Citizen’s Income News: Autumn 2014

In April the UK Parliament’s Work and Pensions Committee published a report on the implementation of Universal Credit: ‘We continue to support the policy objectives of UC, particularly improving incentives to work and smoothing the transition from benefits into work. However, there have been significant problems with developing the IT systems necessary to operate UC, leading to delays in its implementation. … major adjustments to the implementation timetable were made in July and December 2013 because of IT and project management problems. National implementation did not begin in October 2013: claims remain limited to the Pathfinder Jobcentres (increased to 10) and to the simplest claims. New claims to UC are not now expected to be extended to the whole of Great Britain until 2016; the bulk of the migration of existing claimants will not now take place until 2016-17; and the process will not be completed until after 2017. Whilst it is essential to ensure that the system works effectively for claimants before it is extended, DWP needs to be clear and frank about all the implications of the delays. Due to the very slow pace of the roll-out to date, it is difficult to envisage how the volumes required to meet the most recent timetable are to be achieved. … The IT problems mean that £40 million spent to date on software has had to be written off because it is of no further use. The useful life of IT on which a further £90 million has been spent has been reduced from 15 to 5 years. This is regrettable. The IT problems were only revealed when the National Audit Office (NAO) reported on progress with UC implementation in September 2013, although the Government had known about them for at least 18 months before this. It is concerning that it took so long for the Government to acknowledge openly that there were problems with UC IT and to make the necessary switch to a different IT approach-referred to by DWP as the “end-state” solution, which will be open-source and web-based. DWP is continuing to spend millions of pounds (£37-£58 million) on the old IT system during 2014 to extend the functionality for the Pathfinder while at the same time extensive sums are being spent on the IT for the end-state solution. DWP should consider again whether it would not be more effective, and represent better value for public money, to focus solely on the end-state solution and abandon the twin-track approach. There remains a worrying lack of clarity about what the end-state solution means in practice. In the NAO’s view these uncertainties include: how it will work; when it will be ready; how much it will cost; and who will do the work to develop and build it. DWP needs to set out what the costs of developing the end-state solution beyond November 2014 will be, including how much will be spent on in-house IT specialists and on external consultants. It should also make clear when the end-state solution will be ready to test on a representative sample of claimant households; and when and how it will be extended. …’

Compass and the Jimmy Reid Foundation have published In Place of Anxiety: Social Security for the Common Weal, by Ailsa McKay and Willie Sullivan. As the foundations for a system of social security for Scotland, it calls for affordable housing, greater security of employment, and an end to low pay. It also calls for a Citizens’ Income. ‘There are many problems with targeted benefits, not least the withdrawal effect where people are caught in a benefit trap which makes working extra hours unattractive because of the loss of benefits. Targeting has also led to the marginalisation and demonisation of some groups in society and continual downward pressure on benefits. The existing system has also failed to address many periods in life where there are other factors which influence social security such as study, care responsibilities, volunteering, small enterprise start-up and a period prior to retirement when shorter working hours might be appropriate. All of these can be addressed by creating a Citizens’ Income scheme. This is a model which replaces income support benefits (including the state pension but not housing benefit) with a single payment which is made to every citizen. This can be created in a cost-neutral way by converting all existing benefits and a proportion of the personal tax allowance into a Citizens’ Income. It would be universal and would bring many benefits. Once a very basic Citizens’ Income is in place there are a range of strategies that could be pursued to achieve different policy outcomes’ (pp.2-3).

The Joseph Rowntree Foundation has published new research in Wages, Taxes and Top-ups: The changing role of the State in helping working families make ends meet: ‘In the past two decades, the growth of tax credits combined with only modest improvement in wages have changed the balance in working families’ income sources. Many families on low earnings have had more help than before from in-work support, and this has become more important relative to wages for such families. For many families, disposable income rose substantially between 1998 and 2008, and for lone parents and dual earner couples with children in particular, the chance of reaching a minimum acceptable living standard increased substantially. Single-earner couples also became better off, but on low earnings they were still likely to have substantially less than they need. These trends are identified in this paper by measuring the disposable income of typical low-earning families and comparing it to the Minimum Income Standard, a benchmark of income adequacy determined by members of the public. The paper shows the extent to which some of the earlier gains were reversed in the recession, as earnings fell relative to prices and some in-work benefits were cut. It finds that, having come to rely on state support, low-income working families have therefore suffered when the state has made cuts. Moreover, given that those depending on tax credits, and in future on Universal Credit, have these credits withdrawn sharply whenever their earnings increase, it can be extremely difficult to make up for any cuts to state support by earning more (for example, working more hours).’

