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Editorial
An
economic crisis is a good time for re-evaluation, and particularly
for re-evaluating how well our tax and benefits system serves
our society and its economy.
It
is therefore a pleasure to be able to report on the highly
significant results already achieved by a Citizen's Income
pilot study in Namibia. The social change and economic activity
which the study's small Citizen's Income has stimulated
suggests that it is time for additional trial runs not only
in Africa but also elsewhere, so that we can learn as much
as possible about how effective a Citizen's Income might
be in other contexts.
It
would be particularly interesting to see such a pilot study
in the UK (perhaps in a clearly boundaried community such
as the Isle of Sheppey?). If the results from the Namibian
experiment are as significant as we think they are, then
a Citizen's Income is an opportunity for social and economic
change which the UK must not neglect. If we do neglect it
then surely other countries will not and it will be others
who reap the economic benefits.
Can
Unconditional Cash Transfers Work? They Can.
A
report of a seminar on Tuesday 27th January 2009 at the
School of Oriental and African Studies led by Guy Standing,
Professor of Economic Security, University of Bath, and
former Director of the Socio-Economic Security Programme
of the International Labour Organization.
By
Malcolm Torry
Guy
Standing started his presentation with the heart of his
message: Poverty is primarily a lack of money, so giving
people money will lift them out of poverty; he then proceeded
to discuss the options facing attempts at poverty reduction
in the developing world and to report on a significant Citizen's
Income pilot project in Namibia.
Because
globalisation leads to whole societies suffering economic
shocks, and because such risks are uninsurable, social insurance
is not a viable means of preserving economic security so
essential for an individual's autonomy and freedom. We therefore
need new ways of providing people with enough money to prevent
poverty, and in Professor Standing's view potential schemes
need to pass a number of tests:
Schemes
must
- not
be paternalistic
- be
based on rights and not charity
- benefit
the most disadvantaged
- encourage
ecological restraint
- promote
dignified work
In
Africa it has now been recognized that cash transfers can
help to alleviate poverty. There are three types:
- Universalistic
and unconditional
- Targeted
(usually on groups deemed to be the poorest, often
by means testing)
Selective (for instance: in Latin America cash transfers
are received by families who send their children to school)
- Means-tested
systems (and proxy means-testing based, for instance,
on the quality of a family's housing, as in Chile) suffer
from problems familiar to developed countries, and involve
poverty, unemployment and savings traps, with the resulting
moral and immoral hazards. So in Africa new methods must
be sought. At the BIEN Congress in Cape Town much support
was expressed for unconditional cash transfers, especially
among trades unionists and community and church representatives;
and now in Namibia a pilot scheme involving two villages
is answering the questions put by the idea's critics:
that an unconditional cash transfer would be something
for nothing, would reduce labour supply, would go to the
rich as well as the poor, would be wasted on alcohol and
other undesirable expenditure, would be unaffordable,
and would lower incentives to save.
The
current two-year pilot project builds on the Namibian universal
pension by giving to every one of the one thousand inhabitants
of two villages, every man, woman and child an equal amount
of N$100 (one hundred Namibian dollars: about US$12, or
£7) a month. The costs have been borne by donors,
mostly in the form of voluntary contributions. The project
should be watched by potential donors, including the World
Bank which is finally willing to consider conditional cash
transfers as a mechanism for distributing development aid.
The
team organizing the pilot BIG (Basic Income Grants) has
conducted a benchmark survey and an evaluation survey. The
results during the period from November 2007 to July 2008
are significant:
- Administrative
costs are just 3% to 4% of the total outlay
- the
villages of their own volition elected an advisory committee
of 18 residents, and among its achievements are the opening
of a post office, the establishment of savings accounts,
and the closure of shebeens on the day of the monthly
distribution of the grants
- new
shops have opened
- the
number of people experiencing daily food shortages fell
from 30% to 12% of the population in just six months
- the
number of people who rarely experience food shortages
rose from 20% to 60% of the population
- the
number of children malnourished fell from 42% to 17% of
the population
- children's
weight for age improved to such an extent that from a
low base it came to nearly match the world average
- the
vast majority of children in families receiving the Citizen's
income were in school by July 2008 because their families
are rational in their children's interests and therefore
regard school fees as essential expenditure, suggesting
that cash transfers conditional on school attendance are
simply a waste of administrative resources
- use
of the clinic (which charges fees) increased six-fold
- economic
activity rose, suggesting that people are not intrinsically
lazy
- economic
activity rose fastest amongst women
- own
account work saw the largest increase, and particularly
the tending of vegetable plots and the building of latrines,
both of which increase the community's health
- average
income rose in every quintile, and proportionately more
for lower quintiles
- average
income rose a staggering 200% in the lowest quintile excluding
the N$100 (US$12) Citizen's Income, because people
could now purchase the means for making an income, and
they did
- poverty-related
crime fell, giving people confidence to invest in assets
- low
wage employment was in many cases replaced by better paid
self-employment
- women
could now say 'no' to requests to sell sex
So
the pilot project has passed all of the tests:
- it
is based on rights, not charity
- it
is not paternalistic
- it
benefits the poorest most
- it
promotes dignified work
- and
the kind of activity which it promotes cares for the environment
In
addition, the project has refuted the critics of unconditional
cash transfers.
- Far
from encouraging dependency, the Citizen's Income has
increased enterprise
- far
from leading to waste of resources it has encouraged productive
use of resourcesand
far from being unaffordable the level of Citizen's Income
employed in the pilot project would, if extended to the
country as a whole, cost just 2.2% to 3.8% of GDP, and
the increased economic activity generated by the Citizen's
Income would by itself pay the entire cost.
