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Basic Income: a detailed proposal GREEN PARTY OF ENGLAND AND WALES Introduction 1. This document is published in parallel with the 2015 General Election manifesto of the Green Party of England and Wales.
Basic Income: a detailed proposal GREEN PARTY OF ENGLAND AND WALES Introduction 1. This document is published in parallel with the 2015 General Election manifesto of the Green Party of England and Wales. 2. The document sets out in detail a comprehensive plan for a simultaneous reform of the social security, income tax and National Insurance systems. Two elements of the proposed reforms, an enhanced Child Benefit and a Citizen s Pension, are an integral part of the manifesto, proposed for implementation in the new Parliament. In respect of working-age adults, however, the manifesto says: Basic Income would be a massive change to the entire UK tax and benefits system. We recognise that it would not be practicable or right to carry out that change within a single Parliament. We are publishing alongside but separate from this manifesto a detailed set of proposals for a comprehensive Basic Income scheme. It contains full details of the scheme itself, costings and proposals on how to pay for it, and an initial analysis of how the scheme would affect the net income of different groups. This is that detailed set of proposals. What is Basic Income? 3. Basic Income (sometimes called Citizen s Income or Universal Basic Income) is a guaranteed, non-means-tested income, sufficient to cover basic needs, payable to every woman, man and child legally resident in the UK. It would replace personal tax-free allowances and most social security benefits. Children would receive a reduced Basic Income, Child Benefit. People who are disabled and lone parents would be paid a supplement. Pensioners would receive their Basic Income as a Citizen s Pension. Housing Benefit would be payable in the initial stages of a transfer to Basic Income. 1 This document covers the entire scheme for children, working-age adults and pensioners because it has to be seen as a totality; households typically comprise many age groups. Acknowledgements 4. We have found very helpful the illustrative schemes published by the Citizen s Income Trust (and authored by Malcolm Torry and Mark Wadsworth) as we have constructed our own detailed scheme, and we are most grateful to the Trust for this material. But we should stress that this is the Green Party s scheme and it differs in significant respects from schemes published by the Citizen s Income Trust, 1 which has no responsibility for this document or its contents. 5. We also especially acknowledge the inspiration and commitment of the longest-serving active member of the Green Party, Clive Lord, to the cause of a Citizen s Income within the Green Party and more widely over many years. Green Party policy 6. Basic Income (as Citizen s Income) has long been a part of Green Party policy. The essential commitment, from our Policies for a Sustainable Society, 2 is set out in Annex 1. A detailed scheme Eligibility 7. Basic Income and Child Benefit will be paid to UK residents, that is, people who have lived legally in the UK for at least a year. There is no contribution requirement; it will be a universal benefit. Babies born in the UK will be treated as if they had lived here for a year. Basic Income will continue to be paid to people who go abroad for the first three months of their absence, and former residents returning to the UK will be paid Basic Income on their return. This rule will also apply to children, so Child Benefit would not be paid to children who are abroad for more than three months. 8. Citizen s Pension will be paid initially to anyone eligible for a UK State Pension, wherever they live. In the long run we propose that, if someone has lived in the UK for most of their life, they will continue as at present to be able to take their pension abroad (though in the long run they would have no National Insurance contributions record, and in fact the evidence that they had lived in the UK for much of the time would be the fact that they had received Basic Income). But issues arise with shorter-term residents. It would be wrong 1 The differences in the costings between their principal scheme and the scheme set out here are listed in Annex 2. 2 Policies for a Sustainable Society is the Green Party s long-term policy document; it is modified at each party conference. It is published on the web at 2 for someone to come here for just over a year, receive Citizen s Pension as a resident, and then go abroad with it for the rest of their life. We will pay Citizen s Pension to such people on a sliding scale depending on how much of their previous lifetime they had spent in the UK. 9. There will be exceptions to these general rules, most notably for certain foreigners and for foreign students who have been here for more than a year. And some British residents obliged to be abroad, such as members of the forces, will continue to get Basic Income. 10. There will also be a system of emergency Basic Income payments to small groups of people in genuine hardship who might not otherwise be eligible. Examples include young people under 18 living independently (who would otherwise have only Child Benefit paid to a parent or guardian) and certain asylum seekers or older people moving to the UK. 11. We will continue to pay Housing Benefit (without the bedroom tax) and Support for Mortgage Interest while housing costs vary so much in different parts of the country. Withdrawal rates for Housing Benefit will be relaxed. 12. Receipt of particular benefits is sometimes used to passport eligibility for things such as free prescriptions, which of course will not work when those benefits are abolished. However, many items currently passported by receipt of existing benefits, such as free school meals, prescriptions and dental treatment, will become free anyway under our 2015 manifesto. Certain other items, such as Housing Benefit, will be subject to a simple means test. And financial support for childcare, available through Working Tax Credits, which will be abolished, will become unnecessary given our plans for free and universal early education and childcare. Disability 13. The broad principle is that people who are disabled or not capable of work will receive payments in addition to their Basic Income. This includes payments for children and pensioners and for carers. We will in particular pay an extra 30 per week (pw) to those assessed by their GP as not capable of work. 14. But it will not be practicable to maintain the form of all the existing disability benefits; some disability payments stand on their own, but many are integrated into other benefits, such as Universal Credit, or as premium payments in, say, the means-tested form of Employment and Support Allowance, and those benefits will disappear. We will carry out a review of disability payments and aim to introduce a new system with the introduction of Basic Income. There will be no reduction in the total amount of money spent on disability, and, during the transition, no disabled person will receive less than they do under the old system. 