Tuesday, 7 April 2015

"Critics have said it could cost £280 billion"

From the BBC:

Every adult in Britain would be paid a basic income regardless of wealth or earnings, the Green Party will say in a commitment to appear in its manifesto.

But Natalie Bennett, the party's leader in England and Wales, told the BBC a Citizens' Income of £72 a week would take time to implement...

Critics have suggested it could cost £280bn.

That depends how you define 'cost'.

The total amount nominally paid out (including lower amounts to children and double that amount to pensioners) plus running costs, fraud and error would be approximately £280 bn. Nobody's disputing that.

It would all be 'paid for' by scrapping an equal and opposite amount of existing state pension/welfare payments and tax reliefs (notably the tax-free personal allowances for income tax and NIC) and reducing running costs, fraud and error. (Housing Benefit and disability related benefits would continue for the time being) In other words, the cash 'cost' is exactly the same as the current system. That's the whole point.

It would take no time at all to implement; for pensioners and children we use the existing system as for state pensions and child benefit; existing welfare claimants continue claiming what they are getting (but in return they get a BR tax code so pay full income tax and NIC on all their earnings, if any).

The majority of adults who are in work just get an appropriately higher personal allowance (i.e. £72.40 x 52 ÷ 32% = £11,765) but no cash paid out (it nets off with the PAYE they would have had deducted). There's a bit of faff with people who less than the new higher personal allowance, but it is a lot less faff that the existing system, in particular working tax credits.

There will be a few winners and losers, but we are talking relatively few people affected and relatively small gains or losses. A really simple system like this is inevitably slightly less 'progressive' or redistributive than the current system because on the whole, low to middle earners are likely to gain at the expense of non-earners, but so what?

The only debates to be had are whether £72.40 per week is too low or too high; what to do with Housing Benefit; and whether we ought to start tinkering with 'transitional measures' for the small number of people who end up with less money in the short term.

Job done.


Lola said...

Sign here, please.

Dick Puddlecote said...

Signed, Lola, it's a shame that only the daft Greens are considering an eminently sensible, and sellable, policy.

Random said...

My beef with the CI is it does not function as an automatic stabiliser - when the economy contracts it expands and vice versa. This attenuates swings in the economy in real time before politicians screw things up. This is why I think it should be included along with the JG and other stabilisers. So you can have 100% LVT - core govt functions = CI and let the JG float and determine the deficit endogenously?
My view is the currency is a simple public monopoly and you can set either price p or quantity q. In a electricity company for example you would not set the quantity of electricity and then pay 'market prices' would cause chaos.
Of course it is better to raise the LVT rate and then dish back out as CI then do nothing at all.
So then you have countercyclical policy by the central bank and govt runs a balanced budget. And if politicians want to pay for harebrained schemes it cuts into the citizens income.
I have a few questions:
1. How responsive is LVT to changes in the economy? e.g. counter cynical and effects LVT/CI would have regionally e.g. reducing population in London?
2. Will housing benefit be gradually phased out and replaced with CI?
3. Will LVT be collected both locally and/or nationally?

Derek said...

I hadn't considered that autostabilizer advantage of JG over CI, Random. That's actually quite a good point in its favour. Perhaps there's a place for both of them.

Mark Wadsworth said...

R, with LVT in place, you wouldn't need to worry about the economy contracting so much.

Q1. I don't understand. Revaluations ought to be carried out regularly, every year or so. And the chances are it would increase population in London, you can argue either way and there's only one way to find out…

Q2, in a perfect world, yes of course. Or just build more social housing, then we wouldn't need Housing Benefit.

Q3, it's a national tax at a national rate collected and spent 'locally', see here.

JJ said...

Why would LVT decrease London's population?

That makes no sense to me.

Mark Wadsworth said...


Argument 1 - the higher LVT bills will "drive people away".

Counter-argument 1 - no it won't, despite high rents and house prices, there is still net migration to London. LVT will not change this much, it merely changes the split of who collects the rent.

Counter-argument 2 - it will largely be people in homes which are too big for them who downsize or move away, freeing up much more space for people to move in.

Bayard said...

Lola, CI is like LVT, hated by both sides. The left hates it because it gives money to the undeserving rich and the right hate it because it gives money to the undeserving poor (as opposed to the deserving poor, in the eyes of the left, all the rich are undeserving).

Bayard said...

Lola, sorry, that comment should have been addressed to Dick.