Guy
Standing speculated that one reason why policy-makers in
Africa and elsewhere do not like the idea of a Citizen's
Income is that the scheme is emancipatory: it allows people
to make choices for themselves, and it does not allow policy-makers
to interfere in people's lives by imposing conditions on
cash transfers.
In
answering questions, Professor Standing explained that
- in
Namibia, the basic income grants had both reduced inequality
and encouraged more economic activity;
- the
Namibian BIG was pitched at about half the official poverty
level;
- transparent
democratic institutions are required and reinforced by
unconditional cash transfers;
- in
a context of supply elasticity a Citizen's Income is not
inflationary;
- in
the pilot project women's economic status had risen relative
to men's;
- the
Citizen's Income cannot be removed by a local bureaucrat
if someone upsets them, as a conditional cash transfer
can be
- because
unconditional payments limit the power of bureaucrats,
more of the money reaches the poor;
- a
Citizen's Income promotes the kind of market economy in
which people can and do pay for the health and education
services which their families need;
- in
the context of today's more flexible labour markets, trades
unions are more willing to support a Citizen's Income;
- surveys
in Africa have found that 80% of people favour unconditionality.
The
seminar ran out of time.
News
Fiscal
Studies has reported on a number of interesting research
projects: Research in the United States has shown that when
the earnings test was repealed for those above the normal
retirement age 'male workers whose predicted marginal wage
rate increased because the earnings test was repealed had
the largest increase in the subjective probability of working
full-time after age 65.' There were no significant effects
on people's intentions relating to employment between the
ages of 62 and 65. (Pierre-Carl Michaeu and Arthur van Soest,
'How did the elimination of the US earnings test above the
normal retirement age affect labour supply expectations',
Fiscal Studies, vol.29, no.2, pp.197-231). Research
at the University of Essex and elsewhere has evaluated the
medium-term effects of the way in which the Government uprates
benefits in line with price inflation and has found that
'as things stand in the UK, with the combination of high
poverty rates in international terms, particularly for children,
and a system largely using price linking as a default, the
consequences of leaving decisions about uprating on autopilot
are very large, and such decisions are deserving of much
more open discussion than has been the case,' ('Keeping
up or Falling behind? The Impact of Benefit and Tax Uprating
on Incomes and Poverty', Fiscal Studies, vol.29,
no.4, pp.467-498).
The
aim of the think tank Compass is 'to achieve a more
equal, democratic and sustainable world' through 'a policy
programme that is both desirable and feasible', and it is
inviting policy proposals to be submitted and debated on
its website and at meetings around the country. Proposals
will then be voted on by the Compass membership, and those
receiving the most votes will form the policy priorities
for the organisation to campaign on. (www.howtoliveinthe21stcentury.org.uk).
(Readers will find a submission based on Citizen's Income
on the site).
The
Pensions Policy Institute has commented on the Department
of Work and Pensions' recent report Saving for Retirement.
'The report confirms that for most people the interaction
between autoenrolment and means-tested benefits need not
be a barrier to saving. However, it also shows that a minority
of people will not get back the value of their own contributions
after taking account of inflation due to the interaction
of their saving with means-tested benefits. This could have
a detrimental impact on wider public confidence in the pension
system.' (www.pensionspolicyinstitute.org.uk/news.asp?p=324&s=1&a=0)
The
Joseph Rowntree Foundation has published the results
of its monitoring of poverty and social exclusion for 2008.
Amongst the findings are that:
- earlier
improvement has stalled on: children in low-income or
workless households; working-age adults lacking but wanting
paid work; and the value of out-of-work benefits for pensioners
and families relative to earnings;
- deterioration
has followed earlier stagnation on: adults in low-income
working families and working families needing tax credits
to avoid low income;
- there
has been continuous improvement in the number of low-income
households with a bank account;
- there
has been steady worsening on pensioners not taking up
benefit entitlement and the value of out-of-work benefits
for adults without dependent children, relative to earnings.
The
authors conclude that what stands out is how different the
record has been in the two five-year periods from 1997 up
to 2002/2003 and from 2003 to 2008. From 1997 to 2002/2003,
30 out of 56 statistics monitored improved, with 7 worsening.
By contrast, from 2003 to the latest available data, 14
improved while 15 worsened.
(http://www.jrf.org.uk/bookshop/details.asp?pubID=1041)
Research
at the London School of Economics has found that
children are concentrated in households which experience
a combination of time poverty and income poverty. 'One in
fifteen children is in an income-poor household in which
at least one adult is also time-poor. These children are
unlikely to be getting either the material benefits or the
parental input they need in order to thrive ….. the
government's welfare reform and child-poverty agendas risk
freeing lone parents from income poverty only at the price
of deepening their existing time poverty. This is unlikely
to improve children's well-being'. (Time and Income Poverty,
available from http://sticerd.lse.ac.uk/case/publications/reports.asp)
One
of the outcomes of the Joseph Rowntree Foundation's
consultation on today's social evils is a 'viewpoint' by
Ferdinand Mount: Five types of inequality: 'Britain
made great strides to achieving equality of opportunity
in the first three-quarters of the twentieth century but
is no longer progressing, partly because we have failed
to address the other aspects of inequality which are also
to blame for the feelings of estrangement and resentment
to be found among the worst-off. …. Equality of outcome
has not been achieved. The tax system needs to be reformed
so that the poorest do not pay an unfair share of tax or
face a climbing marginal tax rate. …. Equality of treatment
or responsibility has not been achieved. We need to abolish
as far as possible all those forms of unequal treatment
such as the means test, which undermine a sense of agency
and self-worth.'
