Killer Arguments Against Citizen's Income, Not.

I've had a change of heart on how to 'sell' a CI, to deflect the KCNs that it would be 'unaffordable' and/or discourage people from working.

Whether it's 'affordable' (i.e. costs no more than the current system) or not depends entirely on:

1. How many people receive it.
2. How much the weekly CI actually is.
3. What the clawback rate is for people with some income.

As to 1, instead of saying:
"Everybody is entitled to claim it. There will be an income-related clawback equal to basic rate tax plus NIC. Those earning more than a certain amount (let's say the current income tax/primary NIC-free allowance of £12,570 a year), will quickly realise that the cash CI is equal and opposite to the extra tax they pay, so won't bother claiming it and will just claim the personal allowance instead i.e. be completely unaffected". All this appears to be too complex for the mathematically challenged.

I shall just say "Everybody earning less than (say) the personal allowance is entitled to claim it. This will be clawed back via PAYE from those with some earned income to ensure that claimants do not gain an advantage relative to non-claimants with similar low incomes.".

That reduces the number of claimants down to most existing pensioners plus 'about' 10 million adults out of a working age population of 'about' 45 million.

As to 2. We know the weekly rate is going to be more than £0/week (a massive saving, if we consider state pension to be a type of CI). Sensibly, we would take existing spending on welfare and pensions payments, net of clawbacks and tax paid by likely claimants and, first keep state pension at current levels, then divide the rest equally between 'about'10 million working age claimants. The answer would be 'about' £100/week (for sake of argument, depends what you do with disability-related top-ups and Housing Benefit).

Clearly, under this approach, there would be no change to the apparent 'cost' of welfare and pensions.

As to 3. we can then touch on the KCN that "people wouldn't bother working" and the clawback rate.

For sure, there are a few adults who can manage on 'about' £100/week. Most can't and will still have to work if they want the finer things in life (and rightly so, CI is a "hand-up not a hammock"). At present, as a matter of fact, clawback rates (benefits withdrawn and tax/NIC paid) are between 70% and 100%. This is where Working Tax Credits fail miserably. It might be worth officially working 16 hours a week (how the Hell do you prove that one way or another?) to get that bit extra; there is no point then doing 17 hours because you would only keep £2 or £3 for the extra hour. This is an example of the 'benefits trap'.

We know there is a Laffer Curve for taxpayers - if tax rates are too high, it's not worth running a business or working more, once you earn some bare minimum. So there is an optimum tax rate where the government can maximise tax revenues (we are at or past this point, as it happens). The same goes for welfare clawback rates - if the government wants to claw back the maximum total cash from claiamnts, it sets the rate not too low (not much clawed back and 'unfair' advantage for claimants vs non-claiming lower earners) and not too high (discourages working - not much clawed back either).

We also know that the CI clawback rate has to be set at such a rate that people working a small number of hours don't end up with more net income than people working more hours.

Taking all this into account, the optimum clawback rate is somewhere in the region of 30% to 40% (minimm wage earners keep £6 or £7 for every hour worked i.e. two or three times as much as now), which is, happily enough, the same as basic rate tax/NIC (depending on whether you include Employer's secondary NIC or not). So there is no need for a parallel means-testing/clawback system, we just give claimants BR codes for PAYE! And the work incentive has doubled or trebled at the stroke of a pen - and it's not just the extra bit of CI clawed back, their employers will also be making more profit and paying more tax!

* The German 'liberal' FPD party, which is socially AND economically liberal, unlike its UK sister party which is just soft-socialist, had exactly these proposals in its 2021 manifesto, the FDP are part of the ruling Coalition, and it seems not unlikely that this will be actually implemented next year (fingers crossed). I happened to see this in the ZDF evening news yesterday, which I watch occasionally for old time's sake.

Killer Arguments against Citizen's Income, not (35)

I posted one of my usual articles here a couple of weeks ago pointing out that if you add up all the cash benefits paid out (incl. state pensions, excl. housing- and disability-related benefits); the value of the tax -free personal allowances; add on all the 'welfare for the wealthy' tax breaks; and then distribute that total pot equally across the UK population, you end up with something like £180/week for pensioners, £90/ week for working age adults and £45/week per child (+/- £10, no point arguing over precise numbers). Disability and housing top-ups can stay as they are for now.

