Citizen’s Income News, Spring 2010

The Centre for Social Justice has published a report, Dynamic Benefits, which recommends a standard total withdrawal rate for means-tested benefits of 55%. The Centre’s ‘Universal Credits Scheme’ combines various benefits and also aligns them with in-work tax credits and gives the responsibility for the payment of all of the credits to a single agency. The Citizen’s Income Trust has written to the CSJ to suggest that their scheme is just two steps away from a Citizen’s Income. All that’s required is to turn tax allowances into a cash payment and then to combine all of the payments in the scheme into a single payment to every citizen.

Twenty-seven charities have called on the Government to set ambitious targets to improve take-up of welfare benefits and tax credits. More than £16 billion in means-tested benefits and tax credits currently goes unclaimed every year, and as many as four out of five low paid workers without children (1.2bn households) miss out on tax credits worth at least £38 per week – a total of £1.9 billion. Housing benefit, council tax benefit, child tax credit and pension credit are also particularly susceptible to underclaiming. Citizens Advice Chief Executive David Harker said: ‘The government has made a serious commitment to eradicate child and pensioner poverty, and to help the working poor, yet up to £10.5 billion of means tested benefits and £6.2 billion of tax credits remain unpaid each year. … The benefits and tax credits system is extremely complicated and the reasons people don’t claim what they’re due are complex, ranging from simply not knowing about the benefit concerned, to being put off by what can sometimes seem a very daunting process, to feeling that the amount they gain will be negligible.’

2010 is the European Year for Combating Poverty and Social Exclusion. The year’s objectives are to ‘encourage involvement and political commitment from each and every segment of society to participate in the fight against poverty and social exclusion, from the European to the local level, whether public or private; to inspire each and every European citizen to participate in the fight against poverty and social exclusion; to give voice to the concerns and needs of people experiencing poverty and social exclusion; to engage with civil society and non-governmental organisations that fight poverty and social exclusion; to help deconstruct stereotypes and stigmas attached to poverty and social exclusion; to promote a society that sustains and develops quality of life, social well-being and equal opportunities for all; and to boost solidarity between generations and ensure sustainable development.’

The International Labour Office has published a website, Global Extension of Social Security: a most valuable source of information on social security systems around the world. Readers can use a variety of criteria to search the matrix: impact, kind of benefits, specific groups, category of programme, or region/country.

Since the 2nd November 2009, Child Benefit has been disregarded when Housing Benefit is claimed.

Two reports published by the Institute for Fiscal Studies in 2009 complement each other. Poverty and Inequality in the UK: 2009 reveals recent slow growth in take-home incomes, and between 1997 and 2008 consistent growth in income inequality, with ‘the lowest growth at the very bottom of the income distribution over this period and the fastest growth at the very top’ (p.1). Inequality has accelerated during Labour’s third term, and both relative poverty in general and child poverty in particular have risen. The second report, Micro-simulating child poverty in 2010 and 2020, does precisely that, and predicts that by 2010 child poverty will have fallen by a third since 1998 but that it will remain 600,000 higher than the Government’s target. If current uprating rules remain in place then child poverty will remain well above target in 2020. Both reports contain useful appendices on methodology.

The Department for Work and Pensions has launched ‘Benefits adviser’: a website which enables claimants ‘to obtain an estimate of the amount of benefit they may be awarded. In addition, customers will be able to enter potential new circumstances to see how this would affect their benefits, for example, if they would be financially better off in work. The service will make it clear that financial information given is an estimate only.’

In their recent report The Great Transition, the New Economics Foundation argues that a complete restructuring of society and the economy is required. In particular the authors recommend ‘the creation of Citizens’ Endowments of up to £25,000 for all people on reaching the age of 21 to enable them to invest in their future, as well as Community Endowments to provide commonly owned assets to invest in our local neighbourhoods. Both would be funded by a proposed increase in inheritance tax on all estates to 67%.’

Compass has published a report, In Place of Cuts: Tax reform to build a fairer society, which shows in graphic form (p.15) the seriousness of tax inequality. Earners in the lowest decile pay 46% of their gross income in taxation and earners in the highest decile 34.2%. An important reason for the inequality is the regressive nature of VAT. The report recommends a variety of changes to the tax system, including National Insurance Contributions. The report does not discuss the benefits system nor its relationship to taxation.

In an article in Social Policy and Administration, Peter Lloyd-Sherlock reports on research which shows that in Latin America, where social security provision relies largely on social insurance entitlements, the impact of social spending on income distribution is highly inequitable. The poorest quintile receives 18.6% of spending and the richest quintile 28% (Peter Lloyd-Sherlock, ‘Social Policy and Inequality in Latin America: A Review of Recent Trends’, Social Policy and Administration, vol.43, no.4, August 2009, pp.347-363

Social Policy and Administration has also published research on recent pension reforms. ‘The current financial crisis calls the strategies into question in an even sharper form; individuals are less likely to have the resources to devote to long-term savings, especially in any [defined contribution] scheme where returns cannot be guaranteed; the government will not underwrite pension savings, other than for the rapidly diminishing number of [defined benefit] schemes; financially literate investors, having been educated to recognize the problem of investment risks, are likely to act in rational ways and opt out of personal accounts. New Labour claims to be seriously committed to securing reasonable incomes for retirees, but to realize this commitment could require radically rethinking not just the tools of policy but also the underlying policy framework.’ (Barbara Waine, ‘New Labour and Pensions Reform: Security in Retirement?’ Social Policy and Administration, vol.43, no.7, December 2009, pp.754-771)

The Joseph Rowntree Foundation has published the results of its research project on public attitudes to poverty: ‘Surveys suggest that public attitudes towards those experiencing poverty are harshly judgemental or view poverty and inequality as inevitable. But when people are better informed about inequality and life on a low income, they are more supportive of measures to reduce poverty and inequality.’ The authors call for ‘a long-term programme involving government, civil society, media and private sector organisations [which] is needed for sustained attitude change and to build public awareness that solutions to poverty need a societywide response.’