In
January the Institute for Fiscal Studies published
its annual 'Green Budget' which discusses the state of the
public finances, the fiscal impact of the credit crunch,
the economic outlook, and some of the options open to the
Chancellor of the Exchequer when he prepares his public
spending review and budget. Of interest here is that the
researchers show 'that it is possible to realign income
tax and NI thresholds while broadly maintaining revenue
and distributional neutrality' (Institute for Fiscal Studies,
The IFS Green Budget, 2009: http://www.ifs.org.uk/publications/4417)
Research
at the Institute for Employment Research at the University
of Warwick has found the current system of local taxation
to be highly regressive , 'meaning that those on low and
middle incomes spend proportionately more of their income
paying the tax than do those on high incomes'. This is an
example of the social division of welfare (SDW) identified
by Richard Titmuss in 1958. 'The implication is that what
is demonstrated appears to be a very great, but completely
unstated, concern with the welfare not of those on lower
incomes but of citizens with higher incomes. The broader
point to make is the need for social policy analysis to
move beyond a narrow focus on social welfare and poor citizens.
….. A focus solely on social welfare to the neglect
of fiscal and occupational welfare provides only a partial
understanding of welfare,' (Michael Orton and Rhys Davies,
'Exploring Neglected Dimensions of Social Policy: The SDW,
Fiscal Welfare and the Examplar of Local Taxation in England',
Social Policy and Administration, vol.43, no.1, February
2009, pp.33-53)
The
Observer has reported that the Department for Work and
Pensions has decided not to announce the preferred bidders
for private sector contracts to find jobs for the unemployed.
(The Observer, 8th February 2009, page 1: www.guardian.co.uk/money/2009/feb/08/labour-welfare-jobs-plan)
Articles
Promoting
Citizen's Income without Bashing Bureaucracy? (Yes, We Can)
by
Lindsay Stirton, University of Manchester, and Jurgen De
Wispelaere, Trinity College Dublin
In
an otherwise stimulating comment in the previous issue of
the Citizen's Income Newsletter ('Is a Citizen's Income
Scheme the Answer?', Issue 1, 2009), Anne Miller asserts,
though without detailed evidence or argument, that "the
reduced administration costs of CI schemes would enable
the government to reduce its civil service budget".
Miller is by no means alone in the belief that the introduction
of a Citizen's Income would generate significant administrative
savings: hers is a common conception among proponents of
Citizen's Income. But does the claim stand up?
We
do not deny that Citizen's Income may have some significant
administrative advantages - not only in terms of the potential
to minimise bureaucratic expense but also in terms of less
"red tape" and official intrusion into citizens'
lives - when compared with more selective approaches to
income support. But Citizen's Income advocates also need
to acknowledge the limits to this argument: specifically,
that it applies only to a narrow subset of the broad range
of proposals that increasingly fall under the rubric of
Citizen's Income; that the argument only applies under a
restricted set of circumstances or background conditions;
and that the extent of the advantage can easily be overstated.
We address each of these points in turn.
First,
those who share Miller's view need to be meticulous in stating
which particular schemes would generate administrative savings
- and which do not. The simplest case of replacement of
one or more selective schemes with a non-means-tested, unconditional
refundable tax credit would presumably capture substantial
administrative savings. But this scheme has proven politically
intractable, and for that reason many other proposals have
in recent years attracted support from Citizen's Income
advocates. Unfortunately, the administrative savings from
these other schemes are by no means obvious. In a recent
contribution to this Newsletter ("Why Participation
Income Might Not Be Such a Great Idea After All", Issue
3, 2008), we highlighted the administrative difficulties
associated with defining, monitoring and crediting the "broad
participation requirement" that is central to Atkinson's
participation income. Similarly, advocates sometimes point
to the way in which a number of selective schemes combine
to mimic the effects of a Citizen's Income. Such strategies
of implementation-by-stealth have a number of advantages,
but administrative simplification is not one of them.
A
second concern affects even the unconditional version of
a Citizen's Income, as proposed by Miller. Many of the administrative
costs in such schemes are common to the administration of
quite separate policies. For example, an assessment of individual
income may be necessary for the administration of income
taxes as well as for the entitlement to social security
benefits, and could therefore not be fully eliminated by
the introduction of a Citizen's Income. To be sure, welfare
administration often needlessly duplicates the gathering
of such information, but the solution is surely to advocate
administrative simplification of existing policies and more
joined-up government, rather than a Citizen's Income for
that reason. The more general point is that claims about
the administrative savings yielded by Citizen's Income requires
an analysis of the broader policy and institutional context.
Third,
it is worth pointing out that the extent to which a Citizen's
Income could replace other selective programs and their
associated bureaucratic machinery depends crucially on the
level at which a Citizen's Income is set (a point where
different Citizen's Income advocates disagree considerably).
The functional form of the relationship between administrative
savings and the level of a grant needs careful analysis.
In the absence of such a careful analysis, those who anticipate
significant administrative savings may be disappointed by
actual results. At the very least, those who argue for a
Citizen's Income on the basis of administrative savings
need to be specific about a number of crucial variables,
including the adequacy of the grant, as well as which existing
benefits it will replace.