To reduce 'churn', people would then have a straight choice between a) claiming the tax-free personal allowance, which most working age adults would do, and b) claiming the Basic Income amount. You can tweak the numbers to ensure that people in steady jobs are slightly better off sticking with the personal allowance. I then tweeted a link at Citizen's Income Trust, inevitably, the usual left wing argument came up: "So you are just redistributing between people on low or no incomes?".

To some extent yes, but so what? How is this an argument against? If we got accustomed to the Basic Income system, then there would be (say) five million working age claimants, getting £95/week each. If some innumerate lunatic suggested weeding out some subjectively 'undeserving' recipients and paying the remaining 4 million people £119/week each and letting the rest starve (for the same total cost), wouldn't that also be "redistributing between people on low or no incomes?"

How is that better? Marginal utility suggests that you reduce poverty most by paying everybody the same, end of. And seeing as part of the point of any welfare system is to reduce social unrest/improve social cohesion and give people the impression they are all equal citizens (same as one man, one vote), why not have a system where nobody can claim that one group is being favoured and some other group being disadvantaged?

This cuts both ways. Current claimants can't be stigmatised, they just get it as a basic entitlement. The unemployed and single parents have also the same right to vote or use the NHS as everybody else, AFAIAA. Daily Mailexpressgraph reading stay-at-home spouses get £90/week plus £45/week for each child as well, so they've no excuse for looking down on single parents etc.

To all intents and purposes, the UK already has a UBI system

Here's a list of the main benefits and how many million claim each.

The categories overlap to some extent (some pensioners still do paid work, lower paid employees get WTC etc). The total number of claimants/recipients must be less than the total UK population, not more! And clearly there must be a million or two people who get nothing, but I struggle to think who they might be or why they are singled out.

The cash value of most of the working age benefits to one individual is in the order of £3,000 - £4,000 per year (transferable personal allowance is a lot less, SM/PP is much more, but for a shorter period, disability-related payments are much higher but those would be in addition to UBI, that's a job for the NHS not the DWP). Each has its own rules, rates and allowances, but they all come to the same thing. Seriously, why do they keep up the pretence, apart from creating jobs for civil servants?

Click to enlarge.

Seriously, can anybody explain this?

From the BBC:

Employed or self-employed people who test positive for the virus are required to isolate for 10 days, so those eligible for the extra money will get £130. But members of the household of someone who has tested positive, who must self-isolate for 14 days, will be entitled to up to £182, assuming they also qualify for the payment.

As regards the £13 a day, we should be paying (or at least offering) that to everybody as a Citizen's Income anyway.

"Up to £3.5bn furlough claims fraudulent or paid in error - HMRC"

From the BBC:

Up to £3.5bn in Coronavirus Job Retention Scheme payments may have been claimed fraudulently or paid out in error, the government has said. HM Revenue and Custom told MPs on the Public Accounts Committee it estimates that 5-10% of furlough cash has been wrongly awarded.

Latest data shows the programme has cost the government £35.4bn so far. The scheme has paid 80% of the wages of workers placed on leave since March, up to a maximum of £2,500 a month.

That's hardly surprising, as the whole thing was conceptually flawed from the very start:

1. People on furlough were allowed to go and work for another employer, so didn't really need it.

2. Many were under pressure from their employer to work unofficially and many did so, even though that was completely against the rules.

3. There were lots of arbitrary cut-off points, so people did a bit of back-dating and post-dating, accelerating or deferring bonuses to maximise what they could claim.

4. The self-employed nearly all fell through the cracks. There was an insane rule that the payments were based on the tax return submitted for 2018-19, for example.

5. A government has to make sure that everybody can at least afford the essentials*, so sure, introduce a Citizen's Income.

6. A Citizen's Income would not be enough to cover rent or mortgage payments. The excess of Furlough scheme payments over and above the Citizen's Income level (call it £80 a week per adult) mainly went to landlords and banks. In the circumstances, the burden would have been shared more fairly if the government had just given everybody who was laid off a rent and mortgage holiday, and of course a mortgage freeze for landlords whose tenants were entitled to the rent holiday.

7. For sure, there will always be fraud, but fraud rates for non-means tested benefits (Child Benefit and state pension) are barely measurable. If you claim the Citizen's Income but "don't need it" because you are still working (or have other income), that costs the government/taxpayer nothing because by claiming the CI you have to waive the tax- and NIC-free personal allowances so you pay back (in tax and NIC) as much as you get (in CI).

