Citizens' Income: something for nothing?

The Devil's Kitchen gets an email from Polly:

Citizens Income is the 'answer' and maybe the Tory party is the only one that could suggest it. From Labour there would be outcry at profligacy, at giving out money to all for nothing, and at the monumental cost in taxes. But it does solve all the glitches - except the biggest - public support.

This raises the question: if a citizens' basic income is the answer, why has Polly not argued for it more often? I fear this confirms my prior, that the job of dead tree columnists is to echo their readers' prejudices rather than to make genuine contributions to political discussion.
This means the lack of public support for CBI is circular. People don't support it because it's hardly ever advocated (outside the blogosphere). And because it lacks popular support, the dead tree echo chamber never makes the case for it.
Polly does, though, recognize a genuine problem. To win support for CBI, we have to counter the accusation that it gives people money for nothing. It pays them to watch the Jeremy Kyle show rather than get out and work.
I reckon there are several (conflicting) ways to rebut this claim.
1. Our existing system already subsidizes idleness. Some people prefer to stay on benefits because they'd lose  these if they went out to work.
Take a married couple, both out of work. One's offered a 16-hour week job at the minimum wage. How much better off are they if they take the job?
Not at all - they are about 5% worse off. Table 1.4a of this massive pdf shows.
Sure, I've taken an extreme example. But it's easy to find replacement ratios for part-time jobs of over 70%. For many, then, the financial gains from working are so small that the hassle's not worth it.
CBI solves this problem, by paying benefits whether people work or not, and so creates bigger gains from working.
2. Our existing system pays people to do worse than nothing. It pays an army of civil servants to administer the system (badly) and to harrass legitimate benefit recipients. A CBI would be easier to administer, so we could sack these parasites.
3. The idea that people who work contribute to society is exaggerated. By the time you factor in tax credits, the fact that they stink on over-crowded buses, leave a carbon footprint and just get in the way, it's better for some people to stay at home rather than work. What's the value to society of someone standing in a shop doorway pretending to be a security guard?
4. Governments just aren't competent to distinguish between scroungers and those who are genuinely out of work, or caring for sick relatives, or honing their skills. Why pay it to do something it can't do?
5. Our existing system is in many ways like a CBI, as many people do claim benefit whilst doing informal jobs. Why not legitimize this, and save ourselves the administration costs, high replacement rates and marginal deduction rates by moving to a CBI?
Of course, there are many other benefits of a CBI. But these,  I reckon, should help dispose of the "money for nothing" argument.

Comments

[Dominic]

Interesting arguments, although every single on of them is essentially negative/pessimistic. Given that it would be perceived as a rather radical political move, I suspect CBI would be an impossible sell if the arguments made are not positive, i.e. how a CBI wold actively improve the country.

[Matthew]

Doesn't she mean by outcry (from Labour) about giving money to the rich for doing nothing, not the poor?

[Rob Spear]

You have said nothing about the level to which the basic income would be set. The wikipedia article you link to gives a figure of 20% of per cap GDP, but also claims an amount "large enough to live on", which is inconsistent if "large enough to live on" includes living in places like London.

Also, it seems to me that determining "citizenship" is not much simpler than determining if someone is a scrounger or not. What are you going to use? Voter rolls? UK residency? A new government database for tracking citizens? Knowing the typical dole recipient in the UK, they'll spend way more time finding ways to scam whichever system is implemented than they will doing anything productive.

[Planeshift]

Those are good points but I fear they will fall on deaf ears. Many people opposed to CBI do not oppose it because they support the status quo, they do so from the perspective of opposing welfare payments generally. Thus their answer to the incentive problem is simply to scrap many or all payments, thus creating the incentive that people work or starve. (or embrace criminality, but that option tends not to be considered)

Rob also raises a good point regarding the London issue. I'm interested to know how advocates of CBI deal with it.

[Scratch]

I'd deal with it by allowing a fixed level of housing benefit in the form of a repayable loan to be taken straight from the CBI itself once the limit has been reached, there is no other alternative.

Oh, I'd take prison costs, fines etc. straight from it too.

[Matthew]

I was about to say it doesn't matter, as the idea behind a CBI is that almost everyone gets more than the CBI, as they have a job, and in any case benefits now aren't given a London weighting.

I suppose however the one category would be those who can't work for various reasons, and do live in London, and as there would now be no housing benefit then they would be a lot worse off. You could presumably restore some invalidity benefit in such cases?