Underlying
much of the bureaucracy-bashing by Citizen's Income advocates
appears to be an assumption that administration involves
only costs. This is understandable in light of the negative
experience typical of interactions between welfare clients
and bureaucracies. But too much of a fixation with this
experience obscures the extent to which an effective administrative
apparatus is vital if a Citizen's Income is to be substantively
(and not just nominally) universal: providing benefits to
the homeless, disabled, immigrants and others requires positive
effort in addition to the removal of barriers to accessing
a grant. The public administration literature quite rightly
puts a lot of stock in the design of overlapping bureaucratic
systems where, if properly designed, one system captures
what another drops. But such a commitment to substantive
universalism may be hard to justify by those who see slimming
the civil service as an important part of the argument for
Citizen's Income.
There
is a serious discussion to be had about the administrative
savings aspect of Citizen's Income, and some of the results
may indeed prove to be compelling. But the mere assertion
that Citizen's Income will generate administrative savings
does little to contribute to this discussion. Taken out
of context, the very idea of administrative savings easily
becomes a mirage.
Citizen's
Income and Administration
by
Anne Miller
A
response to
'Promoting
Citizen's Income without Bashing Bureaucracy? (Yes, We Can)'
by
Lindsay Stirton, University of Manchester, and Jurgen De
Wispelaere, Trinity College, Dublin.
Stirton
and De Wispelaere (S&DW) are right to castigate me for
making a sweeping claim without stating my assumptions in
my short piece 'Is a Citizen's Income Scheme the Answer?'
(Citizen's Income Newsletter, 2009, issue 1, p.5).
I
wrote: 'The reduced administration costs of CI schemes would
enable the government to reduce its civil service budget
….' However, it is amazing how much meaning and interpretation,
for which there is no evidence or intention, S&DW have
been able to squeeze out of my simple statement. Nowhere
in this statement, nor elsewhere in my writings on Citizen's
Income (CI), have I implied that 'a Citizen's Income would
generate significant savings' (my italics); nor do
I 'see slimming the civil service as an important part of
the argument for Citizen's Income.' No one could sensibly
put slimming the civil service as a major objective of a
welfare reform, although many hope that it might be an additional
outcome. (Indeed, if slimming the civil service were the
main objective of a reform then it could be done by abolishing
the welfare system altogether.) Minimising administration
costs must always be a secondary objective, and that secondary
objective will always be to minimise and never to eliminate
administration costs.
I
do not know where or when the phrase 'bureaucracy-bashing'
arose, but I certainly do not regard myself in that category.
Any faults in the administrative system are the responsibility
of the designers of the system, and not of the administrators
who are expected to carry out ill-thought-through schemes.
Similarly,
I agree that it is obvious that the chosen method of administration
can help to fulfil several important objectives, such as
influencing the personal costs of beneficiaries in terms
of their sense of intrusion or discrimination experienced,
and the time and effort required to apply for the benefit.
The administrative method chosen could also affect the opportunities
for fraud.
The
analysis below of the Citizen's Income Trust's definition
of a Citizen's Income will indicate whether administration
costs are likely to be reduced, compared with the current
system.
When
I first met up with fellow basic income (BI) cognoscenti
in the environment of the Basic Income Research Group (BIRG)
from 1984 onwards (BIRG became the Citizen's Income Trust
in 1993), I was amazed at how people espousing a similar
idea could be so fiercely argumentative over the details.
This was partly due to the fact that BI is an instrument,
comprising several components, not a specific policy objective.
In its trust deed in 1989, BIRG defined Basic Income schemes
as 'schemes which guarantee to each and every man, woman
and child the unconditional right to an independent income'.
The version 'A Citizen's Income is an unconditional, non-withdrawable
income payable to each individual as a right of citizenship'
has appeared as a strap line at the bottom of page 1 of
the Citizen's Income Newsletter for several years
now. These statements were intended to indicate 1) that
a CI is based on the individual as the tax and benefit unit;
2) that it is universal (being based on citizenship, permanent
residence or domicile, and definitely not on any work tests),
and 3) that it is administered as a benefit, rather than
as a negative income tax (NIT) (a net payment after personal
income tax liability has been deducted) or as a tax credit
(TC) (a deduction from one's personal income tax liability).
Based
on these definitions, it is clear CI schemes certainly do
not include hybrid versions, such as participation income
(PI) schemes, even though some of those who prefer such
schemes might claim them as forms of CI.
The
relevant questions are these:
1)
Is a benefit scheme based on the individual likely to
be cheaper than one based on joint applications for all
cohabiting couples, as now?
The
administration costs will be a function of the number of
units and the complexity of each case. With a CI the number
may be larger, but the complexities directly due to the
interaction of the partners are likely to be lower.
2)
Is a universal system likely to be cheaper to administer
than one based on means-tested benefits (MTBs) or one based
on worth or desert?
There
is nothing wrong with the principle of means-testing. Incomes
are means-tested for income tax purposes. One problem associated
with MTBs is that the recipients are assessed twice on the
same criterion (their means), which is very wasteful of
resources. Although individuals would be assessed twice
in a CI scheme, they would be means-tested for taxation
purposes, and a second time on other criteria for
the purposes of the benefit, i.e. citizenship.
The
social assistance part of the UK's Social Security system
has a history of basing benefits on worth or desert. The
distinction between deserving and undeserving poor was often
used to determine eligibility, for instance, by examining
the causes of lone parenthood, and it is still enshrined
in the willingness-to-work and job-seeking tests of today.
Worth is a very subjective basis for eligibility, and it
is difficult to define and monitor, so a universal system
should be cheaper to administer.