* Yes, it has to. Either out of common humanity; to keep the economy ticking over; and/or to stave off riots. Which justification you prefer depends on how cynical you are.

YPP's proposals - how to deal with the corona virus crisis

Joint effort by TBH and me, cross-posted from here.
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Our proposals would achieve various things which the government's do not:
- keeping households afloat;
- helping businesses stay in shape during the lock down;
- minimising the cost to the government/the taxpayer;
- recognising that rental values have - temporarily - collapsed.

David Ricardo came up with his famous law of rent in 1809, and it remains one of the most important and firmly accepted principles in economics. The law states that rental values are equal to the economic advantage of using one site over the marginal (rent free) site for the same purpose. In other words, the economic surplus from using one site over the cheapest available.

In this time of national lock down, the "economic advantage" of using one site over another falls to negligible amounts. Imagine you need to rent somewhere for the next three months- would you price central London over rural Devon? Normally, the market does - by a factor of many multiples. Today - we doubt it.

This brings us on to the Governments response to COVID 19- specifically the Job Retention Scheme (aka 'furlough scheme'), but we can include the business loans and a few other policies with the same analysis. For an initial period of 3 months, if an employee is furloughed, the employer must continue to pay the full salary (liable to PAYE as normal) and the government will later reimburse employers 80% of the salaries of furloughed workers (up to a cap of £2,500 per month) (from Taxation.co.uk).

The government initially said it expected 10% of businesses to take this scheme up, but recent figures suggest that more than nine million employees (about one-third of all employees) will be furloughed (from the BBC).

The monthly cost of a furloughed worker on an average salary (say £2,500 per month) can be estimated as follows (from Listentotaxman.com)
Employer pays £2,500 plus £244 Employer's NIC (unchanged)
HMRC receives £740 PAYE
HMRC then later refunds £2,000
Net cost to HMRC £1,260.
Net cost to employer £744
Net income of employee £2,004

Multiplied by nine million furloughed workers is a net cost to HMRC of £11 billion per month.

The scheme does not cover the self-employed, although the government has said that something similar will be introduced, this will add another £1 billion or £2 billion to the cost. HMRC also expect that there will be significant fraud and error involved (from The Guardian) which will increase the cost further.

So the Government (i.e. current and future taxpayers) is diverting massive sums of cash that could be used in other ways to ensure that affected workers can cope through the crisis. Lovely - except when you look at where most of this largesse will go. For most households, their single largest payment (after taxes of course) is to their landlord or bank in the form of rent or mortgage payments. The payments were negotiated and contracted according to Ricardo's famous law - that is - they reflected the economic surplus available at that time.

But the economic surplus has largely collapsed; and true rental values (or notional house prices based thereon) have also collapsed. So, of all the money being used by the government to keep furloughed workers going will end up in the pocket of landlords and banks, based on the fiction that the economic surplus and hence rental values have not collapsed, however temporarily.

So we are paying surpluses that don't exist to groups that in their role as rent collectors produce nothing. Are we mad? That is above the problems and fraud risks associated with the scheme.

The government has therefore come up with the wrong answer to the wrong question.

The question is not "How do we maintain landlords' and banks' unearned income?". The correct  question is "how much do people really need to live on as a bare minimum during the lock down period, assuming they have no rent or mortgage to pay?". There's no right or wrong answer, the lowest defensible figure is approx. £75/week per adult, just enough for food, utilities, broadband and mobile phone (there are arguments for higher amounts such as £100/week). People do not need extra for clothes, entertainment or holidays at the moment, for obvious reasons. People who smoke or drink will just have to cut back or dip into their savings.

Our proposals answer the right question - making sure funds are directed to where they are needed most in an efficient and simple way and at the lowest cost to the government (i.e. current and future taxpayers)

