A Citizens Income is not a replacement for public services

Would a Citizens Income replace other 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.