3)
Is a CI method of administration likely to be cheaper
than NIT or TC systems?
The
method of administration must define not only the basis
for eligibility, and include a mechanism for identifying
and monitoring those who qualify, as discussed in 2) above,
but it must also provide a conduit for the delivery of the
transfer payment (cf. De Wispelaere and Stirton, 2008).
The physical conduit for the transfer could be a direct
transfer to a bank account, a cheque by post, cash obtained
by presenting a Pension book or Child Benefit book at one
of several designated offices, or cash collected in person
at a specified time and place. The method will also determine
the frequency and amount of information that has to be supplied
by the recipient. This latter is mainly determined by selectivity
criteria.
The
CIT's definition of CI refers only to the preference for
paying a regular gross benefit rather than a NIT or TC.
One reason for this is that a CI is more likely than deductions
from tax to reach people in poverty. Another reason is administrative
simplicity.
While
the same assessments will take place, the actual number
of transactions is likely to be higher in the CI method.
If recipients have a choice about their preferred method
of delivery of the transfer then this could add a complication
for the administrators. However, NIT and TC are complicated
by the involvement of employers in the tax system, by the
complexities of the income tax system, and particularly
by the numerous adjustments which need to be made as people
move in and out of employment, move between employers, and
experience other changes of circumstances. Administration
of a diversity of payment methods for a CI would be less
complex than the costs which changes of circumstances impose
on NIT and TC calculations. Thus far, while the potential
reduction in administrative costs associated with a CI scheme
as defined here could produce savings, the key factor seems
to be the complexity of the cases with which administrators
are dealing.
The
following features (or faces, cf. De Wispelaere and Stirton,
2005) are not specified in the definition of a CI, but many
CI proposals make common assumptions about them.
4)
Selectivity or contingency.
Eligibility
refers to the basis on which people are included in a benefit
scheme. Selectivity, or contingency, refers to the level
of benefit entitlement of each person that is included.
Variations in benefit levels between individuals have variously
been proposed, or implemented, based on personal characteristics
(gender, sexual preference, age, degree or cause of disability),
association (marital status, other cohabitation, lone parenthood,
multiple occupancy of a household, survivorship), activity
status (willingness to work, number of hours at work per
week, student, otherwise unpaid caring responsibilities
for a child or adult).
The
complexity of administrative cases increases enormously
with selectivity. This is especially evident when benefit
levels are based on circumstances that are ill defined and
change frequently. An example is given by the present Child
Tax Credit (CTC), which is a MTB system based on joint applications,
bolted on to the bottom end of a tax system based on individual
tax units, with the level of the benefits being dependent
on a large range of circumstances, such that a multi-page
form must be filled in every time that these circumstances
change. This is supposed to help that part of the population
which lives poverty-stricken but complicated lives where
circumstances change frequently.
Most
advocates of CI schemes argue for minimal selectivity. Additional
payments for individuals with disabilities are universally
proposed. Variations based on age are usually acceptable,
but not those based on race, gender, sexual preference,
marital status, other household living arrangements, or
work tests. Any proposal for a CI scheme is likely to involve
minimal selectivity, and much of the complexity facing administrators
will be much reduced.
5)
Structure of personal income taxation (and benefit withdrawal
rates).
Although
the structure of the personal income tax is not included
as part of its definition, except for Van Parijs' observation
(1986) that it should not lead to a poverty trap, most advocates
of Citizen's Income schemes would recommend a simple proportional,
or mildly progressive, personal income tax on all income
other than the CI. If the implementation of a CI scheme
did not specify a change in the tax system, then the costs
of collecting tax revenues would not necessarily change.
6)
The level of the benefit.
Similarly,
the definition of a CI does not include a specified level
of the CI, although references to Partial and Full CIs are
familiar in the literature. However, De Wispelaere and Stirton
are right to point out that the level of the benefit will
influence administration costs inversely. The more adequate
the CI, the less the administration costs, because the safety
net that would be required to prevent poverty, and the costs
of its administration, would be reduced accordingly.
A
residual safety net scheme would have to be set up even
under a Full CI scheme, in order to cater for those people
who were not eligible to be part of the CI scheme, or for
those whom it was deemed were still in poverty despite receiving
a CI. A social fund would be needed for those hit by emergencies,
such as fires and flood; and a residual National Insurance
scheme would be needed for those who would still be eligible
for National Insurance benefits. It is assumed here that
the administration of extra payments for people with disabilities
would remain the same.
An
adequate CI could be administered in the same way as the
current Child Benefit, which is the most successful UK benefit
at reaching those people who need it most and which also
has low administration costs. Costs at 1% of the total cost
of our Child Benefit scheme have been quoted (CIT, 2007,
p.8), compared with much higher costs for contributory,
means-tested, and taxable benefits.
A
simple CI scheme, with the same Full CI for all citizens
and income tax at a standard rate, could minimise costs.
However, this in itself is not a recommendation. The first
criterion to test for any welfare reform proposal is 'Does
it fulfil its stated objectives, according to its stated
priorities?'
De
Wispelaere and Stirton have added considerably to the sum
of knowledge about administrative aspects of CI (cf. 2005
& 2008), and their response to my piece contains further
interesting material. It just seems to have very little
to do with my simple comment.
BIBLIOGRAPHY
Citizen's
Income Trust, 2007, Citizen's Income: A brief introduction.