For the duration of the crisis:
• Suspend the enforceability of rent payments by all tenants: residential, commercial and retail  (except those largely unaffected by the lock down - such as supermarkets);
• Suspend interest charges on all mortgages: commercial, residential and buy to let, except for those businesses largely unaffected by the lock down such as supermarkets. (As a quid pro quo, any deposit or savings accounts currently paying interest will become non-interest bearing.);
• Allow mortgage borrowers to defer mortgage repayments if they wish;
• Offer a UBI of £75 per week to every legally resident adult in the country who is not already receiving welfare payments or a state pension in excess of that;
• The claims process should be as simple and automated as possible. All claimants should have to do is provide their National Insurance number and bank details. Payments can start almost immediately;
• To minimise the number of claims, the quid pro quo of claiming is that a claimant foregoes the income tax free personal allowance and the National Insurance exempt threshold, so would be paying approx. £75/week more in income tax and NIC. So the lucky majority still in paid employment have no incentive to claim, meaning that HMRC and/or DWP can process the neediest claimants first;
• The same general principle applies to Child Benefit and Child Tax Credit. HMRC pay a total of £30 billion a year for 12.7 million children (from HMRC Annual Report 2018-19). These could be replaced with a flat £45/week for each child (there is no reason for long-term unemployed parents to receive more than the short-term unemployed or furloughed parents);
• A family of four would therefore have a basic income of £240/week, which is surely enough for the basic necessities.

The total cost of YPP's proposal would be less than half the total cost of the furlough scheme, it  would cover the self-employed and it would place a much smaller drag on the economy. The saving to the taxpayer is broadly speaking equal and opposite to the fall in income that landlords and banks will have to bear in the interim. The homes they own and the stock of outstanding mortgages will still be there in a few months time - people's businesses and jobs might not!

The other important question is "how do we ensure that businesses survive the crisis?"

People need jobs to go back to once this is all over. Many businesses will run out of cash to pay salaries long before HMRC start paying out the furlough refunds. Those businesses will fold through no fault of their own, which will set off a chain reaction. It is madness to expect employers to pay the £744 a month cost of a furloughed employee (workings above) for nothing in return, which is the best case scenario assuming HMRC can implement the scheme very quickly.

We will just have to give employers the flexibility to put employees on temporary leave or ask them to cut their hours (with a corresponding salary reduction) with the guarantee that the old terms and conditions will be reinstated once the lock down is relaxed or lifted. This would be similar to Maternity or Paternity Leave. Yes, this will mean a fall in income for many, but there will always be the £75/week per adult and £45/week per child to keep them going.

Businesses would also be exempt from payment of rent or mortgages for the time being (see above). Instead of waiving Business Rates for a year for small businesses, there should be a general waiver of all Business Rates (except for businesses still allowed to trade as normal, such as supermarkets) for the months that the lock down continues. Large businesses are just as much at risk and provide as many jobs as small ones. Under YPP's proposals, businesses would just go into hibernation for a few months and can hopefully pick up where they left off afterwards.

"Basic Income During Quarantine: The Only Way To Avoid Societal Collapse"

John McCone explains on his blog why only Basic Income, Combined With Freezes In Rent, Mortgage and Debt Payments Can Stave Off Calamity.

This is not the usual landlord-bashing. Fact is, at present, the rental value of most business premises is zero as they can't be used; residential rents are set by local average incomes - if average incomes have plummeted everywhere to the same low level (the level set by UBI for most people), then residential rental values are to all intents and purposes zero as well.

The same goes for mortgage payments; they come out of the rental value, and if that is effectively zero, then there's no income to cover mortgage payments (for owner-occupiers or for landlords).

"How to View the World like an Economist"

Something in an article that was in City AM a year ago has been bugging me ever since.

Most of it is good stuff...

When a politician blithely commits to “making childcare higher quality”, you wonder how much any new regulation of the sector will push up prices, and hence make formal care less affordable...

When Jeremy Corbyn states that the existence of profits in certain industries means lower prices could be delivered under nationalisation, you consider whether public ownership is more likely to become captured by producer interests or suffer from worse profitability.

When governments continually tell us that HS2 will be “good for the economy” because the economic benefits exceed the costs, you consider whether other investments, such as road schemes in areas with bottlenecks, would generate even higher returns.

When someone calls for banning plastic bags for environmental reasons, you think about what the effects of paper bags are for the scale of landfill sites, or the health impact of repeat use of linen bags given hygiene risks.

Agreed to all that. But his first real life example is a very bad one:

Remember when the coalition government’s policy of “free” school meals for five to seven year-olds was announced in 2013?

Campaign groups rallied to praise the £600m commitment, claiming it would enhance educational attainment, based upon results from narrow pilot schemes. It was only economists who seemed to question whether this spending really obtained the best bang for the buck to increase attainment, or whether the money could be better used in other departments — or even, heaven forfend, be left with taxpayers.

