The Big Society is a society of personal autonomy: of choice over family structure, labour market activity, and much else. It is a society in which incentive translates into success and in which rights mean responsibility.
Small government is government which doesn’t interfere in people’s family structures, in their labour market activity, or in anything else much.
Our means-tested and complex tax and benefits system is riddled with rigidities and disincentives that deny us the choice which the Big Society promises; and it embodies the kind of interference in family structure and labour market behaviour which big government is all about. The coalition partners have said in their Programme for Government: ‘We will investigate how to simplify the benefit system in order to improve incentives to work’; and the Government’s consultation paper on the future of the benefits system, 21st Century Welfare, recommends a ‘Universal Credit’ as the way to do that:
The family’s gross entitlement would depend on their circumstances. Entitlements would be based on current benefit and Tax Credit rules, with amounts for individuals, couples, children, housing, disability or caring. The total would then be reduced for earnings and other income to produce the net amount payable. The credit would be payable to the household member making the application. …. Such a structure would remove much of the complexity that burdens the system today. Crucially it would also create the platform for tackling the current problems of high Marginal Deduction Rates and low gains to work through reform of earnings disregards and tapers. (p.19)
A Universal Credit would be a step in the right direction: but we suggest that the kind of major reform which the Big Society requires should encompass both the benefits and the income tax systems, because if tax allowances were changed from allowances to cash payments of the same value, and if only minor changes were made to the Universal Credit, then a Citizen’s Income would be the result: an unconditional, nonwithdrawable income for every citizen. Such a Citizen’s Income would provide all of the advantages of a Universal Credit along with substantial increases in simplicity and efficiency (particularly in relation to transitions between different labour market statuses); and, because a Citizen’s Income would take the individual and not the household as its basis, it would free both households and the employment market from significant rigidities and complexities. In terms of the Big Society agenda, a Citizen’s Income would incentivize enterprise, promote family structure and labour market choice, create the possibility of small government, and provide the foundation for the Big Society, in ways in which the Universal Credit would fail to do.
We look forward to working with the new Government on this important agenda, and as a first step would like to direct policy-makers to the research note in this edition of the Citizen’s Income Newsletter.
In the meantime: Please don’t means-test or tax Child Benefit. It’s the only benefit we’ve got which represents the Big Society.
Research by the Fabian Society and published by the Joseph Rowntree Foundation shows that people in this country are not particularly unhappy about the level of income inequality, often exhibit more negative attitudes towards those on low incomes than they do towards the rich, support progressive tax and benefits systems, wish to improve the life chances for disadvantaged citizens, understand the social consequences of income inequality, are not persuaded by arguments for greater equality, but are persuaded by ‘arguments for greater equality framed in terms of fairer rewards for effort and contribution’
A companion volume to the research published by the Fabian Society suggests that ‘as recent public outrage at attacks on the NHS have shown, it is the boldest, the most inclusive, and the most visionary policy solutions which command and retain the strongest popular support. Policy-makers concerned to secure greater economic justice have something to learn from that’ (Is Equality Fair? Ed. Tom Hampson and Jemima Olchawski, The Fabian Society, 2009, p.40).
Research which we publish here shows that a universalist social policy can provide people with a fairer return on their effort in the labour market. Here is a policy which answers precisely to the two attitudinal criteria.