[Sam]

If I live in an expensive area and lose my job, and can't find a new one, I will have to move somewhere cheap. Why is it beyond the pale for an unemployed CBI-only person living in London to consider moving himself to a cheaper town or city?

[dearieme]

Sam, it is universally recognised as an affront to civilisation and all we hold dear to suggest that someone who isn't inclined to should leave London.

[Scratch]

Agreed.

They should run a weekly Failure Special from Euston, stopping at Kirkby, Manchester and Easterhouse, what could be fairer or more humane than that?

[dsquared]

Just to note that the disabled also rather seem to get it in the neck under this proposal.

[dsquared]

By the way, Chris, the specific reason why I don't support it is not that:

[People don't support it because it's hardly ever advocated (outside the blogosphere).]

but that the people who do advocate it, within the blogosphere (basically yourself and Tim Worstall) never present any specific costings or numbers, other than to claim that it would replace all other benefits and lead to a marginal withdrawal rate of zero. It's a bit like that flat tax proposal that we heard so much about a year ago which kind of died the death when it was established that the marginal rate would need to be set at 55%.

[Devil's Kitchen]

dsquared,

If you look at this post of mine (scroll to near the end)...
http://devilskitchen.me.uk/2007/03/polly-hectors-bow-group.html
... you will see that I have estimated the CBI to cost £250bn in pure payouts (to everyone over 16 at £100 pcw). (Current social security spending is £180bn.)

As for the Flat Tax proposal, UKIP's policy [PDF]...
http://www.ukip.org/cgi-bin/axs/ax.pl?http://www.ukip.org/pdf/ukipflattaxpolicy.pdf
... is for a £9k personal tax allowance coupled with a 33% tax rate (merging employee's NICs and income tax) and this would cost £34bn.

However, I would be very interested in Chris would check my figures and see if my estimate of the CBI is actually vaguely correct: I am no economist.

DK

[dsquared]

[to everyone over 16 at £100 pcw]

yeh, see, this is my problem with it - the only way it can be made to work is if the CBI is set low enough as to make it more or less impossible to live in London (or for that matter to have a family since it presumably involves abolishing child benefit too) if you're unemployed, and to

[Luis Enrique]

I'm sorry to add my voice to the naysayers, but I think the differential housing costs problem is the deal breaker. You cannot introduce something which leaves the unemployed in London (and other such pricey places) destitute. Yet if you set a CBI high enough to work in the south, it'll be too high elsewhere.

Come to think of it - how sure are we of how people would respond to the CBI? For my partm were it to be high enough to live on with a bit of odd-jobbing here and there, I would be very tempted to take it easy - so that would be one less person funding the thing (or at least, a sharp reduction in my earnings). I really don't like working you see, and I suspect I am not the only one.

Now the responses of people will vary according to what level the CBI is set at, and the responses of people (by which I mean, at a first approximation, changes in the participation rate) will in turn affect what sort of revenue base the state has to fund the CBI. Get that wrong, and it could all fall apart spectacularly.

So working out what the CBI would be involves a lot more than working out what could be afforded on the basis of the current tax base (never mind the housing problem) - it involves estimating how people would respond to the CBI at various levels. Not easy!

although Chris, if you do have some thoughts on the housing problem, I'd be interested to hear them.

[guest]

The differential housing problem could be solved if the citizen's income check were funded via land value taxation. The total amount of land rent is estimated at ~20% GDP, so the numbers could work.

[dsquared]

I think the big problems are a) differential housing costs b) families c) the disabled. Which are, not coincidentally, the big costs of the current benefits system. The CBI is clearly going to involve either a big cut in benefits to a lot of very poor people, or a big rise in taxes. This is why I'm not a big fan of the cross-blogosphere alliance of libertarians who think it's gonna be the first and socialists who think it's gonna be the second - this was a feature of the "Progressive Flat Tax" debate too.

[Rob Spear]

The citizens income website Chris links to seems to think that paying more to the aged is part of the scheme:

http://www.citizensincome.org/faqs/fq_0017208.shtml
(third item).

[alex rossiter]

A few questions - How would the CBI work better for those on the margins of society, whose needs the present benefits system fails to meet (e.g. the homeless, those with no fixed abode, those with no bank account etc.)? What would be the pre-requrisites for a claim (e.g. would you need to be a UK national or have lived in the UK for a certain amount of time?). Would asylum seekers or guest workers qualify?

[VS]

I am still not convinced by the maths of it all.