Of course those lunches aren't "free", that's a nonsense. But the alternative is not 'leaving the money with taxpayers', it's making the self-same taxpayers make their kids a packed lunch or give them some lunch money for the school canteen.

In the grander scheme of things, funding basic* school lunches for all kids out of progressive taxes (income tax or LVT) ticks all my boxes:

1. It's like a Citizen's Income, non-means tested and mildly redistributive downwards. Vastly better than means-tested "free school meals" for a minority with all the stigma, cheating and administrative hassle.

2. Saves parents the hassle of sorting out a packed lunch or remembering to give their kids some lunch money, which they might or might not spend as intended (or have taken off them by school bullies).

3. It must work out much cheaper per meal if the school bulk-buys and everybody gets the same.

4. ... so it's not necessarily worse value for a better-off parent. They pay £5 extra tax and their kid gets a school dinner costing £2.50., but in the absence of school-lunches-for-all, they might end up paying £5 anyway (or spending a bit less than that but wasting ten or twenty minutes a day sorting it out). They've lost nothing and low-income parent is up £2.50.

5. It is good for solidarity between pupils, they all get the same. School lunches a bit crap? Every kid can moan about it equally, same as moaning about having to wear a school uniform. Best kind of quality control is, teachers sit in the same canteen and eat the same meals as the kids (they did that at my school).

6. It protects kids with low-income or lazy/forgetful parents from being humiliated by the lucky kids with posh lunch boxes/lots of lunch money.

7. At the margin, it helps educational attainment of kids with low-income or lazy/forgetful parents. It's difficult to concentrate when you are hungry, as the advert says. And has similar health benefits.

* The word "basic" is important here. Funding fancy school trips abroad for all would clearly be a total waste of money.

I'm taking part in a debate on Citizens income at Southampton University this evening

The event will take place at 6.30 in Building 35 Room 1005, University Road, Southampton, SO17 1BJ.

"Why every estimate of UBI that simply multiplies the number of recipients by the amount received is simply wrong"

Good article by Scott Santens which save me the bother of grinding some numbers to illustrate the point.

In his example, even though the income tax rate/withdrawal rate is 40%, the actual net transfers as a % of total income are only 12.5%. The lower the initial inequality of incomes, the lower is the net transfer amount.

Includes good quotes from Milton Friedman and Greg Mankiw explaining why negative income tax and UBI come to exactly the same thing.

And while this is good fun mathematically, if you look at the UK's tax and welfare systems and how they interact and take away all the to-ing and fro-ing, overlaps, lacunas and administrative hassle, the end effect is not that far off a UBI anyway, so shifting to UBI would involve no additional net transfers whatsoever.

Good article on UBI

In City AM, a couple of days ago.

My comment:

Excellent summary

Couple of minor niggles - for a start, no serious worked through calculation ever said £10,000 a year, a better starting figure is £4,000 or so, which could be 'funded' by abolishing most working age, non-disability and non-housing related welfare and the tax-free personal allowance. That would not require tax increases and surprisingly few people would see a noticeable difference in their weekly income (after paying tax and receiving UBI). But it has all the merits of simplicity and getting the government off people's backs.

And mathematically, you are wrong about negative income tax, it is in fact the same as UBI.

Rural basic income ‘maximizes impact’ for society

Article by a YPP member on the BIEN website.

... From this we can see that, not only is a rural basic income an affordable way to conveniently pay benefits to those who choose to move to the countryside, but it will also indirectly increase wages, employment and job satisfaction in the city along with lowering rents. A rural basic income could thus affordably improve the lives of everyone.

I debated this with him. I'm not entirely convinced but it's a worthy thought experiment. Would it push up rents in the countryside or pull them down in urban areas? Not sure.

What is the tax base under a LVT + Citizens Income?

One objection against LVT I recently stumbled over was that as a single tax it violated the principle that everyone should contribute to state spending.

Saint of Bacon who recorded a video on Youtube critiquing the LVT said "My argument is the idea of a single tax isn't going to fly in the US because we've adopted the view that everyone should pay into the government. Meaning having some segment of the population be tax exempt by choice isn't how America likes to function. Efficiency only gets so far and that is my point, quoting philosophy that I don't subscribe to isn't going to convince me. You're literally in the position of a Christian quoting Bible courses to an atheist."

