On this page:
- What is a Citizen’s Income?
- Why do we need to replace the present benefit and tax systems?
- What would a Citizen’s Income scheme involve and how would we pay for it?
- Is a Citizen’s Income scheme affordable?
- Would people still work if they received a Citizen’s Income?
- Is it fair to ask people in employment to pay for everyone to receive a Citizen’s Income?
- Isn’t guaranteeing a right to work a better way to prevent poverty?
- Why pay money to the rich when they don’t need it?
How is Citizen’s Income defined?
A Citizen’s Income 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))
- ‘Unconditional’: A Citizen’s Income would vary with age, but there would be no other conditions: so everyone of the same age would receive the same Citizen’s Income, whatever their gender, employment status, family structure, contribution to society, housing costs, or anything else.
- ‘Automatic’: Someone’s Citizen’s Income would be paid weekly or monthly, automatically.
- ‘Nonwithdrawable’: Citizen’s Incomes would not be means-tested. If someone’s earnings or wealth increased, then their Citizen’s Income would not change.
- ‘Individual’: Citizen’s Incomes would be paid on an individual basis, and not on the basis of a couple or household.
- ‘As a right of citizenship’: Everybody legally resident in the UK would receive a Citizen’s Income, subject to a minimum period of legal residency in the UK, and continuing residency for most of the year.
Would there be any conditions attached to receiving it?
Yes, one. Recipients would have to establish their right to legal residence in this country.
Would everyone get the same amount?
No, the Citizen’s Income would be age related: but everyone of the same age would get the same amount. More would be offered to elderly people than to adults of working age; and usually more for adults than children. There would be no differences in the amount of the Citizen’s Income on account of income or wealth, work status, willing-to-work tests, marital status, or household association.
Do we have anything like a Citizen’s Income already?
Yes. Child Benefit, paid on behalf of every child regardless of the income or work status of the parents, is a Citizen’s Income for children. A comprehensive Citizen’s Income could be administered in the same way as Child Benefit.
What’s wrong with the present system?
Our present system is based on contributory benefits and means-tested benefits (including tax credits). Many people on contributory benefits find that they are either time-limited or they do not provide enough to live on so means-tested top-ups are required; and means-tested benefits are withdrawn as other income rises, so there is little incentive to increase earned income.
The present system is complicated, so administration is expensive, calculation errors are common, and fraud is too easy; it stigmatises claimants; and benefits are often withdrawn – through sanctions, or by flawed administration – leaving households without enough to live on.
So how would a Citizen’s Income change things?
A Citizen’s Income would not suffer from any of these problems: so the more means-tested benefits we can replace with a Citizen’s Income the better.
How much would the Citizen’s Income be?
This would depend on the particular Citizen’s Income scheme implemented. For some recent research on three different schemes, see Malcolm Torry, Two Feasible Ways to Implement a Revenue Neutral Citizen’s Income Scheme. The first Citizen’s Income to be implemented might be quite small, but it could then grow. The ideal would be a Citizen’s Income at the level of the Minimum Income Standards published each year by the Joseph Rowntree Foundation, but that might be some way off.
Would the payments be taxable?
No, the Citizen’s Income would be exempt from income tax (although this is not intrinsic to a Citizen’s Income ).
How would Citizen’s Income be paid for?
It is likely that the first Citizen’s Income scheme to be implemented would be paid for by reducing existing benefits and by abolishing the Income Tax Personal Allowance. This Citizen’s Income would not be sufficient to live on (it might look like scheme B in the paper above), so we would need to keep means-tested benefits in place: but because everybody’s means-tested benefits (including tax credits) would be recalculated to take account of their households’ Citizen’s Incomes, a lot of people would come off means-tested benefits, and a lot of people would be so close to coming off them that they would reduce their costs or increase their earned income so that they could come off them.
As the Citizen’s Income grew – perhaps being paid for by new kinds of taxation – the means-tested benefits system (including tax credits) would slowly wither away until it was no longer needed.
How would a Citizen’s Income be introduced?
At the point of implementation, either means-tested benefits could be abolished, or some or all of them could be retained and everybody’s in-work and out-of-work means-tested benefits recalculated to take into account their Citizen’s Incomes. A Citizen’s Income could either be implemented for everybody at the same time, or successively for different age groups.
Would employers take advantage of CI to keep wages low?
A Citizen’s Income would provide an incentive for people to take jobs at higher pay levels, because it would overcome the worst effects of the unemployment and poverty traps. A Citizen’s Income would also make it easier to leave a job, so it would be easier for people to move from one job to another, so employers would have to pay realistic wages in order to retain their staff. The labour market would lose some of its current rigidities and would be closer to a classical market, thus improving the efficiency of the labour market at the same time as improving people’s ability to increase their earned income.
Wouldn’t a Citizen’s Income decrease incentives to work?
Some people believe that, without an availability-for-work test, a benefit such as Citizen’s Income would destroy the work ethic. Paradoxically, it is the present system that decreases the incentives to work, train, care for others etc. by paying benefits to people only so long as they do nothing, and by penalising and often criminalising them when they try to help themselves. A Citizen’s Income would never change, so it would be a solid financial platform on which people would be able to build. We would see more new businesses and more self-employment.
Affordability depends on the particular Citizen’s Income scheme implemented. For some recent research on three different schemes, see Malcolm Torry, Two Feasible Ways to Implement a Revenue Neutral Citizen’s Income Scheme. These three schemes are strictly revenue neutral: that is, no additional public money would be required. The Citizen’s Income would be funded by adjusting Income Tax allowances and rates. Larger Citizen’s Incomes could be affordable if additional tax revenues were to become available.
Under the current system, in spite of sizeable benefit withdrawal rates (or ‘marginal deduction rates’, MDRs), the vast majority of working age adults choose to seek employment. With a Citizen’s Income most people’s withdrawal rates would fall, 1 making it even more likely that working age adults would seek employment.
At the moment, parents and other carers can find that employment for a few hours a week brings only small financial gains – again, because of high withdrawal rates. A Citizen’s Income would reduce this problem, so that working age carers who cannot or do not wish to seek full-time employment would be more likely to seek part-time employment.
As a society we have chosen to fund payments to those not in paid work out of general taxation: so at the moment those in employment pay for benefits for people who are not. With Citizen’s Income both those currently receiving means-tested benefits and tax credits and those not currently receiving them would receive a Citizen’s Income. This would be a lot fairer.
The best way to prevent poverty is through well-paid employment; and the best way to ensure employment’s widespread availability is to reduce the rigidities in the labour market that serve neither employers nor employees. A Citizen’s Income would help to achieve this. A Citizen’s Income in combination with a National Minimum or Living Wage would go a long way towards preventing poverty.
Simply because it is more efficient to pay the same amount to everyone than to run complicated means-testing systems. And in any case, because their Personal Income Tax Allowances would have been removed, the rich would be paying more Income Tax, so they would be no better off than they are now.
- If Income Tax rates rose slightly, then those paying Income Tax and not on means-tested benefits would see a slight rise in withdrawal rates on additional income. Similarly, higher Income Tax and National Insurance Contribution rates would mean that high earners would see increased withdrawal rates on additional income