Abstract
This chapter discusses a second type of financial feasibility: one related to households’ finances rather than to governments’ finances. If at the point of implementation of a Citizen’s Income scheme low-income households were to suffer losses in their disposable incomes, or any households were to suffer significant losses, then the Citizen’s Income scheme would not be financially feasible. With a Citizen’s Income, it would be easier to turn additional earnings into additional disposable income than with means-tested benefits, initial losses would still be a problem. The chapter shows that Citizen’s Income schemes that leave means-tested benefits in place and take Citizen’s Incomes into account when means-tested benefits are calculated can pass this feasibility test, whereas schemes that abolish means-tested benefits struggle to do so.
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Notes
- 1.
Gian Domenico Majone (1989) Evidence, Argument, and Persuasion in the Policy Process (New Haven: Yale University Press), p. 77.
- 2.
Jan Pahl (1983) ‘The allocation of money and structuring of inequality within marriage’, Sociological Review, 31 ( 2), 237–62; Laura Adelman, Sue Middleton, and Karl Ashworth (1999) Intra-household distribution of poverty and social exclusion: Evidence from the 1999 PSE Survey of Britain, Working paper no 23 (Loughborough: Centre for Research in Social Policy); Jan Pahl (1986) ‘Social security, taxation and family financial arrangements’, BIRG Bulletin, no 5, 2–4.
- 3.
In the UK, it can be as high as 96 %: Richard Murphy and Howard Reed (2013) Financing the Social State: Towards a full employment economy (London: Centre for Labour and Social Studies), pp. 25–7.
- 4.
For Ruth Lister’s suggestion that poverty is better defined in terms of dynamic processes than in terms of static measurements, see Ruth Lister (2004) Poverty (Cambridge: Polity Press), pp. 94–7, 145–6, 178–83.
- 5.
Malcolm Torry (2014) Research note: A feasible way to implement a Citizen’s Income, Institute for Social and Economic Research Working Paper EM17/14 (Colchester: Institute for Social and Economic Research, University of Essex), www.iser.essex.ac.uk/research/publications/working-papers/euromod/em17-14, pp. 3–4.
- 6.
This case study uses EUROMOD version G2.0++. The contribution of all past and current members of the EUROMOD consortium is gratefully acknowledged. The process of extending and updating EUROMOD is financially supported by the Directorate General for Employment, Social Affairs and Inclusion of the European Commission [Progress grant no. VS/2011/0445]. The UK Family Resources Survey data was made available by the DWP via the UK Data Archive.
- 7.
Parts of this case study were first published in a EUROMOD working paper, Two feasible ways to implement a revenue neutral Citizen’s Income scheme (2015) Institute for Social and Economic Research Working Paper EM6/15 (Colchester: Institute for Social and Economic Research, University of Essex), www.iser.essex.ac.uk/research/publications/working-papers/euromod/em6–15, and subsequently as an article in the Citizen’s Income Newsletter, issue 3 for 2015. The Institute for Social and Economic Research’s permission to reprint material from the working paper is gratefully acknowledged.
- 8.