Let's assume for arguments sake the LVT could indeed cover all of state spending is Bacon correct?

Say a country spends £250bn on services and £250bn on benefits.  As the rental value of land is £500bn pa, for reasons of efficiency and justice it decides to shift to a LVT and Citizens Income , negating the need to tax incomes, capital or transactions.

The principle behind the LVT is that it is a compensatory payment to those excluded from valuable natural resources. That it is collected and redistributed/spent by the state is a separate issue.  As we are all equally excluded we are therefore all entitled to an equal share of the rents, so this hypothetical country does this by paying out the £500bn pa as a Citizens Income.

This country still has to finance £250bn of spending on defence, schools, hospitals etc, which it does by imposing a Poll Tax on each citizen.

For accounting purposes this makes no sense. So instead of collecting the Poll Tax, it's less bureaucratic just to deduct £250bn of the LVT at source, and pay the other £250bn out as a Citizens Income.

This is viewed by Bacon that only those that pay the LVT pay into state coffers, but that's not correct because that's not what is happening in principle.

The correct view is that the LVT  doesn't belong to the state as tax. The state is merely its collector and redistributor. Therefore any citizen that does not receive their full amount of compensation with no deduction is paying a defacto Poll Tax.

And as all taxes on income, capital and transactions are to some degree incident upon land, that's also true of all current tax systems around the world.  That is, we pay into state coffers simply by not receiving our full share of  land rent.

Alienation from the Tories?

Just to follow up on the previous post about Universal Basic Income - a quick quiz. One of the quotes is from Engels and one is from a Tory minister. Who said what:

By the combined functioning of hands, speech organs, .... men were able to set for themselves and achieve higher and higher aims. The work of each generation itself became different, more perfect and more diversified.

or

Mankind is hard-wired to work. We gain satisfaction from it. It gives us a sense of identity, purpose and belonging … we should not be trying to create a world in which most people do not feel the need to work.

Its a funny old world isn't it? Marxist or Tory - our 'work', is at the centre of their 'moral' universe it seems!

Answer https://www.theguardian.com/money/2017/dec/28/tory-mp-condemns-universal-basic-income-on-moral-grounds.

"Universal income would make inequality worse, say people who don't do numbers or logic"

Emailed in by MBK, from The Times:

A Labour proposal to replace benefits with a universal basic income would increase inequality and lead to billions of pounds in extra taxes, an independent review has concluded.

Let's just bathe in the warm glow of that self-righteous non-logic for a minute...

Would a fiscally neutral UBI paid equally to all mean that some small segments of the population receive less in benefits than they do at the moment? Yes, of course (mainly unemployed single mothers - many of whom might well have an undeclared live-in partner).

You can consider that A Good Thing or A Bad Thing, and say that it would "increase inequality" if you wish. In my book, treating everybody the same reduces inequality, the same as everybody gets one vote at elections, the right to vote is free and neither contributory nor means-tested.

In the next breath, the author is wailing about "billions of pounds of extra taxes", implying that people would be worse off all the way up the income scale, which in turn would reduce inequality.

Put the two together, and he is saying that everybody would be worse off, which is mathematically impossible.
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If you read the full report by Bath University's Institute for Policy Research, you notice that they have indeed played fast and loose with the numbers and ignored their own logic.

Let's go with their Model 2.4, page 20, which is fairly full-on "UBI set at the level of existing benefits" which they consider to be £67/week per child; £73/week per working age adult; and £156/week per pensioner. The gross cost of this would be £288 billion.

This would be part funded by eliminating the personal allowance for income tax, the basic state pension, Pensions Credits, Child Tax Credits and Child Benefit, Working Tax Credits and the various categories of unemployment benefit (Carer's Allowance, Employment Support Allowance, Income Support, Jobseeker's Allowance etc). They say the shortfall would be £76 billion, to be made up with higher taxes.
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Let's iron out the easy mistakes first, if you divide total Child Benefit and Child Tax Credits by the number of children in the UK, it works out at about £50 a week, so let's stick with that. No need to worry about funding it.

The same goes for a Citizen's Pension replacing state pensions (basic and earnings-related) and Pensions Credit. Add up current cost, divide by number of pensioners, comes out at about £156/week, job done, no need to worry about funding that.

