The Case for a Citizen’s Income

The UK Social Security system comprises a National Insurance scheme, plus a means-tested-benefit (MTB) ‘safety-net’. National Insurance was designed for industrial societies with high employment. The withdrawal rates of MTBs act as inherent disincentives to work-for-pay for unemployed and low-paid workers, leading to inefficiency in the labour market. In addition to the below-poverty benefit levels, there are many other structural faults in the system. This results in widespread out-of-work and in-work poverty, stigmatisation, intrusion, insecurity, high stress and anxiety levels, and endemic fear of long-term unemployment, debt and homelessness.

In addition there is evidence that all government administrations over the last four decades have systematically redistributed income from poor to rich. This has lead to the UK having one of the highest income inequalities in the developed world, and high levels of personal debt.

What sort of society do we want to be part of and help to create? A government’s first duty should be to provide the conditions to enable all of its citizens (not just the wealthy) to meet their needs to be able to develop and flourish.

The UK Social Security system is complex, unwieldy, unjust, inefficient and not fit for 21st century society. This Gordian Knot needs to be cut through and replaced by a radical alternative suitable for today. A Citizen’s Income (CI) scheme is just such an alternative. It is like Child Benefit, but for everyone. It involves a new way of thinking about Social Security policy, and represents a new, more compassionate relationship between society and its citizens. A CI uncouples the link between income and work, and can secure both greater equality and efficiency; the more generous the scheme, the greater the fulfilment of these objectives.

A CI is defined as universal, individual, unconditional, and high enough to enable one to live a life of dignity, participating in society. This definition does not create a complete system.One still needs to decide who gets what. Will everyone get the same? How will it be financed? Potential sources of finance include income tax, sales tax, land value tax or other wealth tax, or a sovereign wealth fund.

A CI scheme can help to achieve several related objectives for welfare reform, including healing the current divisions in society of stigmatised benefit-recipients and resentful taxpayers. It can also help to reduce financial poverty and insecurity. Prevention is cheaper than cure. A CI will restore incentives to work-for-pay, and labour market efficiency. It could introduce simplicity, transparency and thus accountability into the administration of benefits. It grants financial privacy and autonomy to individuals, and gives citizens more control over their lives.

A CI scheme can help to achieve the objectives listed above, but, by itself, cannot redistribute income from rich to poor without a restructured income tax system. For instance, income tax and employees’ NI contributions could be amalgamated. It would contain no personal allowances, or tax loopholes. All sources of income could be taxed at the same rate.

CIs can fulfill a variety of welfare objectives. There is no single optimum CI scheme, and so it should be designed to fulfill a set of prioritised-objectives and constraints. It is not a panacea for all ills, but is a necessary (but not sufficient) condition for a better society, and it has been shown to be economically feasible.