Citizen’s Income News: January 2016

The Resolution Foundation has published a report, Making the most of UC: Final report of the Resolution Foundation review of Universal Credit: ‘Today’s high withdrawal rates mean that, for many UC recipients, increasing their earnings may not feel worthwhile. A lower overall taper rate should, therefore, be a clear policy objective. However, there is little evidence as to what the most effective withdrawal rate should be. In principle, we support a significant reduction in the taper rate over the medium term (for instance to 55 per cent or less) to improve incentives. Given the cost of this reduction, and uncertainty over the exact impact this would have on behaviour, we propose testing different lower rates to guide policy in this area. … The coalition government localised CTS in the last parliament and simultaneously cut its budget by around £500 million. As a result, local authorities introduced their own schemes, many of which require a minimum payment towards council tax regardless of a family’s income. This was a mistake. It has greatly complicated the system from the point of view of a UC claimant and may well undermine some of the anticipated key gains. Integrating CTS inside UC would, of course, have cost implications. But savings are likely to be made by centralising its administration, with local authorities currently spending around £800 million delivering CTS. Our view is that CTS assessment should occur within UC, with the precise taper rate determined by the administrative savings released by this move. The current design of UC allows for variations in the generosity of housing support across different areas. Further integration of Council Tax Support could take a similar approach, in line with the Smith Commission recommendations for the devolution of further powers to the Scottish Government’ (pp 13-14, 15-16). Full report here.

The New Policy Institute has published a report, Managing the Challenges of localised Council Tax Support: ‘… As it stands, it is hard to see how CTS can be integrated with Universal Credit (UC). The variation at local level is the opposite of the national standardisation in UC.’ (p.4) More details

In July the Joseph Rowntree Foundation published new Minimum Income Standard figures for the UK: Minimum weekly budgets (without housing and childcare costs) are stated as follows: single working age, £196.16; pension couple, £264.04; couple and two children: £484.48; lone parent and one child, £291.14. If housing and childcare costs are included, then the figures become £282.29, £350.24, £742.53, and £545.12. Full report here.

The Institute for Fiscal Studies has published research into the effects of the 2010-15 coalition government’s tax and benefits changes, and has found that ‘lower-income working-age households and the very richest have lost the most, while working-age households without children in the upper-middle of the income distribution actually gained from these reforms. … we find that the coalition’s changes have slightly strengthened work incentives. The participation tax rate has, on average, been reduced by 3 percentage points, perhaps a less significant strengthening of incentives than might have been expected given the scale of the coalition’s benefit cuts. However, this average effect disguises considerable variation across the population; indeed, the majority of workers have seen the incentive to increase their earnings weaken, not strengthen, as a result of the coalition’s reforms’. (Stuart Adam, James Browne and William Elming, ‘The Effect of the UK Coalition Government’s Tax and Benefit Changes on Household Incomes and Work Incentives’, Fiscal Studies, vol. 36, no. 3, pp. 375-402, p. 376).

The National Bureau of Economic Research in the USA has published research results: ‘We examine how a positive change in unearned household income affects children’s emotional and behavioral health and personality traits. Our results indicate that there are large beneficial effects of improved household financial wellbeing on children’s emotional and behavioral health and positive personality trait development. Moreover, we find that these effects are most pronounced for children who are lagging behind their peers in these measures before the intervention. Increasing household incomes reduce differences across adolescents with different levels of initial emotional-behavioral symptoms and personality traits.’ Full research paper.

Compass has published a paper by Michael Orton entitled Secure and Free: 10 foundations for a flourishing nation: ‘What is evident is not a lack of suggestions but a lack of consensus. For example, there are strong advocates of an unconditional universal Citizen’s Income while others express preference for contribution based entitlements. Decent living standards for disabled people depend on adequate support for the costs associated with disability but there are differences in the importance given to public services versus individual income measures, or prioritising immediate issues such as the bedroom tax over longer-term changes to Universal Credit and the tax system more generally. For example, The Good Right – drawing on work by the Resolution Foundation – argue that a better use of limited funds would be to increase the work allowances within Universal Credit rather than raise the basic threshold for paying income tax (85 per cent of the benefit of which accrues to the 50 per cent highest earners). The Policy Network calls for a new generation of social investment, building on previous approaches aimed at investing in capabilities and skills to equip people in the face of labour market change but applicable more broadly too. A wide range of groups is calling for an independent review of the sanctions regime. To move beyond what have already been noted as angry and fruitless debates, consensus building is critical. Rather than put forward a specific proposal, Compass will seek to work with other civil society groups on how to progress this. A starting point of seeking greater security may help provide an analytical and policy development framework that steps away completely from cul-de-sac arguments about welfare, benefits and unfortunate (or undeserving) others, to how we build a comprehensive system across tax, employment and other policy domains, that builds upstream preventative social security for us all. Agreement on (or improvement of) this Idea would be an important step forward’ (p.20). Full report available here.