Next, paying all UK resident working age adults who hold a British passport £73/week would cost £141 billion. The bulk of working age adults have a job and earn more than £11,000 a year, the intention is not to make them better or worse off.

This can be achieved quite simply by scrapping the personal allowance for income tax and the lower limit for NICs and halving the lower limit for Employer's NICs. The extra tax and UBI net off to nothing, so no problem funding this.

This leaves maybe ten million adults who are unemployed, students, low-wage/part timers earning less than £11,000, and non-working spouses. Nearly all these people currently get something or other - unemployment benefit, Working Tax Credits, Statutory Maternity Pay, Statutory Sick Pay, student loans and grants etc. These people break even if they get a flat £73/week.

We could shave off a few billion by sticking with current rules and paying people under 25 a lower weekly amount. The report ignores the current cost of SMP, SSP and student loans/grants or the under-25 savings, but clearly no problem funding this.

For sure, a couple of million low- and non-earning adults in the UK currently get zilch in benefits (mainly spouses of people with a full-time job), paying them £73/week is an extra cost of maybe £10 billion. But it costs about £10 billion to run the DWP and next to nothing to run a Citizen's Income scheme, so that extra cost covers itself.

So overall nobody knows what the additional cost or saving would be, it's all within the margin of error. Their headline figures of £76 billion and at least 4% on income tax are clearly miles out.

As to higher tax rates, most people would face the same marginal tax rate, a few low-earning non-claimant spouses would face a slightly higher tax rate and several million claimants (and people with children earning more than £50,000) would face much lower marginal tax rates if they find some paid work/increase their earnings.

Added to that is the fact that all this complying and claiming, notifying of change in circumstances, worrying about being overpaid and having to pay it back etc, all the hours wasted filling in forms, traipsing to the job centre, being on hold with a call centre etc falls by the wayside. That's not necessarily a cash cost, but a massive benefit to people in the bottom couple of deciles.

Killer Arguments Against Citizen's Income, Not (4)

From Business Insider UK:

The universal basic income — a universal payment to every adult, designed to support a basic living standard regardless of whether the recipient works — has never been a broadly popular idea.

Agreed.

But it has become subject of fascination for policy wonks...

Ad hominem. How would be describe the maniacs who came up the myriad of overlapping rules in the current welfare system? And better a 'wonk' than a total wanker.

... across the ideological spectrum because of the goals it intends to serve: decoupling subsistence from wage labour (a goal of the left), replacing complex safety-net programs that often create disincentives to work (a goal of the right)...

We have a welfare system that largely achieves (1) but the high marginal withdrawal rates are a massive disincentive (2). So a UBI set at the same level as current unemployment benefit (in the UK, at least) ticks boxes (1) and (2) and would cost no more than current welfare system and various tax breaks meant to alleviate hardship/poverty.

Job done.

... and preparing for a future in which automation reduces the demand for labour.

It is true that a lot of proponents say this, but it's a complete red herring AFAIC. Let's worry about it if and when it happens. This is the only one of the pro-UBI arguments which looks a bit shaky, so he then focuses the rest of the article on this.

On the basis of no facts or logic whatsoever, he bungs in this bit of wild exaggeration as an aside:

But after watching voters act out their rage at the establishment this year, I have become convinced that a UBI is a very bad idea that would further destabilize the global order — and that the assumptions that had policy wonks interested in the UBI in the first place are bad, too.

"Destabilise the global order"? FFS.

One problem is that a UBI does nothing to replace the sense of reward or purpose that comes from a job. It gives you money, but it doesn't give you the sense that you got the money because you did something useful.

WTF does that have to do with anything? A UBI can't and doesn't replace lots of things, but so what? Going back to his basic principles, if we reduce the insane high marginal withdrawal rates (i.e. move towards a UBI), the unemployed are more likely to look for work, and those in work will do longer hours, that's reason (2) he mentioned at the start but then completely ignores for the rest of the article.

And so on and so forth. Finally:

Policies are available to make work more central in society and more rewarding for workers, but unlike the UBI, they have to be conditional on work.

Follow that link - 1 is a step towards UBI, 7 is a good idea in and of itself but has nothing to do with UBI or 'worker's rights' or anything, and the rest is just a long wish list of government subsidies and market interventions, all of which will be either expensive, counter-productive or unenforceable. So a load of crap dreamed up by, er, 'policy wonks'.

