On this page:
- What is a Citizen’s Basic Income?
- Why do we need to replace the present benefit and tax systems?
- What would a Citizen’s Income scheme involve and how would we pay for it?
- Is a Citizen’s Income scheme affordable?
- Would people still work if they received a Citizen’s Basic Income?
- Is it fair to ask people in employment to pay for everyone to receive a Citizen’s Basic Income?
- Isn’t guaranteeing a right to work a better way to prevent poverty?
- Why pay money to the rich when they don’t need it?
- Will a Citizens Income replace public services?
- Further Reading
1. What is a Citizen’s Basic Income?
How is Citizen’s Basic Income defined?
A Citizen’s Income is an unconditional, automatic and nonwithdrawable payment to each individual as a right of citizenship.
(A Citizen’s Basic Income is sometimes called a Basic Income (BI) or a Citizen’s Income (CI))
- ‘Unconditional’: A Citizen’s Basic Income would vary with age, but there would be no other conditions: so everyone of the same age would receive the same Citizen’s Basic Income, whatever their gender, employment status, family structure, contribution to society, housing costs, or anything else.
- ‘Automatic’: Someone’s Citizen’s Basic Income would be paid weekly or monthly, automatically.
- ‘Nonwithdrawable’: Citizen’s Basic Incomes would not be means-tested. If someone’s earnings or wealth increased, then their Citizen’s Income would not change.
- ‘Individual’: Citizen’s Basic Incomes would be paid on an individual basis, and not on the basis of a couple or household.
- ‘As a right of citizenship’: Everybody legally resident in the UK would receive a Citizen’s Basic Income, subject to a minimum period of legal residency in the UK, and continuing residency for most of the year.
Would there be any conditions attached to receiving it?
Yes, one. Recipients would have to establish their right to legal residence in this country.
Would everyone get the same amount?
No, the Citizen’s Basic Income would be age related: but everyone of the same age would get the same amount. More would be offered to elderly people than to adults of working age; and usually more for adults than children. There would be no differences in the amount of the Citizen’s Basic Income on account of income or wealth, work status, willing-to-work tests, marital status, or household association.
Do we have anything like a Citizen’s Income already?
Yes. Child Benefit, paid on behalf of every child regardless of the income or work status of the parents, is a Citizen’s Basic Income for children. A comprehensive Citizen’s Income could be administered in the same way as Child Benefit.
Has a Citizen’s Basic Income ever been tried?
Short pilot projects have taken place in Namibia and India, and something like a Citizen’s Basic Income has been implemented by accident in Iran. Experiments in the similar but different Minimum Income Guarantee and Negative Income Tax in the United States and Canada during the 1970s showed useful social outcomes and very little withdrawal from employment. The similarities between the economic effects of a Minimum Income Guarantee and Citizen’s Basic Income would suggest that the results of the Minimum Income Guarantee experiments would be replicated if a Citizen’s Basic Income were to be implemented; and the differences between them mean that the effects are likely to larger for Citizen’s Basic Income than for the 1970s experiments. Basic Income pilot projects and similar experiments continue in the United States, Uganda, Kenya, Spain, Finland, and the Netherlands, and experiments are planned for Scotland.
2.Why do we need to replace the present benefit and tax systems?
What’s wrong with the present system?
Our present system is based on contributory benefits and means-tested benefits (including tax credits). Many people on contributory benefits find that they are either time-limited or they do not provide enough to live on so means-tested top-ups are required; and means-tested benefits are withdrawn as other income rises, so there is little incentive to increase earned income.
The present system is complicated, so administration is expensive, calculation errors are common, and fraud is too easy; it stigmatises claimants; and benefits are often withdrawn – through sanctions, or by flawed administration – leaving households without enough to live on.
So how would a Citizen’s Basic Income change things?
A Citizen’s Basic Income would not suffer from any of these problems: so the more means-tested benefits we can replace with a Citizen’s Basic Income the better.
Would a Citizen’s Basic Income threaten the welfare state?
If a revenue neutral Citizen’s Basic Income scheme were to be implemented, then no cuts to public services would be required. The amounts of means-tested benefits received by households would fall, but only because they were already receiving Citizen’s Basic Incomes. Benefits specifically designed to cover the additional costs of disability, and benefits to cover the differing housing costs in different areas, would continue.
3. What would a Citizen’s Basic Income scheme involve and how would we pay for it?
How much would the Citizen’s Basic Income be?
This would depend on the particular Citizen’s Income scheme implemented. For some recent research see Malcolm Torry, A variety of indicators evaluated for two implementation methods for a Citizen’s Basic Income. The first Citizen’s Income to be implemented might be quite small, but it could then grow. The ideal would be a Citizen’s Income at the level of the Minimum Income Standards published each year by the Joseph Rowntree Foundation, but that might be some way off.
Would the payments be taxable?
No, the Citizen’s Basic Income would be exempt from income tax (although this is not intrinsic to a Citizen’s Income ).
How would Citizen’s Basic Income be paid for?
