Policy Briefing: Basic Income – a benefits system for our society, today and tomorrow

Policy Briefing: Basic Income – a benefits system for our society, today and tomorrow

Malcolm Torry (Citizen’s Income Trust)

 

What kind of society do we live in? What kind of society will we live in: in five years’ time? – twenty years’ time? – fifty years’ time? And what kind of benefits system will that society need?

I shall begin by discovering our society today:

In the UK, somewhere between 1.4m and 2.7m employees are on ‘zero hours’ contracts (that is, contracts that do not guarantee a particular number of hours of work per week, but which might require availability for work). Such employees are likely to be undertaking either no work or varying amounts of work. There are too many low-skill, low-paid jobs and not enough high-skill, highly paid jobs; part-time employment now constitutes about one quarter of all employment; ten per cent of workers now have more than one employment; and, in general, employment patterns are becoming increasingly diverse. For increasing numbers of people, employment does not provide a route out of poverty, and employment and income are becoming increasingly precarious, giving birth to a new social class, what Standing (2011) calls the ‘precariat’, for whom changes in circumstances are a way of life.

Another source of changes in circumstances is that no longer is there a ‘normative’ family; that households are getting smaller; and that at the same time 3.3m young adults (between 20 and 34 years old) are living with their parents, which is an increase of 25% over the figure in 1996 (there has been no increase in the number of people between the ages of 20 and 34 in the population during that period).

All of this means that the number of changes in circumstances that households experience is high and rising.

Households that claim Working Tax Credit and/or Child Tax Credit are expected to report the following changes of circumstances to Her Majesty’s Revenue and Customs:

Income changes

Benefits start, stop or change

Job starts, stops or changes

Work hours fall below or increase above the minimum

Work hours fall below or increase to 30 or more a week (combined hours if you’re in a couple with children)

You don’t return to work after a gap or leave

Relationship starts or ends – e.g., you live with a new partner, get a permanent separation or divorce

Childcare costs start, stop, change by £10 or more per week or you start or stop getting help with them

Childcare provider changes or is no longer registered or approved

Baby born or you take responsibility for another child

Child leaves home – e.g., taken into care, moves out

Child over 16 stays in or leaves approved education or training

Child over 16 joins an approved careers service

Child over 16 leaves an approved careers service

Child is registered blind (or no longer registered)

Child or partner dies

Ill or in hospital for more than 28 weeks (adults only)

You or a member of your family become or stop being disabled

Holiday or trip abroad (usually 8 weeks or more)

Leave the UK for good (or lose the right to reside here)

Prison sentence

Tax credits are means-tested benefits. People claiming Jobseeker’s Allowance and Income Support, and those who will be claiming Universal Credit, will have to report a similar list of changes of circumstances. Because the amounts paid to households depend on household income, household structure, and household employment pattern, any change in any of these can trigger a recalculation of benefits. The complexity of any of these benefits, when combined with the complexities of today’s households and of today’s employment market, is a recipe for error, underpayment, overpayment (and therefore debt), and budgetary uncertainty – and, of course, fraud and criminalisation.

So whether a household is on in-work means-tested benefits in the form of tax credits, or on out-of-work means-tested benefits, it is now not unusual for household income to change (often frequently), for childcare costs to change (particularly during school holidays), for numbers of hours employed to change (often weekly, and in some occupations daily), and for relationships to change ( – it is not unusual for fathers to move out, move back in, move out, etc.). All of these changes of circumstances need to be reported.

When from 1976 to 1978 I worked on the public counter of Brixton’s Supplementary Benefit Office, there were claimants who obsessively declared every small change in circumstances; those who never told us about changes, however large (knowing that our resources were so stretched that the likelihood of detection was small); and those in the middle who declared what they regarded as significant changes in their circumstances and chose not to trouble us with the rest. What those who reported changes always wanted to know was whether their benefits would be recalculated quickly and accurately so that they would not find themselves without an income. I could only say that we would do our best. I can only imagine that the situation is either the same or worse today, and that it will be the same or worse tomorrow if we remain wedded to means-tested benefits.

New complications, which have emerged as a serious issue during the past ten years, are the way in which small infringements of the job-search and job-readiness regulations attached to Jobseeker’s Allowance can result in sanctions being applied – that is, loss of benefits; and the way in which Local Authorities are stopping Housing Benefit when they learn of such sanctions.