Insanely stupid reader's letter of the day

From City AM:

Isn't the logical progression from the universal basic income idea so in vogue at the moment a national maximum wage?

People should be careful what they wish for.

Jim Smart

We can also file this one under "people with wildly inapposite surnames".

That Institute for Economic Affairs report seems to recommend a Citizen's Income

From page 172 of this

A flat rate tax plus a lump sum transfer could be optimal

The theoretical ideas behind this are complex. However, progressivity could be achieved by having a lump sum transfer to all people (which would be progressive because it would be a bigger proportion of income for the poor) and a flat tax rate (which would avoid the problem of rising marginal rates).

Correct, how come it's mainly right-wingers who get this?

From the point of view of low earners, it is the personal allowance/Citizen's Income which has the biggest impact on how much tax they pay in total; from the point of view of high earners it is the marginal/flat tax rate which has the biggest impact. For middle earners, it is a bit of both.

So you can keep everybody happy with a Citizen's Income/flat tax system. And the 'theoretical ideas' behind this are not 'complex', it is basic maths that a ten year old can understand.

"Virtuous Rent: a Rudder That Can Transform Our Economy"

A great article from Evonomics forwarded by SJS. Worth reading in full (quite lengthy) but here is the salient bit:

In Adam Smith’s view, landlords benefited from land’s unique ability to enrich its owners “independent of any plan or project of their own.” This ability arises from the fact that the supply of good land is limited, while the demand for it steadily rises. The effect of landowners’ collection of rent, he concluded, isn’t to increase society’s wealth but to take money away from labor and capital. In other words, land rent is an extractor of wealth rather than a contributor to it…

More recently, the concept of rent was expanded to include mono­poly pro­fits, the extra income a company reaps by quashing com­pe­tition and raising prices. Smith had written about this form of wealth extraction too, though he didn’t call it rent. “The interest of any particular branch of trade or manufac­tures is always to widen the market and to narrow the competition… To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can only serve to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens"

… In short, traditional rent is income received not because of anything a person or business produces, but because of rights or power a person or business possesses. It con­sists of takings from the larger whole rather than additions to it. It redis­tributes wealth within an econ­omy but doesn’t add any. As British economist John Kay put it in the Financial Times, “When the appropriation of the wealth of others is illegal, it’s called theft or fraud. When it’s legal, it’s called rent.”

Another hatchet job on Citizen's income

From the BBC:

Why are so many on the left now arguing that the state should pay everyone a universal basic income?

Imagine this. You can sit back, relax, turn on the telly, put your feet up. And the government will pay you for it without any of that tedious job-seeking and signing on business.

It sounds like a fantasy. But it's an only slightly exaggerated version of the big idea animating many on the left of British politics, and which has just been adopted by Unite, the country's biggest trade union...

It's not a "slightly exaggerated version" it is a crass misrepresentation. No serious proponent would set the CI rate at anything much higher than current unemployment benefit (i.e. £ not much per week).

We know that most people are prepared to waive their dole money in exchange for a wage and some people on the dole decide that the extra they could earn is not worth the hassle. With a CI, those in work would continue working, and some of those currently on the dole would start working as they would not be penalised by losing their dole money. For the no-hopers, not much changes. Simples.

And there are other objections. Labour MP Jon Cruddas sees the embrace of universal basic income as "absolutely deadly" for his party.

"Part of the thing about the basic income is that it assumes that the working class will disappear, right?" he asks. "Now if you disrespect them to that degree, is it any wonder that they'll go walkabout?"

Mr Cruddas warns that a left-wing embrace of the policy would constitute an electoral gift to UKIP, dismissing it as "a form of futurology which owes more to Arthur C Clarke than it does to Karl Marx".

"It imports a sort of passive citizenship with no sense of contribution. It doesn't contest the sphere of production, and it just retreats into a hyper-consumption."

None of that makes any sense, it's just Westminster bubble-speak. Nobody "assumes that the working class will disappear". And WTF does "contest the sphere of production" or "retreat into hyper-consumption" mean? A small weekly payment towards the cost of basic essentials for the lowest paid and a modest tax rebate for those in work is hardly fuelling "hyper-consumption"... right?

And the CI idea was in UKIP's 2010 manifesto, I know because I wrote it myself and even did a ten minute speech at a UKIP conference which was received far more warmly than I would have expected. I bet it disappeared long ago though.