De
Wispelaere, Jurgen and Stirton, Lindsay. 'The Many Faces
of Universal Basic Income', Citizen's Income Newsletter,
2005/1, pp.1-8
De
Wispelaere, Jurgen and Stirton, Lindsay. 'Why Participation
Income Might Not Be Such a Great Idea After All', Citizen's
Income Newsletter, 2008/3, pp. 3-8
Miller,
Anne G., 'Is a Citizen's Income the Answer?' Citizen's
Income Newsletter, 2009/1, p.5
Van
Parijs, Philippe (1986), 'Basic Income: A Terminological
Note', in The Proceedings of the First International
Conference on Basic Income, Louvain-La-Neuve, BIEN,
pp.3-10
Reviews
Gary
Craig, Tania Burchardt and David Gordon, Social Justice
and Public Policy,
Policy Press, 2008, x + 284 pp, pbk, 1 86134 933 0, £19.99,
hbk, 1 86134 934 7, £65
The
term 'social justice' can mean a bewildering variety of
different things and can be attached as an intended outcome
to a wide variety of social policies. The editors of this
volume take as their guides to the meaning of 'social justice'
the definition employed by the Labour Party's 1994 Commission
on Social Justice: '[the] equal worth of all citizens; [an]
equal right to be able to meet basic needs; [a] need to
spread opportunities and life chances as widely as possible;
and [a] requirement to reduce and where possible eliminate
unjustified inequalities' (p.1) and John Rawls' difference
principle: 'Those who wish to justify a deviation from total
equality in key social and economic outcomes must demonstrate
that such an arrangement will be of benefit to the least
well off in society' (p.4). They judge New Labour to have
failed to match policy to the Commission on Social Justice's
definition, and they judge the strength of Rawls' difference
principle to depend on which justifications for inequality
pass his test - and this requires careful study of social
policies and their outcomes.
The
aim of this collection of essays is accordingly to relate
theories of social justice to real-world policy problems.
Jonathan
Wolff suggests that political philosophers should develop
theories based on social policy; and from a study of three
theories of social justice David Piachaud and Ruth Lister
draw conclusions relating to inequality in past, present
and future society. Will Kymlicka suggests that we can both
recognise cultural diversity and sustain a redistributive
welfare state; Iris Marion Young asks that we rebalance
the diversity/equality debate towards equal opportunities;
Ruth Lister asks that respectful treatment and genuine voice
should accompany redistribution; Christopher Bertram asks
for global social justice; Harry Brighouse and Adam Swift
recognise that parents must be partial towards their own
children and suggests that social policy should promote
equality of relationship and other goods; and David Gordon
points out that scandalously little has been written on
social justice for children. Katie Schmuecker discusses
diversity and equity across the UK now that government is
increasingly devolved; Tania Burchardt applies Amartya Sen's
capability approach (an approach to equality based on the
distribution of substantive freedom) to inequality in Britain;
Gary Craig finds ethnic minorities to be unjustly treated;
and Maria Abedowale asks us to integrate social justice
with environmental protection through a sustainable development
perspective.
As
with all collections of essays based on seminar series,
there is a certain amount of overlap between the essays,
and the chapters' agendas are often driven more by the authors'
interests than by the editors' stated aims ( - some chapters
don't explicitly ask how theories of social justice relate
to social policy). But many students, teachers and researchers
will find this a valuable collection, not least because
it demands to be followed up in particular policy areas.
For instance: there is no chapter on the social justice
theories underlying different ways of organising tax and
benefit structures - a gap which we hope the Citizen's Income
Trust's 2009 seminar series will go some way to filling.
Tony
Fitzpatrick, Applied Ethics and Social Problems,
Policy Press, 2008, vi + 270 pp, pbk, 1 86134 859 3, £21.99,
hbk, 1 86134 860 9, £60
This
book asks the question: 'If social policy studies the production
and distribution of public goods, and if the State has a
considerable role to play in maximising welfare and social
justice, why and to what extent can the State justifiably
regulate and interfere with individual freedom to this end?'
(p.2) and it applies 'debates, theories and methods from
moral philosophy to contemporary ethical issues relating
to the disciplinary field (social policy) investigating
the interactions of social problems, justice and wellbeing'
(p.5).
Chapter
1 recommends 'social humanism' (with the human roots of
ethics not disconnected from religion and nature) as a foundation
for ethical theory; chapter 2 studies consequentialism (the
theory that it is outcomes that matter); chapter 3 explores
Kant's very different ethics (leading the author to principles
which guide our choice of action); chapter 4 discusses Aristotle's
'virtue' ethics (which is about the kind of people we are
and how we should live); and chapter 5 provides three principles
on which the rest of the book is based: common sense, humanism,
and equality.
The
second part of the book deals with the boundaries of free
choice. Chapter 6 concludes that 'harming is entwined with
our social freedoms such that eradicating all instances
of the former also threatens the latter' (p.114); chapter
7 asks that choice be conceptualised in terms of equity;
and chapter 8 argues that financial contributions to public
services should be either compulsory and indirect or discretionary
and direct and that, in general, government should relate
to families by 'maintaining appropriate social environments
and welfare systems' (p.157). Along the way practical policy
issues are discussed: the legalisation of drugs, schools
admission policies, and the care of the elderly.
Then
come chapters on particular controversial issues: chapter
9 on abortion ( - a discussion about appropriate time limits);
and chapter 10 on euthanasia ( - in which Fitzpatrick proposes
in the first instance the making of living wills compulsory).
