Citizens’ Income News: Autumn 2015

The Institute of Gerontology at King’s College, London, has published a report, An Age Friendly City – How far has London come? by Anthea Tinker and Jay Ginn: Oe of its recommendations is that ‘the government restores the Winter Fuel Payment to its original value relative to fuel prices and older people be allowed to opt (in 2016) into the new single tier pension; the latter to be raised above the poverty threshold (about £175 per week in 2014)’ (p.30). Full report here.

Research published in the journal Work, Employment and Society ‘investigates how welfare generosity and active labour market policies relate to employment commitment. As social policy is increasingly directed towards stimulating employment in broader sections of society, this article particularly studies employment commitment among groups with traditionally weaker bonds to the labour market. This is also theoretically interesting because the employment commitment in these groups may be more affected by the welfare context than is the employment commitment of the core work force. A welfare scepticism view predicts that disincentive effects and norm erosion will lead to lower employment commitment in more generous and activating welfare states, while a welfare resources perspective holds the opposite view. Using multilevel data for individuals in 18 European countries, the article finds increasing employment commitment as social spending gets more generous and activating. This was also evident for weaker groups in the labour market, although the effect was less pronounced in some groups’ (Kjetil A van der Wel and Knut Halvorsen, ‘The bigger the worse? A comparative study of the welfare state and employment commitment’, Work, employment and society, 2015, Vol. 29, no.1, pp. 99-118)

The Child Poverty Action Group has published a report by Lindsay Judge, Round the Clock: In-work poverty and the ‘hours question’: ‘Universal credit must be reformed so that it protects the incomes of parents. A second-earner work allowance would improve the incentives for the second partner in a couple to move into work, while a higher lone-parent work allowance would allow lone parents to retain all their universal credit award at a higher level of earnings. … The poverty-reduction potential of universal credit could be greatly enhanced by reducing the taper rate, thereby allowing families to keep more of the in-work support they receive as their earnings increase. In addition, different taper rates should be considered in order to improve incentives once families start paying national insurance contributions and tax. … The value of children’s benefits must be restored to their pre-2010 levels. …’ (p.38). Full report here.

ComRes has published the results of research on public attitudes to the Green Party’s policies. In relation to Citizen’s Income, ‘More people oppose (40%) than support (36%) the idea of a Citizen’s Income’. Read more.

The Institute for Policy Research at the University of Bath has published a report, Temporary agency work in the UK today: Precarity intensifies despite protective legislation: ‘Employment agencies and companies in the food, hospitality and healthcare sectors circumvent the legislative protections of the European Union Agency Workers Regulations (AWR). … Temporary agency workers do not earn an adequate income and may have to rely on welfare benefits. … Overall, TAW offers insecurity rather than flexibility.’ Full report here.


The General Election is now over, so it is appropriate to review what the major parties said about the benefits system in their manifestos. The manifestos divide into three groups:

1. Means-testing is the right approach, and Universal Credit will reduce disincentives. The Conservative Party’s manifesto says this: ‘We will deliver Universal Credit, in order to provide the right incentives for people to work; target support at those who need it most; reduce fraud and error; and streamline administration of the welfare system.’ (p.28). Similarly, the Liberal Democrat manifesto promises to ‘complete the introduction of Universal Credit (UC), so people are always better off in work. We will review UC to address any issues regarding “cliff edges”, and ensure increased working hours are properly incentivised for all claimants.’ (p.43).

2. We’re not sure. The Labour Party manifesto ‘supports the principle behind Universal Credit – that there should be a smooth transition into work – but it must be affordable and fit for purpose, so we will pause and review the programme.’ (p.47). UKIP’s manifesto doesn’t mention Universal Credit or any alternative social security mechanisms.

