Replacing benefits with a Basic Income

For a while now I have been thinking that there must be a better way to re-distribute income in our society. The current welfare system is hugely inefficient and complicated with all the means testing and civil servants needed to administer it.

Our system is also full of perverse incentives, whereby it encourages people NOT to work. If you are unemployed and receiving benefits, then you risk losing them by going back to work, and unless your new job pays well above minimum wage, you might not be any better off!

Wouldn’t it be better to provide everyone with a minimum amount of income (funded through taxation) that was not in any way mean’s tested? This would remove a huge amount bureaucracy and encourage unemployed people to get a job without the fear that they would lose their existing income.

Basic Income

The idea is known as a Basic Income – also referred to as a Citizen’s Income. It is similar to a Negative Income Tax and it works like this:

• It is paid to individuals rather than households;
• It is paid irrespective of any income from other sources;
• It is paid without requiring the performance of any work or the willingness to accept a job if offered.

I think that this basic income could then be combined with universal public services, free to the end user. So every citizen would receive a fixed basic income plus certain guaranteed minimum entitlements, such as health care, education, shelter and security.

The public and private sector would compete to provide schools, hospitals, and accommodation to satisfy the universal guarantees. The social housing should be modest to keep costs down and to encourage people to work if they want better.

In the 2008 Budget, we spent £169 billion on social protection – that’s almost £3000 for every citizen of the UK – £57 a week per person. The basic income could be stepped, so that children receive the lowest amount, working age adults would earn more, and pensioners would receive the most.

Advantages of the Basic Income System

• Increased incentives and rewards for those who want to work.
• Simpler, more efficient and easier to implement than the complicated means tested system we have now. Thus represents better value for citizens.
• Minimum guaranteed income for all citizens

We should simplify the tax system at the same time, and scrap the complicated capital, corporation and income tax schemes with a single flat tax.