Evidence to the Scottish Parliament’s expert group on welfare

Click here to read Anne Miller, evidence to the Scottish Parliament’s Expert Working Group on Welfare, December 2013

Anne Miller summarises her paper:

The purpose of this paper is to show that a Basic Income (BI) would not only be desirable in an independent Scotland, but would be economically feasible. The paper starts by suggesting that the widespread incidence of poverty in the UK is not just caused by the below-poverty levels of benefit, but is due to the structure of the UK Social Security system. Further, the systematic redistribution of income from poor to rich by successive UK governments since 1979 has added to this impoverishment, and has had a disastrous effect on the economy.

The features that define a Basic Income scheme are described, together with the objectives that they can fulfil on their own account. However, a BI scheme by itself cannot redistribute income from rich to poor without financing it from a restructured income tax system.

Defining a BI scheme does not specify a complete benefit system, and there are many further aspects to consider, including how to finance it. It becomes obvious that there is not an optimum BI scheme. Any scheme put forward should be designed to meet clearly-specified, prioritised objectives, to which a constraint as to its maximum cost may be added. A method is indicated for costing a scheme in terms of a standard rate of flat-rate income tax in a hypothecated, restructured personal income tax system that subsumes National Insurance contributions by employees, and removes all tax loopholes. It is suggested that the maximum feasible amount of a Full BI would be in the region of half of average income per head of man, woman and child. This figure for the UK in 2012 would have yielded a Full BI of £9,087 pa (£174 pw) in 2014-15, or for Scotland, £8,585 pa (£164 pw), for financially vulnerable people, and a partial BI of half of this for all others. Depending on the particular scheme, this could have been funded by a standard flat-rate income tax of 40%.

Some of the typical arguments that are made against a BI scheme are rehearsed and their counter-arguments given, including the claim that a BI scheme would be too expensive and that ‘we can’t afford it’. Schemes can range from ones that would be revenue neutral, based on the current structure of income tax, designed to restore incentives to work-for-pay, reduce administration costs, and give more choice, to other more expensive, radical ones which could also help to prevent poverty and redistribute income from rich to poor.

If a BI scheme were to be implemented, the transition should start with a modest entry-level scheme that continues with the same income tax structure. Once the wrinkles in the scheme had been ironed out, more generous levels of benefit could be considered. Political will is more of a stumbling block at the moment than economic feasibility. The concept of a Basic Income is still not very well known or understood by the public, and a grassroots campaign would be required. Some examples are listed of where a Basic Income scheme or pilot study has been implemented in different parts of the world.

A Basic Income scheme is a necessary, but not sufficient, condition for a better society. But it is not a panacea for all society’s ills, and equitable policies for health, housing, education, etc. are still vital.

 

Footnotes

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