The International Labour Office has published The State of Social Safety Nets 2014: ‘The expansion of cash transfers is particularly evident in Sub-Saharan Africa. For example, back in 2010, 21 countries in the continent (or about half) had some form of unconditional cash transfer in place; by 2013, the number had almost doubled … Unconditional cash transfers are also common and now are implemented in 118 countries globally. (p.xiii) … Unconditional cash transfers (UCTs) include the provision of cash without particular co-responsibilities. Examples embrace various cash transfer programs targeted to particular categories of people, such as the elderly (also known as “social pensions”) (p.3) [NB ‘unconditional’ does not mean ‘nonwithdrawable’]

The Campbell Collaboration has published Relative Effectiveness of Conditional and Unconditional Cash Transfers for Schooling Outcomes in Developing Countries: ‘Our main finding is that both CCTs and UCTs improve the odds of being enrolled in and attending school compared to no cash transfer program. The effect sizes for enrollment and attendance are always larger for CCT programs compared to UCT programs but the difference is not significant.’

The Joseph Rowntree Foundation has published updated figures for a Minimum Income Standard: ‘Working-age benefits, which already fell short of meeting the standard, have fallen further behind. Pensioner benefits remain close to the standard, although they too have reduced relative to MIS. The official poverty threshold defined as 60 per cent of median income, which was below MIS for working-age households in 2008, has fallen further short of the standard because median incomes have fallen in real terms but MIS has not. Households supported by workers on the National Minimum Wage, most of whom did not meet the standard in 2008, have also fallen further behind, partly because this wage has risen more slowly than living costs but also, for families with children, because of cuts in in-work benefits.’ (p.5) To take a single result: a couple with two small children needs on average £735.36 per week (including rent and childcare).

The OECD has published an Income Inequality Update: ‘Lower income households either lost more during the crisis or benefited less from the recovery. Across the OECD countries, real household disposable income stagnated. Meanwhile, the income of the bottom 10% of the population declined from 2007 to 2011 by 1.6% per year (Figure 3). Focusing on the top and bottom 10% of the population in 2007 and in the latest year available shows that, on average across the OECD, the drop in income was twice as large for the bottom 10% compared with the top 10%. Out of the 33 countries where data are available, the top 10% has done better than the poorest 10% in 19 countries.’ (p.2)

The Scottish Parliament’s Welfare Reform Committee has published a report that says that ‘evidence presented to the Committee showed that the loss of income that sanctions can lead to is now twice the maximum that can be imposed in fines by the courts, with 79 people in Scotland in receipt of the maximum 3 year sanction. Additionally, four in ten decisions to apply a sanction are overturned.’

UNICEF has published a report, Simulating the costs and benefits of a Europe-wide Basic Income scheme for Children: ‘At first sight it might appear far-fetched to introduce a Europe-wide Basic Income for Children (BIC) (for EU countries), but similar schemes already exist in most European countries and [a Europe-wide scheme] might be thought of as a rather modest extension of current policies. The case for universal child benefits is twofold. … if children to some extent can be viewed as a public good, shifting some of the costs involved from families with children to society at large must enhance social welfare (contributing to horizontal equity) [and] … because universal child benefits avoid the gaps in coverage associated with targeted policies, they improve the position of families at the bottom of the income scale who often fail to take up or are ineligible for assistance under targeted policies (contributing to vertical equity). … The European Commission have cautiously floated the case for a Europe-wide BIC; “it could be a demonstration of the European Union’s commitment to children, to the future, and could contribute to the reduction of child poverty. It would also document the solidarity existing between people without and with children.” Furthermore, if jointly financed it might be useful in the current economic crisis to ease the situation of countries that face massive shocks.’

The Royal Society of Arts has published an article on a Creative Resources approach to tax and expenditure: ‘… Another option is to consider tax in a completely different way; to regard it not as cash to be used by government and public sector officials but as a creative resource available to citizens. In other words to use tax in a way that chimes with our creative times. The fundamental shift would be from one where the default position is the use of tax by government and its agencies to provide services to citizens to one where the default position is the distribution of tax revenues to citizens to arrange the delivery of services for themselves. Importantly such a principle, by virtue of its redistributive aspect, still addresses the fundamental problem of a free market in this area, namely that unequal material resources mean unequal access to services such as healthcare and education which are fundamental to human well-being, flourishing and equal opportunities. Indeed, the extent and nature of the redistributive aspect would remain, as it currently is, a matter for political debate. But, importantly, it removes the second part of the twentieth century equation which was that a technocratic elite knew better than citizens how to spend the tax revenue.’

Benefits sanctions

Over seventy years ago, Juliet Rhys Williams, a member of the Beveridge committee, [note]Sir William Beveridge, Social Insurance and Allied Services, Cmd 6404, Her Majesty’s Stationery Office, London, 1942[/note] objected to the majority’s recommendation of time-limited National Insurance benefits topped up by means-tested National Assistance. In her minority report (later published as Something to Look Forward to) she pointed out that means-tested benefits would mean that many families would receive too little of any additional earnings and that there would therefore be too little incentive to seek paid employment. This would mean that coercion would be required to get people to accept employment. Rhys Williams would have preferred an unemployment benefit that was not time limited and was not withdrawn as earnings rose:

The hope of gain is infinitely preferable to the fear of punishment and the fear of want as a motive for human labour . . . The real objection to the Beveridge scheme does not lie in its shortcomings in respect of the abolition of want, which could be made good, but in its serious attack upon the will to work. [note]Juliet Rhys Williams, Something to Look Forward to, MacDonald and Co., London, 1943, pp.13, 45, 141[/note]

Rhys Williams’ prediction is even more relevant today than it was then. Employment is becoming more precarious. [note]Guy Standing, The Precariat: The New Dangerous Class, Bloomsbury, London, 2011[/note]  To accept precarious employment is to lose means-tested benefits and then to have to reclaim them and suffer the inevitable income gaps. ‘Universal Credit’ is meant to improve on this experience, but, whereas now, entering employment means moving from out-of-work means-tested benefits to in-work means-tested benefits, under Universal Credit the shift will require a seamless computerised administrative transition within the same means-tested benefit. This will be no more seamless in practice. The ‘precarity trap’ is Guy Standing’s term for the way in which these income transitions disincentivise employment. It compounds the unemployment and poverty traps (the results of means-tested benefits being withdrawn as earnings rise), and makes ever more necessary the coercion represented by benefits sanctions and predicted by Juliet Rhys Williams. There will be no escape from benefits sanctions until our benefits system is based on a genuinely universal benefit that is not administratively precarious and is not withdrawn as earnings rise.

But isn’t a return to full, secure and well-paid employment the answer to this problem? It would be if it were possible, but unfortunately it isn’t. Employment is becoming more precarious, and although there are still ‘good jobs’, the number of ‘lousy jobs’ is growing and ‘middling jobs’ are disappearing. [note]Maarten Goos and Alan Manning, ‘Lousy and Lovely Jobs: The rising polarization of work in Britain’, Review of Economics and Statistics, vol.89, no.1, pp.118-133, 2007[/note] The reasons for this are complex ( – the average annual rate of return on capital is rising faster than the annual rate of growth of the economy, [note]Thomas Piketty, Capital in the Twenty-first Century, Belknap Press, Cambridge, Mass. 2014, pp 22-7[/note] which means that a smaller share is going to wages and investment; rising inequality reduces yet further the share of GDP going to low earners; [note]Stewart Lansley, ‘From inequality to instability: Why sustainable capitalism depends on a more equal society’, Fabian Review, The Fabian Society, London, Winter 2011, pp.12-14[/note] whilst new technology creates new jobs it also destroys old ones): but whatever the reasons, even if a return to full full-time employment were to be possible, this would not necessarily be desirable if it were to increase the rate at which we were using up the planet’s resources.

Anna Coote of the New Economics Foundation argues that a shorter working week would help to deliver the kind of sustainable economy that we shall need, and that it would reduce unemployment, improve wellbeing, and increase opportunities for engagement in caring, community, and political activities. If a shorter working week were to be achieved, then clearly it would deliver the promised benefits for individuals, families, and society as a whole: but it is difficult to see how a shorter working week is likely to be achievable in the context of a benefits system (including so-called Tax Credits) that withdraws additional income rapidly at low numbers of hours of National Minimum Wage employment. For higher earners, shorter working weeks are always a possibility: but for lower earners they are not.

Juliet Rhys Williams’ solution to the problem was that every adult citizen should receive an income from the State, and that this should not be reduced if the citizen earned an income or if their earned income rose:

The State owes precisely the same benefits to all of its citizens, and should in no circumstances pay more to one than to another of the same sex and age, except in return for services rendered . . . Therefore the same benefits [should be paid] to the employed and healthy as to the idle and sick. . . . The prevention of want must be regarded as being the duty of the State to all its citizens and not merely to a favoured few. [note]Juliet Rhys Williams, Something to Look Forward to, MacDonald and Co., London, 1943, pp.139, 145[/note]

A Citizen’s Income – an unconditional and nonwithdrawable income for every individual – would provide an income floor on which everyone could build. It would enable low earners to earn their way out of poverty more quickly than they can now and so would therefore reduce income inequality. It would not be withdrawn as earnings rose, so it would not be withdrawn faster for part-time employees than for full-time employees and it would therefore make more possible the kind of shorter working week that the New Economics Foundation would like to see. A Citizen’s Income would therefore enable parents more easily to care for their own children, would give to more people the option of spending their time on community and political activity, and would give to families and communities the time to create for themselves many of the services that they currently purchase in the market. Whether the economy would be more sustainable is a question that only experience would be able to answer, but I suspect that it would be, because, as the Green Party suggests,

saving the planet is down to all of us, but we cannot expect people still stuck in the poverty trap to think of it as a priority. Creating a fairer society and saving the planet go hand-in-hand. [note]Green Party, Citizen’s Income: An end to the poverty trap, Green Party, London, 2008[/note]


In 2011 Compass published the final report of its High Pay Commission, and the Living Wage Commission, chaired by the Archbishop of York, published its report in June of this year. Both reports are well-researched and are the result of thorough consultation, and the commissions responsible for them have been made up of broad diversities of experts. It would be a pleasure to see a similar commission to study the feasibility and desirability of a Citizen’s Income. We would do all that we could to assist.