If we assume a CBI of £100pw, then this works out [given an adult UK population of 50m] at around £260bn. This is about 25% of our GDP and is more than what we currently pay in social security at the moment. What's more, those with significant housing costs or with children or suffering from disabilities would be worse off than they are at the moment as D^2 points out above. We would thus be spending more public money on social security, but some of the poor would be worse off.

I also doubt that those on the Right who favour a CBI (who often call it a negative income tax in their case) would be willing to spend more than we do at the moment on social security. As such, they would probably fix a CBI even lower - maybe at £50 or £60 per week. This would then leave the poor clearly worse off and would be doing this to give the CBI to the richest. In such a situation, we would either have to tolerate more poverty _or_ re-introduce a means-tested benefits system to assist those who had no income bar the CBI.

[dsquared]

VS: well fair do's to DK - he's ponied up the figure of GBP250bn. Also note that for anyone who earns roughly the national average wage, the CBI would basically just be a tax cut (hence its popularity with libertarians).

I think that the real problem here is comparing like with like - the "cost" of the CBI is per adult citizen while the "cost" of the current benefits system is per benefits recipient. My guess is that GBP250bn on CBI would compare to a figure somewhat lower than the current GBP180bn on benefit recipients.

Add my name to the list of people who'd very much like to know where Chris would plan to set the level of the CBI - IIRC, during the flat tax debate last year he was arguing for a much higher allowance and marginal rate than a lot of other flat taxers.

[dsquared]

Rob: thanks very much for that link. But a) if the CBI is meant to replicate disability benefit and child benefit then I think Chris is being quite optimistic in assuming that a really big reduction in the admin overhead will be possible, and b) the housing issue is still there, so we'll need to run Scratch's "Failure Special".

[Mark Wadsworth]

UKIP's Flat Tax Policy suggests that they will include a modified CI scheme in their manifesto, the idea being to reduce the ridiculously high total marginal withdrawal rate faced by benefit claimants (and even things up between married/unmarried as well as in the interests of overall simplification).

They called it "Basic Cash Benefit" rather than Citizen's Income (a phrase that I coined in my Bow Group report), but hey.

[Sam]

Alex Rossiter:

My take would be that the CBI would be payable to all British citizens resident in Britain. Currently foreigners can get British citizenship after 5 years of living and working in the country, which seems reasonable. You can probably remove, at a stroke, most of the immigration bureaucracy, and replace it with the fact that until you've worked and paid taxes for 5 years, you aren't entitled to the CBI (and there won't be any other benefits). This should be sufficient to discourage scroungers and welfare tourists.

We might have to leave the EU to be able to apply the same rules to Germans as to Kenyans.

[Alex]

I see no reason why, Sam. After all, we wouldn't be imposing any further restriction on Germans, would we?

[sanbikinoraion]

DD: IMHO one could solve the disability benefit problem by allowing the disabled to claim access to all sorts of things that they need to support their disability on the NHS.

As to the numbers, okay, sure, we need £250bn (probably more), but by giving 'rich' people £5200 per year, they can now afford... £5200py more tax. To them it can be revenue neutral. Since there are ~31mil workers in the UK and ~29mil non-working, you're only actually paying out £125bn (probably more), which you'll note, is somewhat less than the current benefeits proposal, and takes advantage of firing the army of civil servants currently dealing with benefits.

As to the London problem, as stated above, if you can't afford to live in London FUCKING MOVE OUT OF LONDON. The fact that so much wealth and jobs are concentrated there is a big problem in this country that needs to be dealt with precisely because it enforces such a large cost-of-living differential across the whole country. If a UBI can encourage people to leave London then all the better (one could start off by having a London bonus that would tick down to nothing over the course of five years if you want something a bit more voter-friendly)

[Steve]

I think there is a reasonable consensus that the idea of a CBI is a sound one. However implementing it with a populace used to the current system is the problem. So,
is there any reason why a CBI couldn't be phased in? Would that ease some of the problems highlighted?

[Scotsman]

I think you let yourslf down by referring to the DWP/HMRC staff as parasites.

Most are not very well paid. Their clients assume that they are well off, when in fact many of the clients on the full panoply of benefits have considerably greater disposable income than some DWP staff- many of whom are entitled to lots of benefits themselves.

While the various Gordon Brown wheezes are bureaucratic and cost money, my understanding is that DWP staff are amongst the most harrassed in the public sector, with relatively poor terms and conditions.

The system might be inefficient, but the staff are hardly living the life of Reilly.

Compare this with the police or fire brigade with their early retirements and generous pay and allowances.