It is likely that the first Citizen’s Basic Income scheme to be implemented would be paid for by reducing existing benefits and by abolishing the Income Tax Personal Allowance. This Citizen’s Basic Income would not be sufficient to live on (it might look like scheme B in the paper above), so we would need to keep means-tested benefits in place: but because everybody’s means-tested benefits (including tax credits) would be recalculated to take account of their households’ Citizen’s Incomes, a lot of people would come off means-tested benefits, and a lot of people would be so close to coming off them that they would reduce their costs or increase their earned income so that they could come off them.
As the Citizen’s Basic Income grew – perhaps being paid for by new kinds of taxation – the means-tested benefits system (including tax credits) would slowly wither away until it was no longer needed.
Would public expenditure go up?
If Income Tax Personal Allowances were to be reduced in order to fund Citizen’s Basic Incomes of the same value, then no additional government funds would need to be spent: but because the Citizen’s Basic Incomes would count as public expenditure, and the revenue foregone through Income Tax Personal Allowances does not, it would look as if public expenditure had risen when it hadn’t.
How would a Citizen’s Basic Income be introduced?
At the point of implementation, either means-tested benefits could be abolished, or some or all of them could be retained and everybody’s in-work and out-of-work means-tested benefits recalculated to take into account their Citizen’s Basic Incomes. A Citizen’s Basic Income could either be implemented for everybody at the same time, or successively for different age groups.
Would employers take advantage of CBI to keep wages low?
A Citizen’s Basic Income would provide an incentive for people to take jobs at higher pay levels, because it would overcome the worst effects of the unemployment and poverty traps. A Citizen’s Basic Income would also make it easier to leave a job, so it would be easier for people to move from one job to another, so employers would have to pay realistic wages in order to retain their staff. The labour market would lose some of its current rigidities and would be closer to a classical market, thus improving the efficiency of the labour market at the same time as improving people’s ability to increase their earned income.
Means-tested benefits function as dynamic subsidies – that is, they rise if wages fall, which can encourage wage-cutting. A Citizen’s Basic Income would not rise if wages fell, so employers would experience more resistance if they attempted to cut wages.
Some wages might rise. Because everyone would have a secure financial platform on which to build an income strategy, some workers would be more able to leave undesirable jobs in order to start their own businesses, or to learn new skills and seek new jobs; and workers would be able to spend longer looking for a job that they might want rather than any job. Either currently undesirable jobs would have to improve, or wages would have to rise in order to attract workers.
Some wages might fall. Because everyone would have a secure income layer, some people might decide to take a desirable job even if it didn’t pay very much. Wage levels for desirable jobs might therefore fall.
Wouldn’t a Citizen’s Basic Income decrease incentives to work?
Some people believe that, without an availability-for-work test, a benefit such as Citizen’s Basic Income would destroy the work ethic. Paradoxically, it is the present system that decreases the incentives to work, train, care for others etc. by paying benefits to people only so long as they do nothing, and by penalising and often criminalising them when they try to help themselves. A Citizen’s Basic Income would never change, so it would be a solid financial platform on which people would be able to build. We would see more new businesses and more self-employment.
Would immigration go up?
As with other benefits, a government would be likely to require a period of legal residence before someone could receive a Citizen’s Basic Income. Because any feasible Citizen’s Basic Income would not be providing additional money, but would rather provide everyone with a secure layer of income, and therefore a greater employment incentive than means-tested benefits, anyone coming into the country would be even more likely to contribute to the economy than they are now.
4. Is a Citizen’s Basic Income affordable?
We shall take this question to mean: Could a Citizen’s Basic Income of a useful size be implemented on the realistic assumption that no additional public funds would be available?
Tests for a Citizen’s Basic Income scheme’s feasibility might be listed as follows:
- revenue neutrality ( – that is, it would be funded by making changes to the current tax and benefits system)
- poverty and inequality need to fall
- Low income households should suffer no significant losses at the point of implementation, and no household should suffer unmanageable losses
- Income Tax rates should not rise by more than 3%
- A significant number of households should be released from means-tested benefits.
Affordability depends on the particular Citizen’s Basic Income scheme implemented. For some recent research see Malcolm Torry, A variety of indicators evaluated for two implementation methods for a Citizen’s Basic Income. The scheme is strictly revenue neutral: that is, no additional public money would be required. The Citizen’s Basic Income would be funded by adjusting Income Tax allowances and rates. Larger Citizen’s Basic Incomes could be affordable if additional tax revenues were to become available.
5. Would people still work if they received a Citizen’s Basic Income?
If by ‘work’ we mean ‘paid employment’, then the answer is yes. In the short to medium term, we are unlikely to see a Citizen’s Basic Income that would be sufficient to live on, so everyone would need additional sources of income. And because Citizen’s Basic Incomes would not be withdrawn as earnings rose, any family taken off means-tested benefits by their Citizen’s Basic Incomes would experience a reduction in withdrawal rates, and would experience more incentive to seek employment, or to start their own business, than they do now.