The result of all of this is that households already coping with multiple layers of complexity (in relation to employment patterns, income generation, and household structure) then experience an additional layer of benefits complexity, and then another layer of complexity composed of work-search requirements, benefits sanctions, and the related press treatment of benefits recipients. The resulting anxiety and waste of effort, for millions of low-earning households, as well as for millions of those not earning, is a drain on their psychological health and their time, and thus on their ability to care for each other and for their communities.

Very different, of course, is Child Benefit. This is still paid unconditionally and nonwithdrawably for every child – that is, there are no conditions attached to receipt, apart from a residence test; and, as earnings rise, Child Benefit is not withdrawn. In 2010 the Government planned to means-test Child Benefit, and subsequently found that it could not do so – so instead it ‘withdraws’ the value of the Child Benefit by increasing the Income Tax paid by higher rate taxpayers living in households containing children.  Until the child reaches sixteen years of age (or nineteen if still in full-time education) the only changes of circumstances that generally need to be reported are change of address or leaving the country.

Child Benefit not only does not add to the complexity of people’s lives, it reduces that complexity by providing a small but secure income floor whatever the changes that families are going through. When I was administering the benefits system forty years ago, Child Benefit was the most popular benefit amongst both benefits claimants and benefits office staff. It was simple, non-stigmatising, and almost entirely free of calculation errors and fraud, and – perhaps most importantly – it provided a continuing secure income floor when a household’s other benefits weren’t being paid because they had reported a change in circumstances. I can only imagine that Child Benefit is as popular today, both with benefits claimants and with Her Majesty’s Revenue and Customs and Department for Work and Pensions staff.

Similar to Child Benefit is the National Health Service. This too is unconditional and nonwithdrawable. If a legal resident goes into hospital, or visits their GP, there is no charge. There are means-tested elements (prescriptions, and most visits to the dentist or the optician), but the expensive and important parts are free at the point of use – for everyone. The system is cheap and simple to administer, and it attracts no stigma.

In a survey of welfare state reform in Europe, Thomas Gerlinger (2009) discusses changes in the regulations of insurance-based health systems, but not the UK’s NHS (because it is not funded via a health insurance system). Somewhat surprisingly, Child Benefit does not get a mention in the same book that contains Gerlinger’s article even where it would have been relevant. The omission of the NHS and of Child Benefit can only be because they do not provide the kind of social policy problems that social policy academics spend their time solving.

As soon as we discover the kind of society in which we now live, it becomes clear that a benefits system for working age that is largely reliant on means-testing is less and less appropriate; and given the fact that people’s lives are likely to become more complex rather than less, it is equally clear that means-tested systems will become even less useful than they are today. It will become increasingly important to take Child Benefit and the NHS as our models and not Working Tax Credits, Child Tax Credits, Jobseeker’s Allowance, Income Support, or Universal Credit. If this Government does nothing else about this situation, then it is surely time for it to initiate a substantial enquiry into the kind of benefits system that we need now and that we are going to need in the future. Any enquiry will need to recognise that both the tax system and the benefits system are integral to households’ and individuals’ income maintenance strategies, that both need to be studied by the enquiry, and that both need to be reformed in an integrated fashion – which does not mean integrating them.

If it is correct that Child Benefit and the NHS might be more useful models than the means-tested benefits and tax credits that currently afflict many working age individuals and households, then a Citizen’s Income (an unconditional and nonwithdrawable income for every individual as a right of citizenship) will need to be high on the agenda of the Government enquiry into income maintenance. Because it is possible to construct an illustrative Citizen’s Income scheme that would require no additional public expenditure, there is no reason to exclude the idea from consideration; and because a Citizen’s Income would substantially reduce the number of layers of complexity that households suffer, and would positively enhance the ability of individuals and households to choose their employment and household patterns on grounds important to them rather than because the benefits system forces particular courses of action upon them, there is every reason to place a Citizen’s Income at the heart of the enquiry’s agenda.

References:

Gerlinger, Thomas (2009) ‘Competitive Transformation and the State Regulation of Health Insurance Systems: Germany, Switzerland and the Netherlands Compared’, pp.145-175 in Irene Dingeldey and Heinz Rothgang (eds.), Governance of Welfare State Reform: A Cross National and Cross Sectoral Comparison of Policy and Politics, (Edward Elgar, London).

Standing, Guy (2011) The Precariat: The New Dangerous Class, (London: Bloomsbury).

 

Malcolm Torry is the Director of Citizen’s Income Trust and a Senior Visiting Fellow at the London School of Economics and Political Science. His book Money for Everyone: Why we need a Citizen’s Income, was published by the Policy Press in 2013.

 

 

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