The notion of a Citizen’s Income, an unconditional income for every individual as a right of citizenship, has been around for thirty years, thanks in no small part to the efforts of author and director of the Citizen’s Income Trust Dr Malcolm Torry. In today’s guest post, Dr Torry gives clarity and background to the recent debate over whether a Citizen’s Income would really leave some low-income families worse off.
An unconditional income for every individual as a right of citizenship would help to solve the problem of poverty and would create a more just society. This is no doubt why the Green Party voted to include a Citizen’s Income in its manifesto for the forthcoming General Election.
The details have not been published, but what is known is that the party intends a Citizen’s Income of £72 per week for every adult (less for children and young people, and more for elderly people), and that it would pay for it by abolishing personal tax allowances and means-tested benefits.
Current controversy around the Citizen’s Income was caused however by Andrew Neil’s interview with Natalie Bennett, the Leader of the Green Party. He suggested that because people would lose their personal tax allowance of something like £10,000, and would only receive £3,500 in Citizen’s Income, they would be worse off.
In making this suggestion it is clear that Neil had not understood that the cash value of a tax allowance is the value of the allowance multiplied by the tax rate; and Natalie Bennett didn’t pick him up on the mistake.
But even though the logic was erroneous, the idea was out there that a Citizen’s Income would lose people money.
The Green Party scheme might be similar to the Citizen Income Trust’s illustrative scheme that the Work and Pensions Select Committee published as evidence in 2006 and updated in 2013. There is no problem with affording this scheme, as the abolition of personal tax allowances, the abolition of means-tested benefits, and the restriction of pension contribution tax relief to the basic rate, would save enough money to pay for the whole of the UK population’s Citizen’s Incomes: but there is a problem with it.
For some low income households their Citizen’s Incomes would more than replace the value of their lost personal tax allowances, but they would not also replace the whole of their abolished Working Tax Credits.
Because the Citizen’s Income would never be withdrawn, additional earnings would produce more additional disposable income than additional earnings can produce in the context of means-tested benefits, so households suffering small losses at the point of implementation of a Citizen’s Income would be able to make them up quite easily by earning a little more. But this was clearly not a total solution, so more work was required.
In 2012 I used the Euromod modelling software maintained by the Institute for Social and Economic Research at the University of Essex to quantify the losses that low income households would experience; and during the summer of 2014 the Citizen’s Income Trust studied a number of schemes similar to our illustrative scheme. We found that we could reduce the losses but not eliminate them. So the search began for alternative methods of implementation.
Work I subsequently carried out using Euromod showed that a revenue neutral Citizen’s Income scheme need not impose losses on low income households at the point of implementation if means-tested benefits are left in place and households’ Citizen’s Incomes are taken into account as income when their means-tested benefits are calculated. The 2012 and 2014 results were published together in an Institute for Social and Economic Research working paper and have been republished in a recent edition of the Citizen’s Income Newsletter.
The Guardian’s Political Editor, Patrick Wintour, then read our website, telephoned me for a discussion, and wrote an article stating that the Citizen’s Income Trust had said that the Green Party’s Citizen’s Income scheme would impose losses on low income families.
We had not said that – in fact, we had never commented on the Green Party’s scheme, except to note that they intended to develop one for their manifesto: but by noticing the similarities between our illustrative scheme and what the Green Party had so far said about theirs, Patrick Wintour had drawn his own conclusion and published it as if it was ours.
“…it is perfectly possible to implement a genuine Citizen’s Income of £72 a week without imposing losses on low income households…”
What he did not emphasise, which he might have done, is that we had proved that it is perfectly possible to implement a genuine Citizen’s Income of £72 a week without imposing losses on low income households if means-tested benefits are retained and households’ Citizen’s Incomes are taken into account when their benefits are calculated.
What other journalists have correctly noted is that if additional tax revenue is raised, either through higher Income Tax rates, through the implementation of a financial transaction tax, or through some other new tax, then a larger Citizen’s Income would become affordable. This would eliminate losses on low income households, and possibly on all households, without means-tested benefits having to be retained.
On the plus side, Patrick Wintour’s article, and the many articles that have followed it, in the Guardian, the Times, the Financial Times, and elsewhere, have stimulated a substantial increase in the level of the debate, which is exciting for the Citizen’s Income Trust. We have never before had so many people asking to join our mailing list, our website has never experienced so many daily visits, and we have never had so many new Twitter followers.
Later this year Policy Press will be publishing my new book, 101 Reasons for a Citizen’s Income. This will be a short introduction to the subject, and cheap enough to enable readers to give copies to their friends, colleagues and relatives.
The need for the book is clearly urgent, and I’m working as hard as I can to finish it.
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Dr Malcolm Torry’s book Money for Everyone: Why we need a Citizen’s Income (Policy Press, 2013) is available at a 20% discount from the Policy Press website – here.
His new book 101 Reasons for a Citizen’s Income publishes later this year. Sign up to our newsletter to get the latest information on forthcoming publications, be part of the Policy Press community and access members special offers.
The Citizen’s Income Trust was formed from a group of people who had gathered together thirty years ago to discuss how they might promote debate on a Citizen’s Income (then and sometimes still called a Basic Income), they became the Basic Income Research Group, and then the Citizen’s Income Trust. They promote debate on the desirability and feasibility of a Citizen’s Income. They publish the Citizen’s Income Newsletter, maintain a library and a website, hold meetings and conferences, and respond to requests for information. They run on voluntary labour and a shoestring budget. More information is available via their website – here.
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