In place of pensions – why there is no alternative to a Citizen’s Income, for pensioners and working adults alike

The global financial crisis (GFC) has now been on-going for 6 years. All the promises made by politicians in 2008 that they would soon be able to restore the system to stability have been proved hollow. Output and real incomes are still below the level of 2007 – in Britain and most industrialised countries. At the same time the huge debts, public and private, that brought the global economy to its knees – including the “toxic waste” on the banks’ balance sheets – are at least as great as ever.

Although this outcome was predictable, all mainstream political parties, media, trade unions and academic economists even now remain resolutely in denial and stuck in a sterile debate about whether the cure for continued stagnation is to cut or expand public spending – even though it has been obvious from the outset that neither strategy can possibly cut the massive debt burden that is crippling the economy. None of them can face the truth that most of this debt is unpayable and that the only solution is to write it off, in line with the dictates of market forces. In their desperation to avoid such an outcome – which would entail the mass insolvency of enterprises and the wiping out of stock markets and asset values round the world – most governments, including the UK, have now resorted to printing money (officially known as Quantitative Easing) – a practice normally associated with bankrupt governments such as Weimar Germany in the 1920s.

All this obscures the wider truth that

  • the capitalist economy is as dangerously unstable as it always has been, and
  • in addition it has now been rendered completely obsolete by technological change, just as the rural / feudal economic order was put out of business by steam power 200 years ago.

The failure of our rulers to come to terms with this new reality is shown in their continued insistence that ‘full employment’ is still attainable – presumably based on at least 97 per cent of the labour force being employed for at least 1600 hours a year for at least 40 years of their lives. This despite the fact that millions of jobs (in the UK alone) have been automated permanently out of existence over the last 40 years. In this climate of permanently high and rising unemployment the traditional Beveridge model of social welfare based on contributions from employees – which always depended on maintaining more or less full employment over the long term – has effectively collapsed.

Against this background – which is broadly similar across Europe and other industrialised countries – successive British governments’ attempts to recast the social welfare system look increasingly doomed to fail. Following the nightmare of the Working Tax Credit and other means-tested benefits in a climate of increasingly insecure employment we have to look forward to the coming fiasco of Universal Credit as it is rolled out with cross-party support. At the same time the future of the basic state pension (BSP) seems unclear, although in principle the Coalition remains committed to introducing a flat-rate single tier state pension at a high enough level to avoid recipients having to claim means-tested supplements. If the rate is no higher than the figure of £144 per week that has been mentioned then this condition will clearly not be met.

Where does this leave pensioners? Since the turn of the century they have seen the ‘promise’ of occupational pensions – based on a guaranteed proportion of their lifetime earnings – increasingly broken, whether in the public or private sector, in response to growing weakness in the economy and financial markets. Although the non-funded, pay-as-you-go BSP model – financed through National Insurance contributions – is much more efficient and viable than funded schemes, it is not clear that there will be enough people in employment in future to enable the system to continue working as it has hitherto.

The only logical way forward in this situation must be a system based on a universal, non-means-tested Citizen’s Income: a flat-rate benefit paid to all adult citizens, preferably at subsistence level. It is payable out of general taxation unconditionally (regardless of other sources of income) and does not affect entitlement to welfare benefits in kind (health care, education, special needs). It will:

  • Ensure that everyone’s basic needs are covered by a non-means-tested weekly payment.
  • Replace benefits such as Job Seeker’s Allowance or other forms of income support, as well as replacing personal tax-free allowances.
  • Ensure that anyone who takes paid work will be better off financially for doing so (avoiding the poverty traps created by means-testing).
  • Make working part-time a more affordable option for many people who would prefer it.
  • Act as a safety-net for those considering self-employment, so that they have less to fear if their business isn’t successful.
  • Put an end to demeaning benefits procedures and form filling – as well as saving the substantial administrative costs of means-testing.
  • Recognise the economic value of the vast amount of presently unpaid work of family carers.
  • Permit the undertaking of other socially useful and creative (but non-commercial) activities which would not otherwise happen.
  • Raise everyone’s level of dignity and freedom by liberating them from the obligation to undertake paid work in order to survive.
  • Remove the need for governments to find or create jobs for people simply as a means of providing them with an income, thus avoiding costly and wasteful public spending both on welfare-to-work schemes and on infrastructure projects which are often justified on job creation grounds but serve no other worthwhile public purpose.

For existing and prospective pensioners such a system would be especially liberating as it would effectively eliminate the distinction between them and other citizens in terms of entitlements – as well as the distinction between working life and retirement. The same applies to those, particularly women, who have devoted much of their adult lives to being family carers. Those who have made NI contributions under the current system could be compensated with appropriate payments as it was wound up.

Such a change to our system of income distribution may seem like a logical evolution from the traditional model, given that the opportunities for earning work-based entitlements are progressively disappearing along with much of the need for labour. But it is also clearly a very radical change from the pattern of economic and social organisation that we have become used to in the 20th century. Likewise it is easy to see that it threatens the established power of those who have always controlled the masses by forcing them to seek work to survive. That is why they continue to try to prevent such rational alternatives from even being discussed in the mainstream media – or simply dismiss the idea as hopelessly unaffordable.

Despite their best efforts the idea of a Citizen’s Income is forcing itself onto the political agenda in more and more European countries, notably Germany, Italy and Spain. Significantly it is now to be the subject of a referendum in Switzerland, likely to happen later this year.