Of particular interest to readers of this newsletter will
be chapter 11 on whether we should restrict the welfare
rights of recent immigrants ( - the debate would be different
in a context of social equality) and on the compatibility
in principle of welfare states and global justice.
This
book will be of value to any student of social policy, social
ethics, or both. It constantly refers backwards and forwards
between ethical theory and practical social policy, and
it shows how 'applied ethics directs our attention to many
of the challenges we face and [to how] social policy has
a crucial role to play in helping us to face them' (p.231).
Whilst
social, economic, labour market and distributional issues
will remain vital components of the now widespread Citizen's
Income debate, continuing to found the debate in a study
of social ethics will remain just as important. This book
will help us to do that.
Peter
Taylor-Gooby, Reframing Social Citizenship,
Oxford, Oxford University Press, 2009, xii + 218 pp, hbk,
0 19 954670 1, £45
Today's
welfare state is characterised by 'competition, the expansion
of internal markets, and target-setting' and for the 'customer'
by 'choice, opportunity, activation, and individual engagement'
(p.v). Underlying these trends is a conceptual framework
which understands the citizen as an individual rational
maximiser. The message of the book is simple: social citizenship
and the welfare state rely on a conceptual framework characterised
by reciprocity, inclusion and trust: characteristics at
the opposite ends of spectra from the competition and rational
choice which characterise today's welfare provision. If
current trends continue then we might find ourselves discarding
the social citizenship on which any welfare state must depend.
The
first chapter defines 'social citizenship' as the 'rights
and duties associated with the provision of benefits and
services designed to meet social needs and enhance capabilities,
and also to guarantee the resources necessary to finance
them' (pp.4,5) and discusses redistribution both vertically
(between members of a society) and horizontally (across
the individual's lifecycle) as the practical basis for reciprocity
and inclusion. The chapter also discusses uncertainty as
the problem which the welfare state addresses, and trust
in the welfare system as essential to the contract between
citizen and government. The author lists challenges facing
the welfare state: technological change in industry, the
rise of the service sector, a loss of working class cohesion,
an ageing population, changes in family structure, the changing
role of women in society and employment, and, in chapter
2, globalization, which results in increased competition
in goods and services, more flexible labour markets, growing
inequality, growing downward pressures on tax revenues,
and mobile populations, capital and revenue. Government
response in the UK, as well as in Europe more generally,
is to promote a 'transition to a new more individualized
welfare state citizenship' (p.31) and in particular an active
casework approach to unemployment benefits.
Subsequent
chapters ask how rational individual choice can be integrated
with social norms and institutions and how the emerging
new configuration will affect social citizenship. The author
finds that reciprocity is valued as much by the new 'active
citizen' as it was in the previous 'passive benefits' phase
of the welfare state, but that 'the rational actor welfare
state will struggle to secure trust and inclusion' (p.106)
and that this will make sustaining the welfare state problematic.
The
next three chapters take the UK's National Health Service
as a detailed case study and asks how new policies have
impacted on social citizenship: 'The reform programme has
been most successful in areas which correspond to the needs
of the mass of the population, the broad field of reciprocity.
It is less impressive in relation to the more intractable
issues of inequality and inclusion' (p.159).
The
final chapters regret that the new welfare state configuration
is strong on a rather defensive reciprocity amongst the
better off and that it is weak on inclusion and thus does
little to tackle inequality. The author finally suggests
that 'sustaining the values that underlie [the welfare state]
requires political determination to enhance competitiveness
by reducing the privileges of advantaged groups and extending
the inclusion of the weakest and to rebuild public trust
by extending democratic engagement in social provision'
(p.190).
This
is an important book which should be on every government
minister's desk. Theory and case study are well integrated,
and the conclusions arise naturally from the evidence. It
is a bit of a surprise that there is no mention of such
counterexamples to the current rational choice trend as
Child Benefit. This universal benefit relies on and promotes
the values of trust, inclusion and reciprocity, and for
low income groups it acts as a foundation on the basis of
which rational choices can be made. It's the one benefit
which doesn't change when a lone parent takes the often
difficult decision to enter the employment market.
A
Citizen's Income would, of course, have the same effect.
It would enhance trust, inclusion and reciprocity and at
the same time encourage the active citizenship which a globalised
and ageing society requires. It would be interesting to
see a further such case study from Peter Taylor-Gooby
John
Hills, Julian Le Grand and David Piachaud, Making Social
Policy Work,
Policy Press, 2007, ix + 286 pp, pbk, 1 86134 957 6, £25,
hbk, 1 86134 958 3, £65
This
Festschrift for Howard Glennerster is about the 'historical
development and practical implementation of policy in key
areas of social concern', and it asks the questions: 'How
[can we] make social policy work? How can policies be designed
so as to achieve the aims of government in the social arena?
How can these policies be implemented in such a way [that
they] promote the desired aims but without damaging other
aims that we might wish to pursue? Can we ensure that social
policies have only those consequences that are intended?'
(p.1)
There
is a wonderful variety of chapters. Jose Harris offers an
interesting history of the welfare state (though it's a
bit confusing to call insurance benefits 'universalist',
and strange not to notice that Child Benefit really is
universalist); Tania Burchardt asks what welfare is for,
and commends a 'capability' approach which asks what welfare
provision enables people 'to be and do' (p.45); Jane Lewis
finds that governments no longer privilege particular family
forms but rather work with today's diversity of forms; Anne
West studies schools and their funding and Nicholas Barr
the funding of higher education; Julian Le Grand explores
quasi-markets in healthcare and Martin Knapp choice and
control in social care; and Anne Power studies neighbourhood
renewal and social integration.