The method is as follows: A new set of benefits is created in the UK country system in EUROMOD: a Citizen’s Pension (CP) for over sixty-five-year-olds, a Citizen’s Income (CI) for adults aged between twenty-five and sixty-four, a young person’s Citizen’s Income (CIY) for adults aged between sixteen and twenty-four, and a Child Citizen’s Income (CIC) for children aged between zero and fifteen. In the definitions of constants, levels are set for these Citizen’s Incomes, and all Personal Tax Allowances are set at zero. So that the additional taxable income is taxed at the basic rate, and not at the higher rate, the first tax threshold is changed from 32,010 to 42,010. The NIC Lower Earnings Limit is set to zero, and the NIC rate above the Upper Earnings Limit is set to 12 % (to match the rate below the limit). For schemes A and C, Working Tax Credit, Child Tax Credit, Income Support, Income-Related ESA, Pension Credit, and Income-based Jobseeker’s Allowance are no longer added to the total for means-tested benefits. For all schemes, Incapacity Benefit, Contributory ESA, and Child Benefit are removed from non-means-tested benefits (except that in scheme B, Child Benefit is left in payment), the Citizen’s Income total is added to non-means-tested benefits, and for scheme B, Citizen’s Incomes are added to the means applied to means-tested benefits. The state pension is no longer added to the pensions total in schemes A and C (as the Citizen’s Pension has already been added to the non-means-tested benefits total). Where benefits are no longer in payment, they are removed from the tax base. Simulations of the 2013 system and the system being tested generate two lists of household disposable incomes for the entire Family Resource Survey sample. These then generate a list of gains (negative gains are losses), and the total of the gains gives the net cost of the scheme for the sample. To convert EUROMOD’s monthly figures to annual figures, and the sample size to the total population, a multiplier of (12 × 64.1 m/57,381) = 13.4 gives the cost in £ms for the UK population. A process of trial and error adjusts the Income Tax rates until the net cost minus the assumed administrative saving is below £2 billion per annum. The initial disposable incomes are then ordered, the bottom 10 % are selected, and the percentage gains are evaluated. The process is then repeated for all households.
- 9.
Jordi Arcarons, Daniel Raventos Pañella and Lluís Torrens Mèlich (2014) ‘Feasibility of Financing a Basic Income’, Basic Income Studies, 9 (1–2), 79–93.
- 10.
Purely for the purpose of modelling the net cost, we eliminate Child Benefit for sixteen- to nineteen-year-olds by adjusting the definition of a dependent child both in the current system and in the system with raised Child Benefit.
- 11.
The results are modelled by removing Child Benefit for everyone aged sixteen and above, and instead paying a Young adult Citizen’s Income. In this case, the results are extracted from simulations of individual rather than household disposable incomes. As above, the removal of Child Benefit over the age of sixteen is achieved by adjusting the definition of a dependent child.
- 12.
Anthony B. Atkinson (2015) Inequality (Cambridge, Massachusetts: Harvard University Press), pp. 303–4. The text offers some pointers towards social participation conditions for receipt of the Participation Income, but no such conditions are mentioned in the text relating to the results of EUROMOD modelling on p. 297.
- 13.
Malcolm Torry (2013) Money for Everyone: Why we need a Citizen’s Income (Bristol: Policy Press); Malcolm Torry (2015) 101 Reasons for a Citizen’s Income: Arguments for giving everyone some money (Bristol: Policy Press, Bristol).
- 14.
Martin Greenberger, Matthew A. Crenson and Brian L. Crissey (1976) Models in the Policy Process: Public decision making in the computer era (New York: Russell Sage Foundation), p. 23.
- 15.
William H. Dutton and Kenneth L. Kraemer (1985) Modeling as Negotiating: The political dynamics of computer models in the policy process (Norwood, NJ: Ablex Publishing Corp), pp. 7, 9.
- 16.
A good example of this process is provided by some recent research papers. Malcolm Torry (2014) Research note: A feasible way to implement a Citizen’s Income modelled a Citizen’s Income scheme; Donald Hirsch (2015) Could a ‘Citizen’s Income’ work? (York: Joseph Rowntree Foundation), www.jrf.org.uk/publications/could-citizens-income-work, offered a critique; and Malcolm Torry (2015) Two feasible ways to implement a revenue neutral Citizen’s Income scheme, Institute for Social and Economic Research Working Paper EM6/15 (Colchester: Institute for Social and Economic Research, University of Essex), www.iser.essex.ac.uk/research/publications/working-papers/euromod/em6-15, took the critique into account.
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Torry, M. (2016). Is a Citizen’s Income Financially Feasible? Part Two: Household Financial Feasibility. In: The Feasibility of Citizen's Income. Exploring the Basic Income Guarantee. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-53078-3_4
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