The basic income, a cure for the welfare state?

Keep it simple is the theme behind an increased push for a basic income. The idea is gaining momentum with trials in Finland, Holland, and Canada. By making a small payment to all citizens the government can move away from an increasingly complex welfare state, reducing fraud and incentivising acceptance of casual work. It also gives individuals a financial safety net, allowing them to consider reducing their work time to concentrate on family responsibilities. Most would increase spending and help to stimulate the economy.

The main argument against is the perceived unfairness of including every citizen, including billionaires. Yet the current welfare state in the UK is grotesquely unfair with some well reported case of people on benefits receiving more than people who work and women receiving lower pensions than men because they took time off work to have children. There are also vulnerable people who don’t claim everything they are entitled to because of the complexities of the system. A system that requires people to notify changes in relationship status and other personal details, and penalises them when they do not. In 2013/14 the National Audit Office found that $4.6 billion was overpaid, due to fraud and error, with £1.6 billion underpaid. With multiple categories of benefit across local and national government, often unconnected, there is a heavy and frustrating administration cost for both user and government and an incentive for fraudsters.

The cost of the welfare state in 2015-16, not including admin or fraud, was estimated at £214 billon. A basic income of 100 per week for the 49 million adults in the UK, would cost £254 billion. Some of this would be offset with the reduction in admin costs, potentially freeing civil servants to help the unemployed find work as suggested in one of my earlier blogs. It would also help simplify the tax system. Currently people don’t pay tax on the first £11,000, a nightmare to calculate and understand for those who change jobs or have multiple sources of income. With a tax free basic income of £5200, all earnings could be taxed at say 20%. A person currently earning $11,000 and paying no tax would receive £16,200 and pay tax of £2240, giving them a gross income of £13,960, nearly £4000 higher, whilst the government recouped 46% of its outlay.

The original welfare state was devised as a simple safety net. It is time to revitalise that concept, with a wider net. In the increasingly complicated twenty-first century, simplicity is best.




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