A new Fabian report, Andrew Harrop, For Us All

Andrew Harrop, For Us All: Redesigning social security for the 2020s, Fabian Society, 2016, xxiii + 164 pp, pbk, 0 7163 4128 4, free to download 

This is an important report from the General Secretary of the Fabian Society, and it will make a useful contribution to the current debate about how the UK’s social security system can best serve our changing society and economy.

The first part of the book provides a useful introduction to the UK’s social security system, and a well-researched critique of the trajectories of the current benefits system. At the heart of that critique is the increasing divergence between more adequate incomes in retirement and increasingly inadequate incomes for working age adults, and the divergence between the government’s generous support for the incomes of the wealthiest (via tax allowances) and its rather less generous support for the incomes of poorer families (via benefits and lower value tax allowances). The outcome of the current trajectories will be increasing child poverty.

In the second part of the book, Harrop asks ‘how social security can evolve in the 2020s to respond to the economic and social change that a decade of technological transformation will bring’ (p. 45): to which we ought to say ‘yes, but …’. The ‘but’ is that we simply don’t know what social and economic conditions will be like during the 2020s, particularly by the time we get to the end of them. A better question might have been: ‘how can social security evolve in the 2020s so that it can respond to any conceivable economic and social conditions that we might encounter in the future’. But having said that, Harrop’s particular predictions probably hold good for the next few years, and they mirror those made in numerous recent publications.

Then follow four ‘options for reform’. The first option, more means-testing, recognises the central place that means-testing has in the UK’s benefits system, and makes some sensible suggestions for adjusting Universal Credit, particularly in relation to housing costs, so as to improve the net incomes of low-earning households. (Memories are short: anyone who had anything to do with the Manpower Services Commission of the 1980s will know that Harrop’s proposal for ‘guaranteed compulsory jobs’ should be quietly dropped.) A similar approach is taken in relation to the second option: more contributory benefits. Here there is a quite proper recognition that the current contributory system, even if it were to be reformed, would not provide the income security that so many families now lack and need: but a useful suggestion is that individuals should have the option of postponing retirement and of taking periods of ‘pension’ income earlier in life in order to facilitate caring activity. The third option is an increase in private provision. Again, Harrop recognises that there is a limit to what private provision can achieve for low-earning households. He suggests a compulsory savings scheme, and compulsory income protection for middle- and higher earners: although whether compulsory schemes of this nature should be counted as ‘private’ provision or as ‘contracted out public provision’ is an interesting question.

The fourth option is additional universal provision. Harrop recognises that non-means-tested benefits are appropriate for people with disabilities, and that an increase in the level of Child Benefit would be useful. While suggesting that a Basic Income that replaces means-tested benefits is not feasible, he recognises that government support of family incomes through personal tax allowances and benefits of various kinds is not far from being ‘flat rate’ support for incomes, and he suggests that flat-rate ‘individual credits’ and ‘child credits’ should replace tax allowances, Child Benefit, and, increasingly, means-tested benefits. Harrop’s suggested waiting period for new migrants is entirely practical, and his suggestion that the personal tax allowance should be slowly reduced and flat-rate credits slowly increased has much to commend it: but his suggestion that the credit should be paid only to those ‘participating’ in society would generate an administrative nightmare; the suggestion that only those paying direct taxes should be recipients would create serious administrative problems as people moved in and out of employment, and would leave out families with the most need to experience higher incentives to seek employment; and the idea that the credit could be paid through PAYE takes no account of increasingly diverse employment experiences, and would generate an administrative problem of Universal Credit proportions. However, Harrop’s flat-rate credits, if paid as cash, and shorn of their ‘participation’ and ‘direct tax’ conditionalities, would be a Citizen’s or Basic Income, as at one point he recognises:

A basic income becomes a more practical proposition if it is conceived, not as vast new spending, but a process of integrating and rationalising existing entitlements of broadly similar generosity. (pp. 136-7)

It is not an intrinsic part of the definition of a Citizen’s Income that it should dispense with means-tested benefits.

Given that the ‘participation’ and ‘direct tax’ conditionalities, and the PAYE option, would be unadministrable, the administratively feasible conclusion to be drawn from this report is that a Citizen’s or Basic Income, alongside continuing means-tested benefits (reformed as suggested), would be the best option for the UK’s social security system. As we have shown, [1] a Citizen’s Income of this nature would reduce child poverty, create almost no losers at the point of implementation, and redistribute somewhat from rich to poor.

As Harrop sums up: there is a good case

for a strong universal tier, as a foundation for other forms of support, created by turning the tax-free allowances into a credit for all adults. Additionally, turning child benefit into a more generous child credit would tackle poverty, equalise life chances and reduce income inequality, as well as helping people transfer resources over their lives and meet the extra costs of children. (p. 145)

This is a most useful publication, full of information, well researched, and containing some sensible proposals. The one proposal that requires a little more research is that for individual and child flat-rate credits, and a further well-researched report on this proposal would be most welcome. The Citizen’s Income Trust would of course be pleased to assist.

 

(An additional note on the appendices, which appear on the Fabian Society website and not in the report: Appendix 7 contains two lists, one of arguments for a Citizen’s Income, and one of arguments against. Some of the arguments would apply to a Citizen’s Income of any value, and whether or not means-tested benefits were still available, whereas some of them assume that a large Citizen’s Income is in payment and that means-tested benefits have been abolished. Readers will need to distinguish between the different kinds of argument in each of the lists. Readers might also wish to compare the two lists with the arguments for and against Citizen’s Income in Malcolm Torry, 101 Arguments for a Citizen’s Income (Policy Press, 2015).)

 

[1] Malcolm Torry, An Evaluation of a Strictly Revenue Neutral Citizen’s Basic Income Scheme, Institute for Social and Economic Research Working Paper EM5/16, Colchester: Institute for Social and Economic Research, University of Essex, June 2016

Footnotes

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