The case for the Universal Credit (UC) would make far more sense headed ‘Universal Basic Income’ (UBI) yet there has been no mention whatsoever of the UBI in debates recently.
The original report ‘Dynamic Benefits: towards Welfare that works’ is not easy to find. I think the government would be embarrassed if anybody more famous than me drew attention to it. Search ‘Centre for Social justice’, Click ‘Policy Work’, then ‘Publications’. You then had to find the right page from about 13 (it was published on 16th September 2009), but strangely, the link for ‘Publications’ where I have accessed the report before did not work today. However, it came up when I searched for ‘Dynamic Benefits’ whilst on the CfSJ website.
Passages should have been read out in last Thursday’s Parliamentary debate on the UC (18.10.2017). Its cardinal point is that the UC would
Make work pay
because it recognized, and claimed to deal with the poverty trap created by means testing.
The UBI will make work pay, but even if the UC was not dogged by the delay in payments, it would do so only marginally. ‘Dynamic Benefits’ sets out in a series of graphs how means tested payments are exactly the same as a tax for those losing them as they obtain other income. At best, the UC would reduce effective tax rate equivalents from between 90% and 100% to just over 70%. UC claimants receive only 35% of their former earnings, which is an effective tax rate equivalent of 65%, but even if they pay no tax, workers pay National Insurance contributions.
I tried to insert the UBI into the public debates on the UC on ‘Any Questions’ and ‘Question Time’ (BBC TV and Radio 4), but it seems not to be gaining enough ground for anyone involved with those programmes to notice its relevance to the UC debate.
I had hoped that the debate in Parliament might be better informed. Both Caroline Lucas And Mhairi Black (SNP, member of the Work & Pensions Select Committee) spoke in the debate. Caroline’s contribution was only on a point of order. Perhaps she was one of the those who did not get the opportunity to contribute content to the debate, but she could have discussed the whole issue with Mhairi Black, who did.
Mhairi’s contribution rose above the general debate, which otherwise consisted mainly of a series of a succession of painful instances of the effect of the UC, and disgraceful party-line Conservative repetitions deploring ‘negativity’. Mhairi began by acknowledging and welcoming the stated intention of the UC, but this is where she could and should have inserted the Basic Income principle into the debate.
I know why Ms Black did not mention the UBI The crucial factor is covered in this official summary of the enquiry into the principle by the Work & Pensions Select Committee in January 2017. Frank Field, Chair of the committee has always been against the Basic Income, but he was quite restrained in his cross-examination. If coming to the idea ‘cold’, I would have not have been swayed by the efforts of the UBI team to overcome the Committee’s doubts on funding, and disability payments.
There are at least partial answers to both, sufficient for either Caroline Lucas or Mhairi Black to mention the crucial relevance of the underlying principle, particularly in the light of the failure of the UC roll out already apparent in January 2017. Full rollout was supposed to be 2018. Five years since launch it has reached 8%, and is projected to be completed sometime in the 2020s. The entire sanctions régime assumes the UC is in place, and should be scrapped without it, not just for the 8%, but for the 92% who are not receiving the UC anyway.
For Ms Black simply to add the above facts about the fundamental inadequacy of the UC regardless of the current difficulties would have been an enormous step forward.
‘Dynamic Benefits’ is not just an excellent, though clearly unintended statement of the case for the Universal Basic Income, it even provides unintended ways towards answers to the apparent problems.
It comes down to money – specifically redistribution. The Centre for Social Justice was set up by Iain Duncan Smith as a right-wing Think tank. ‘Dynamic Benefits’ is surprisingly hard-hitting in its attack on means testing, but its remit was to provide an answer which did not involve redistribution.
Those graphs in ‘Dynamic Benefits’ give the game away. They show, for different family configurations, the loss of means tested benefits on the same graphs as taxes, because that is what they are for the person losing them. All graphs (the one at the top of this page is one) show a massive mountain of withdrawal of benefits on low income, and a fairly low plateau of taxation on high incomes.
What ‘Dynamic Benefits’ does not show you is the effect the Universal Credit would have. On the graph at the top of this page, draw a straight line at 72% up to the point at which all means tested benefits are lost. That replaces the higher withdrawal rates which still apply for the vast majority.
If it is impossible to devise a system whereby everybody gets a starting sum, and loses exactly the same proportion of that sum whatever their other income, then the economy is already bankrupt. Of course that is not the case, but putting everyone on the same, fair, starting line will entail redistribution. According to Richard Murphy, it could be done by abolishing personal tax allowances, and increasing the basic tax rate to 23%. Even if these figures are over-optimistic, why has Caroline Lucas, who is aware of my approach, not yet pointed out any of this in Parliament?
In 1979 there were two rates of Supplementary Benefit: a Short Term Rate for those temporarily without any other income, and a Long Term Rate for categories not (then) expected to find work. Thatcher decided that they were unnecessarily generous.
But a large number of individuals who did have disabilities had until then notclaimed benefits. The unintended (giving Thatcher the benefit of the doubt) consequence of ‘reform’ was that such individuals were now forced to claim disability. Even worse, since the sanctions regime was introduced in 2012, those operating the system have no alternative but to assume that every new disability claimant might be able bodied, trying to avoid sanctions.
Unfortunately the employment situation has deteriorated considerably since 1979, so it would cost more money to reinstate that system now, but at least logically it should considerably reduce the disability benefits bill without the cruelty currently being used for that purpose
My main reason for the Basic Income is to allow everybody to think ecologically. But they certainly can’t do that whilst waiting for their Universal Credit.
Written by Clive Lord, originally published at clivelord.wordpress.com