Citizen’s Income News, Spring 2012

The Pensions Policy Institute has published a report: An assessment of the Government’s options for state pension reform. The report concludes that the Government’s second option, a single tier state pension, ‘would dramatically reduce the number of pensioners reliant on means-tested benefits. The proportion of pensioner households eligible to claim Pension Credit could fall from 35% of pensioner households (4.4 million pensioners) in the current system to only 5% of pensioner households (0.8 million pensioners) by 2055. The reform would be broadly cost neutral to introduce.

A new think tank, Green House, has published a report entitled Mutual Security in a Sustainable Economy, by Molly Scott Cato and Brian Heatley. The authors argue that the benefits system needs to be taken out of the context of a neo-liberal market economy and re-considered afresh against the reality of the coming sustainable economy. They call for a new definition of poverty, a system based on individuals, the abolition of a retirement age, greater thrift, an emphasis on traditional skills for self-reliance, and a Citizen’s Income.

The Institute for Fiscal Studies has published a report on Child and Working-Age Poverty from 2010 to 2020. ‘In the short run, relative child poverty is forecast to remain broadly constant …, before rising slightly in 2013-14. Relative working-age adult poverty is forecast to rise slightly … before rising faster in 2013-14. Absolute child and working-age adult poverty are forecast to rise continuously, and by more than relative poverty, over this period.’ (p.1) This unusual combination is because ‘real median household income is forecast to be 7% lower in 2012-13 than it was in 2009-10, and to remain below its 2009-10 level until at least 2015-16.’ The report concludes that ‘there is almost no chance of eradicating child poverty … on current government policy.’ (p.3)

The Organisation for Economic Co-operation and Development (OECD) has issued a new report, Divided We Stand: Why inequality keeps rising. ‘In OECD countries today, the average income of the richest 10% of the population is about nine times that of the poorest 10% – a ratio of 9 to 1. However, the ratio varies widely from one country to another. It is much lower than the OECD average in the Nordic and many continental European countries, but reaches 10 to 1 in Italy, Japan, Korea, and the United Kingdom; around 14 to 1 in Israel, Turkey, and the United States; and 27 to 1 in Mexico and Chile. … Until the mid-1990s, tax-benefit systems in many OECD countries offset more than half of the rise in market-income inequality. However, while market income inequality continued to rise after the mid-1990s, much of the stabilising effect of taxes and benefits on household income inequality declined … Reforming tax and benefit policies is the most direct and powerful instrument for increasing redistributive effects. … However, redistribution strategies based on government transfers and taxes alone would be neither effective nor financially sustainable. First, there may be counter-productive disincentive effects if benefit and tax reforms are not well designed. (An Overview of Growing Income Inequalities in OECD Countries: Main Findings, pp.22, 37, 40).