3. We want to change the structure of the benefits system. As readers of the previous edition of the Citizen’s Income Newsletter will know, the Green Party’s Spring Conference in 2014 voted that Citizen’s Income should be Green Party policy. Accordingly, the manifesto says this: [5]

The Green Party thinks the time has come to reconsider the whole tax and benefits system and to rebuild it from the ground up – a system not built on punishing and isolating people, making them jump through hoops to get hand-outs from the state, but one that goes back to the founding principles of the welfare state, in the belief that, as members of society, we have a shared responsibility for one another’s well-being in times of need and a shared commitment to helping others play the most active role they can in our society. The idea in a nutshell is this. Scrap most of the existing benefits apart from disability benefits and Housing Benefit. Abolish the income tax personal allowance. Then pay every woman, man and child legally resident in the UK a guaranteed, non-means-tested income, sufficient to cover basic needs – a Basic Income. For those who earn, the Basic Income compensates for the loss of the personal allowance. Children will receive a reduced Basic Income, Child Benefit. Pensioners will receive their Basic Income at a higher level, as a Citizen’s Pension.

As the manifesto suggests,

The advantages are many and we support the principle of a Universal Basic Income because it has the potential to:

  • Act as a springboard rather than a safety net; people can take jobs without fear of prosecution for working while on benefits;
  • Prevent people falling into absolute poverty rather than trying to help them when they are already there;
  • Reward people for all the work that’s done outside the formal economy, and most of this work is done by women;
  • Encourage more of this unpaid activity, much of which – such as food growing, fixing things that have gone wrong, converting older buildings, protecting the natural environment – is a vital part of a transition to a more sustainable economy;
  • Avoid the poverty trap in which an increase in wages leads to a massive loss of benefits;
  • Make everyone who earns, however little, a citizen who contributes to society by paying taxes, giving almost everyone a stake – raising the personal allowance takes us in precisely the wrong direction;
  • Be simple to administer and easy to understand.

We would use the forthcoming Parliament to

  • Consult upon this scheme,
  • Have government departments carry out and commission research (including research into behavioural changes and how
  • Basic Income would affect those on the lowest incomes and child poverty), and
  • Draft appropriate legislation, with a view to implementing the full scheme in the following Parliament. (p.54)

Similarly, the Scottish National Party says this: ‘We’ll prioritise the immediate scrapping of the Bedroom Tax and a halt to the rollout of Universal Credit … . The current tapers for Universal Credit have been set too low, which means claimants will still be caught in the benefits trap, with clear financial disincentives in place for work.’ (pp.5, 16)

Given that genuine reform of the social security system in the UK along the lines of a Citizen’s Income will probably take more than one parliament ( – not because a Citizen’s Income is complicated, but because the present system is), all-party agreement will be required. Universal Credit, although a means-tested benefit, might be a useful first step towards a Citizen’s Income, so there need be no contradiction between the different parties’ positions on whether to base the benefits system on means-testing or on universal benefits. This really is an issue over which the parties in the new parliament might be able to co-operate.

Quantitative Easing for the people

On the 21st May, The Guardian suggested that quantitative easing should benefit consumers rather than the banks:

The empirical evidence from analogous policies – such as tax rebates in the US – suggests that transfers to the household sector would have a far greater impact on demand at a fraction of the size of QE. Consumers appear to quickly spend between a third and a half of any cash windfalls. So to increase consumption by 1% of GDP, you would need a transfer of 3% of GDP. UK QE currently stands at about 20% of annual GDP. The Bank of England estimates this raised GDP by 3%. Further QE would likely have less effect. So cash transfers to consumers are a far more effective stimulus than that provided by more QE for a lower spend

Consistent with operational independence of the Bank of England, the size of payments and their timing should be solely under its control, and subject to the inflation target. Parliament needs to equip the Bank with the infrastructure to administer payments, and determine in advance the recipients. An equal payment to all households is likely to be the least controversial rule. It would have an immediate impact on spending and it is transparent and fair – favouring neither borrowers nor savers, rich nor poor, nor one demographic over another.

It is not easy to define a ‘household’, so payments should made to individuals rather than to households if they are to be ‘transparent and fair’. Evidence from Alaska suggests that one-off varying payments do not result in consumption in the same way as regular earned or benefits income, so if increasing consumption is an important objective then additional revenue should be employed to make the payments both equal and regular. The Citizen’s Income that would result would indeed ‘have an immediate impact on spending and [would be] transparent and fair’.