Some typical household effects of a Citizen’s Income scheme

The research results that the Citizen’s Income generally publishes are of the aggregated variety – that is, they answer such questions as: How many households in lowest earnings decile would experience losses of over 5% of net income if a particular Citizen’s Income scheme were to be implemented? and On average, how much would the net incomes of the lowest disposable income decile increase and the net incomes of the highest disposable income decile decrease if a particular Citizen’s Income scheme were to be implemented?

Using the software developed by Ferret Information Systems, we are able to provide a lot more detail as to what would happen to particular individual households if a specified Citizen’s Income scheme were to be implemented.

For the purposes of this particular exercise we assume an illustrative Citizen’s Income scheme described as scheme B in the working paper Two feasible ways to implement a revenue neutral Citizen’s Income scheme, [1] and a couple with one member employed and earning £10,000 per annum, with two children, and rent of £120 per week.

Table 1 shows the net income for this family (after Income Tax, National Insurance Contributions, Child Benefit, and means-tested benefits – tax credits, Housing Benefit, and Council Tax Reduction). A second column shows the net income for the same family if it is receiving Universal Credit rather than tax credits.

Table 1: Net income for a couple with one earner (earning £10,000 p.a.), two children, and rent of £120 p.w., both for the current tax credit system and for Universal Credit

Current System Universal Credit
2016/2017 2016/2017
Weekly Weekly
 Gross Earnings / Net Profit 192.31 192.31
 Net Earnings – after Income Tax and N.I. 187.83 187.83
 Benefits & Credits Income 0 0.00
Working Tax Credit 0.00 0.00
Child Tax Credit 117.40 0.00
Housing Benefit 89.72 0.00
Council Tax Reduction 14.72 5.13
Income Based JSA 0.00 0.00
Pension Credit 0.00 0.00
Child Benefit 34.40 34.40
 Other Income 0.00 0.00
Universal Credit 0.00 258.61
Weekly Income £444.08 £485.97

Table 2 shows the net income that would be experienced by the same family if its members were receiving Citizen’s Incomes and its means-tested benefits were being reduced by their Citizen’s Incomes in the same way as they are reduced by earnings.

Table 2: Net income for a couple with one earner (earning £10,000 p.a.), two children, and rent of £120 p.w., in receipt of Citizen’s Incomes and with their tax credits or Universal Credit reduced in relation to their Citizen’s Incomes

Citizens Income Scheme B
Current System Universal Credit
2016/2017 2016/2017
Weekly Weekly
 Gross Earnings / Net Profit 192.31 192.31
 Net Earnings – after Income Tax and N.I. 143.60 143.60
Citizens Income
Scheme B 140.00 140.00
Benefits & Credits Income
Working Tax Credit 0.00
Child Tax Credit 108.14
Housing Benefit 26.99
Council Tax Reduction 0.00 0.00
Income Based JSA 0.00
Pension Credit 0.00
Child Benefit 34.40 34.40
 Other Income 0.00 0.00
Universal Credit 167.56
Weekly Income £453.13 £485.56

We can see that this family in receipt of tax credits would gain slightly if the Citizen’s Income scheme were to be implemented, and that it were in receipt of Universal Credit then the implementation of scheme B would make almost no difference to net income.

In both cases the difference that the family would experience would be a reduction in mean-tested benefits, offering the possibility of a more rapid escape from means-tested benefits if the family’s earned income were to rise.

We look forward to publishing similar tables relating to additional family types and an updated Citizen’s Income scheme.

 

Gareth Morgan is Managing Director and founder of Ferret Information Systems, and is a trustee of the Citizen’s Income Trust. Opinions expressed in this article do not necessarily reflect the views of either the Citizen’s Income Trust or of Ferret Information Systems.

 

Note

[1] Malcolm Torry, Two feasible ways to implement a revenue neutral Citizen’s Income scheme (Institute for Social and Economic Research, Colchester, April 2015) https://www.iser.essex.ac.uk/research/publications/working-papers/euromod/em6-15

Footnotes

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.