Under the current system, in spite of sizeable benefit withdrawal rates (or ‘marginal deduction rates’, MDRs), the vast majority of working age adults choose to seek employment. With a Citizen’s Income most people’s withdrawal rates would fall, making it even more likely that working age adults would seek employment.
If by ‘work’ we mean purposeful activity of any kind, then the answer is again yes. By providing a secure layer of income, a Citizen’s Basic Income would enable people to readjust their employment hours in order to undertake additional caring and community work.
At the moment, parents and other carers can find that employment for a few hours a week brings only small financial gains – again, because of high withdrawal rates. A Citizen’s Basic Income would reduce this problem, so that working age carers who cannot or do not wish to seek full-time employment would be more likely to seek part-time employment.
6. Is it fair to ask people in employment to pay for everyone to receive a Citizen’s Basic Income?
As a society we have chosen to fund payments to those not in paid work out of general taxation: so at the moment those in employment pay for benefits for people who are not. With Citizen’s Basic Income both those currently receiving means-tested benefits and tax credits and those not currently receiving them would receive a Citizen’s Basic Income. This would be a lot fairer.
7. Isn’t guaranteeing a right to work a better way to prevent poverty?
The best way to prevent poverty is through well-paid employment; and the best way to ensure employment’s widespread availability is to reduce the rigidities in the labour market that serve neither employers nor employees. A Citizen’s Basic Income would help to achieve this. A Citizen’s Basic Income in combination with a National Minimum or Living Wage would go a long way towards preventing poverty.
8. Why pay money to the rich when they don’t need it?
It is efficient to pay the same level of income to everybody of the same age and then tax it back from those who don’t need it. The alternative is to means-test incomes so that only those who are poor receive them: but that results in complexity, stigma, errors, fraud, and intrusive bureaucratic interference in people’s lives.
9. Will a Citizens Income replace public services?
Like most countries, the UK provides ‘free’ state education and ‘free’ (or very low cost) healthcare. These are similar to a Citizens Income. They are universal, non-means tested, non-taxable, easy to access and there is no stigma attached to using them.
There are clear social and economic advantages to this arrangement:
- If left to the private sector, the quality of these services would probably improve for those who can afford them, but the cost to parents and patients would double or treble (see the US healthcare system and UK private schools as examples). Lower income households would clearly lose out.
- Health and education businesses can make super profits (a form of ‘rent’), because the value of healthcare or education is vastly greater than the cost of providing them. As a near-monopoly provider, the government can keep costs low and pass on the savings to the general population.
- Health and education are public goods and merit goods. We all benefit from everybody else having a reasonable level of education. Employers benefit from having healthy workers, as do members of patients’ families. Even if you have no children, it is worth paying some extra tax to pay for other children’s education (who will be paying for your state pension!)
So the answer is, no, of course a Citizens Income will not replace these!
The Citizens Income we envisage would primarily replace some of the existing benefits which are paid out in cash, like Universal Credit. And even for those, not immediately but gradually.
The Citizens Income would cover the costs of things which the private sector can provide more efficiently, at lower cost or at higher quality than the government – such as food, utilities, clothing, mobile telephones.
The Citizens Income should not be earmarked for particular items, such as food vouchers or travel passes for the over-60s. Some areas have good public transport, so a travel pass in London is worth much more than a travel pass in a rural village with an infrequent bus service.
For most households, the Citizens Income would only be a small part of their total disposable income, and each individual household is in a far better position to decide how to spend it than the government. The needs change every week, and as family circumstances change (for example, as children grow up).
The other downside of earmarked benefits is that the private sector will respond by increasing prices to soak them up if prices are not capped, so private providers will extract super-profits or rent.
For example, the UK has gone from a situation where over a quarter of households lived in social housing to mainly private provision. In the 1970s, social tenants paid affordable rents and local councils made a modest profit. This was replaced with Housing Benefit after much of the social housing stock was sold off. So instead of the council incurring the modest annual maintenance costs for a council house occupied by a low income household claiming rent relief, the government pays five times that amount to a largely unregulated private landlord, a huge cost to the taxpayer.
Most models of a Citizens Income implementation assume no reduction in public services. But they also show that by giving all citizens a (taxable) secure financial floor, it has the effect of lifting them out of some of the more demeaning and stigmatising means-tested components of the Welfare State, such as Universal Credit.
10. Further reading
More detailed responses to questions can be found in chapter 10 of Malcolm Torry, Why we need a Citizen’s Basic Income: The desirability, feasibility and implementation of an unconditional income, Policy Press, 2018.
Recent research on a financially feasible Citizen’s Basic Income scheme can be found here.
Three recently published introductions to the subject are as follows:
Annie Miller, A Basic Income Handbook, Luath Press, 2017
Guy Standing, Basic Income: And how we can make it happen, Penguin, 2017
Malcolm Torry, Why we need a Citizen’s Basic Income: The desirability, feasibility and implementation of an unconditional income, Policy Press, 2018
For a detailed treatment of feasibility, see Malcolm Torry, The Feasibility of Citizen’s Income, Palgrave Macmillan, 2016