financial credibility. It may be a sort of government-issue note. This financial measure will not increase governmental debt at all.