Of
particular interest to readers of this Newsletter
will be David Piachaud's chapter 'The restructuring of redistribution'
in which he studies how 'the impact of government through
benefits and taxes on the distribution of net money incomes
has changed since 1997' (p.199). He discusses such changes
as tax credits and rightly decides that the redistributive
effects of both taxation and social security need to be
studied together. He discusses the decrease in the number
of people facing marginal deduction rates of over 70% and
the increase in the number facing marginal deduction rates
of over 60%, and he compares the redistributive effectiveness
of the system now with that in 1997 by comparing the numbers
taken out of poverty by the tax and benefits systems both
today and then. He concludes that restructuring since 1997
has been effective but that there is still a long way to
go - and that now 'the entire system is mightily confused'
and 'many more now gain very little from extra earnings
due to high marginal tax [i.e. deduction] rates' (p.215).
After
this, John Hills studies 'pensions, public opinion and policy'
and suggests that the compromises recently enshrined in
legislation will need to be constantly explained to the
public; and Tony Travers studies how social services resources
are distributed.
This
book is by academics, so, as we would expect, the answer
to the question 'How [can we] make social policy work?'
has more to do with theoretical outcomes than with why so
many people can't face filling in tax credits application
forms (no, not 'form': 'book'). People are deeply alienated
from the system by recurrent errors and draconian demands
for repayment of overpayments which weren't their fault,
and all of this makes us ask serious questions about whether
it's possible to make the current system work.
This
is an informative book as far as it goes. We now need a
book by people who know how the system works on the ground,
and how it doesn't work. 'Making it work' means making it
work in practice for everyone involved in it.
Richard
E. Just, Darrell L. Hueth and Andrew Schmitz (eds), Applied
Welfare Economics,
Edward Elgar, 2008, xxiv + 767 pp, hbk, 1 84720 577 1, £195
The
forty-six papers collected here discuss the market failure
and second best justifications for government expenditure,
theoretical and methodological foundations of welfare measurement,
income redistribution, the social costs of monopoly, welfare
measurement in single and multiple market models, measurement
of welfare in a context of risk and uncertainty, the welfare
effects of information and advertising, and non-market welfare
measurement (for instance, in the household). All of the
papers apply the economist's methods to 'welfare': to the
faring well of individuals in society. Of course, this isn't
all there is to be said about welfare, but it is an important
perspective because it enables the activities of the private
and public sectors to be evaluated using the same tool-kit,
thus enabling us to understand their connections and differences.
Most
of these papers assume an understanding of welfare economics
and its methods, and to students who possess this understanding
the collection will be a valuable resource - and if they
can't afford it then they should ask their library to obtain
it.
As
a collection it is very thorough. It contains both classics
and some more recent pieces - though it's a pity that some
of A.B. Atkinson's work on flat taxes and Basic Income isn't
included; and it would also have been interesting to see
some of the more recent work on labour market participation.
For if it is true that welfare and work are intimately related
(and the evidence suggests that they are) then the application
of the economist's methods to labour market behaviour would
have contributed to this volume on welfare economics.
But
maybe there just wasn't space, for at 767 pages this is
already a substantial volume and it will make available
to students, teachers and researchers some important papers
which otherwise they might struggle to find.
Viewpoint
The
Real Economy is in Good Shape The good news is that the
real global economy remains in good shape with all the potential
it needs to flourish and grow. Its supply side factories,
offices, shops, restaurants, transport and communications
systems are capable of high productivity output. Its 6bn
consumers are ready to continue growing consumption demand
- in the majority of cases to raise low standards of living.
But it's the financial sector whose turmoil now threatens
the real economy that it is designed to serve - a classical
case of the tail wagging the dog, of the speedometer trying
to drive the car, of the virtual world controlling the real
world. We know from Keynes that monetised aggregate demand
has to be sufficient in purchasing power to consume the
potential output of the supply side of the real economy.
Since there is no problem in delivering real output, why
should it be difficult to fund adequate demand?
Of
the various components of macroeconomic demand, the current
problem is with consumer expenditure and its funding from
wages, pensions, dividends and credit. As productivity increases
in an advanced technology economy, the wage component of
aggregate demand will decrease, leading to an increased
dependence on credit to fund real demand to consume the
available output. Until very recently this has worked. The
fact that the last decade has been the NICE, non
inflationary, decade demonstrates that exactly the right
amount of credit has been fed into the economy to fund consumer
demand - there has been sufficient output, and growth has
been stable. The problem now is that this surge in consumer
credit demands repayment out of wages which are as insufficient
for this as they were for the initial purchasing power required
in the economy.
What
can be done? Public and private sector investment increases
have only a medium term effect, so for immediate effect,
consumer spending has to be re-funded by interest rate cuts,
tax cuts, or fresh credit. But the only form of consumer
credit which will sustain the same long term NICE economy
is credit which does not have to be repaid since this would
reduce disposable wage income in a future period. In a future
world where total automation made goods and services available
with very few workers and therefore ever decreasing disposable
income from wages, some such form of allocation of the product
would be necessary. Money can be created - banks
already lend multiples of what they have on deposit. The
Citizen's Income, for which some have long campaigned, might
be the instrument needed. Wealthy Middle East oil rich states
with small populations have necessarily developed such citizen
income allocations and Japan is currently making a similar
income distribution. A Citizen's Income might now have an
equally necessary role in the economies of the developed
industrial world.
Geoff
Crocker
©
Citizen's Income Trust, 2009
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