An unconditional, non-withdrawable income payable to each individual as a right of citizenship
A Citizen's Income (CI) is an unconditional, automatic and nonwithdrawable payment to each individual as a right of citizenship.
(A Citizen's Income is sometimes called a Basic Income (BI), a Universal Grant, or a Universal Benefit)
If someone who is on means-tested Income Support or Job-Seeker's Allowance enters employment, fairly soon their benefit is withdrawn pound for pound (apart from a small disregard), and, as their income rises, they lose Housing Benefit and Council Tax Benefit and they start to pay Income Tax and National Insurance Contributions.
Something similar happens to someone in low paid work who is receiving tax credits: as their earned income rises, tax credits fall, income tax is paid, National Insurance Contributions are paid, Housing Benefit is lost ä
The 'unemployment trap' and the 'poverty trap', as these traps are called, discourage people from entering employment and from seeking to increase their earned incomes. The problem is compounded by the complexity of the system and the resulting uncertainty over how much net income someone will have if they enter or change their employment and have to pay travel and other expenses. This situation is bad for them, for their families, for their communities, and for the economy.
The 'savings trap' applies especially to retirement pensioners. The present Minimum Income Guarantee for pensioners means that, unless someone has a retirement income already above the guaranteed level, it is not worth saving for retirement. (The new pension tax credit will go some way towards solving this problem, but still the full benefit of savings will not be realised.)
Yes. In this country, Child Benefit is a Citizen's Income for children: it is unconditional and non-withdrawable. It provides a small but important secure income for all families with children, and its administrative costs are small.
Residents of Alaska receive a Citizen's Income, and pensioners in Holland receive a Citizen's Pension.
Yes. Because the Citizen's Income is not withdrawn as earnings rise, a large CI would mean that net income would rise steadily for the poorest families as earned income rises, and a small CI would mean that for those families still on means-tested benefits net income would rise more rapidly than it does now.
For Britain's many flexible workers, a Citizen's Income would provide a measure of security on which they could build. Part-time work and self-employment would become more attractive, allowing people to develop more flexible patterns of working more consistent with their own and their children's or other dependents' needs. Thus consistently high levels of employment can be expected.
A Citizen's Income would help people to undertake higher education, training, or retraining by providing a small, secure income. A universal Citizen's Pension would encourage people to save for their retirement because it wouldn't be withdrawn from people with personal pensions or other investments. Above all, a Citizen's Income would help to tackle poverty by providing an income on which people with low earnings potential could build through paid work and savings. Rather than destroying the work ethic, as our present system does, a Citizen's Income would help to lift people out of the various traps outlined above and would encourage them to earn a living.
Work undertaken by economists has already demonstrated that a small Citizen's Income could be introduced on a cost neutral basis by reducing income tax allowances, means-tested benefits, National Insurance benefits and tax credits. A larger Citizen's Income would require a higher marginal rate of tax (though net incomes of earnings + CI would still be greater than before for everyone below or slightly above median earnings). It would be for a government to decide how high a Citizen's Income to pay and thus whether tax rates would need to be raised.
It is important to remember that the introduction of a realistic level of Citizen's Income would be accompanied by substantial savings to be made in the huge administration costs associated with means-tested benefits. These include the costs of policing applicants. Even more important, by taking more people out of the various poverty traps and allowing people on low incomes to get back into work, and/or work more hours, or receive a higher salary without being penalised, tax revenues would increase substantially.
Yes. Research on the effects of a small cost-neutral Citizen's Income shows that those earning the least would gain, and that those with the highest earnings would lose slightly.
But it is not the redistributive effects which will have the greatest impact on the incomes of many of the poorest families: it will be their increased ability to raise their net income as earned income rises. It will also eliminate the deep poverty of many who are entitled to means-tested benefits but do not claim them.
In an ideal world, every citizen would receive an income sufficient to cover all their basic needs (a 'full' Citizen's Income). This is unlikely to be feasible in the near future as it would require higher tax rates (though interestingly, the Republic of Ireland is seriously discussing a Citizen's Income of £70 per week for adults and £30 per week for children, to be paid for with a combined tax rate of 47% on all income).
Even if it were thought desirable to implement a full Citizen's Income, it would be wise to start with a smaller one so that labour market behavioural changes could occur slowly enough for the labour market to adapt and for behavioural and market changes to be evaluated. A Citizen's Income of about £30 per week for each adult and £15 per week for each child could be paid for by reducing tax allowances, tax credits and benefits and without raising tax rates.