The 2013 budget

In his budget George Osborne announced that the individual tax allowance will rise to £10,000 in 2014. This means that £10,000 of an individual’s earned income will be tax free. The basic rate of income tax is 20%, so if instead of receiving a tax allowance of £10,000 each individual was given a Citizen’s Income of £2,000 per annum (i.e., about £40 per week) and they paid tax on all of their earned income, then their net income – the money they had to spend – would be exactly the same.

The higher the tax allowance, the higher the Citizen’s Income that could replace it. We look forward to the tax allowance going even higher.

The important difference between a tax allowance and a Citizen’s Income, of course, is that everyone would get the Citizen’s Income but not everyone gets a tax allowance. If you’re earning, then you receive the benefit of a tax allowance, and it’s not taken away from you, however much you earn. But if you’re on means-tested benefits (which includes so-called Tax Credits, of course) then as your earnings rise your benefits are taken away.

There are few social policies that could do as much both for work incentives and for a cohesive society as a Citizen’s Income would do.

Footnotes

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