3 The rate for Basic Income 15. As set out above, we will not plan to introduce the whole scheme until after However, it is unrealistic to do a costing for a year so distant because none of the relevant figures primarily tax and benefit rates are available. Hence the rates and the associated costings are done for , for which most of the relevant figures are available. The hypothetical implementation year will of course be different, but the assumption is made that a calculation will give at least a guide to the later year. 16. Turning to the rates for a Basic Income scheme, there are five basic rates: Basic Income for children under 18. We assume that we will pay the same Basic Income to second and subsequent children as to the first child. The current rates of Child Benefit (after April 2015) are pw for the eldest or only child and for additional children. At present, Child Benefit ceases when the child reaches 16, unless they are in full-time education or training. 3 We think Child Benefit should better reflect the actual extra costs of a child, and to move towards this propose to increase Child Benefit to 50 pw, payable in respect of all children under Basic Income. This is the single most important parameter since so many people everyone between 18 and the retirement age (see below) will get it. We propose 80 pw, which is a little above the most usual Jobseeker s Allowance (JSA) level (currently ( 73.10). 5 Basic Income supplement for lone parents. Under Green Part policy, single parents will receive a supplement. 6 We add a single parent supplement at the rate of 80 pw. Citizen s Pension. Under Green Party policy, the Citizen s Pension will initially be set at a level no lower than the official poverty line. 7 The official poverty line for is estimated to be for a single pensioner and for a couple. 8 We propose a Citizen s Pension rate of 155 pw, so a couple will get 310 pw, while a single pensioner will get 155 pw plus the supplement below. 3 See (accessed 15 March 2014). 4 Note that the main manifesto has 40 pw. This is not a contradiction: 40 pw is a figure appropriate for a situation when tax credits are still in place. The 50 pw quoted here is for a world where tax credits are abolished. 5 See (accessed 5 April 2015) is the rate for both contribution-based and means-tested JSA for a person over See Annex 1. 7 Also see Annex 1. For these purposes, the poverty line is 60% of median population income adjusted for household size. 8 These figures are from Richard Murphy and Howard Reed, Financing the Social State: Towards a Full Employment Economy (Centre for Labour and Social Studies, 2013), p. 31, updated to money values. Available at _Richard_Murphy Howard_Reed_(Social_State_-_Idleness.pdf (accessed 7 April 2015). 4 Citizen s Pension supplement for single pensioners. Our policy says: There will be a supplement paid to pensioners living alone. We propose a supplement of 25 pw for single pensioners, so they will receive 180 pw (i.e ), which is above the official poverty line of How to pay for Basic Income Introduction 17. Broadly this calculation follows the methodology of the calculation done by the Citizen s Income Trust. 9 It includes abolishing most existing benefits, abolishing income tax allowances, changing employees National Insurance, reducing tax concessions on private pension contributions, and replacing the current contribution-based basic State Pension (for existing pensioners) and the new single-tier flat-rate Pension (for new pensioners) with a noncontributory Citizen s Pension. 18. In common with the Citizen s Income Trust calculation, no effort is made here to account for changes in behaviour brought about by the change to Basic Income. But these are likely to be substantial; in particular, the incentives for those on benefits to take paid work are greatly increased, but equally others argue that increased numbers will elect to leave employment and earn nothing (though they may often contribute in other ways). Modelling and estimating these changes is beyond our resources, but it is something we believe government should be doing over the next Parliament. 19. The calculation has three main elements: - a calculation of the total cost of the Basic Income proposals; - a calculation showing the savings from abolishing various existing benefits; and - a final calculation showing how the current receipts from income tax and National Insurance would change. These are dealt with in the three sub-sections below. The total cost of Basic Income 20. It is not too difficult to work out what the Basic Income proposals would cost one of the benefits of their simplicity. Working out the total cost is just a matter of multiplying the annual rates by the estimated number of people 9 See Citizen s Income Trust, Citizen s Income: A Brief Introduction, 2013, (accessed 5 April 2015). 5 eligible for Basic Income in each of the relevant age groups (see the section on eligibility above). 21. The number of eligible children and working-age adults is assumed to be the same as the population figures for these age groups. Residents who are temporarily abroad will continue to receive their Citizen s Income whereas short-term visitors to the UK will not. 10 Assuming these two groups roughly cancel out, it is reasonable to base the number of people receiving Citizen s Income on population, which is a snapshot of people actually in the UK on any one day. Population projections are obtained from the Office for National Statistics (ONS) For the number of pensioners we apply the current government policy on pension age, the State Pension age, which is to gradually increase it. For this means assuming 65 for men and 62.5 for women. 12 We also add the large number of existing pensioners, perhaps 1.1 million, 13 who live permanently abroad. They have been added in to the cost of the policy because, at least as a transitional measure, these pensioners are eligible for a State Pension. 14 They are incidentally all to be paid the full rate for Citizen s Pension, which implies that those overseas pensioners whose pensions have not been annually up-rated will be moved on to the normal full pension rate. 23. Then the total gross cost of regular Basic Income payments for this central case works out at about 321 billion, as follows: 10 See the Green Party policy on Citizenship: (accessed 5 April 2015). NY500 Responsibilities and rights of citizenship will include Citizens Income, personal taxation and the right to participate in the democratic process. The Green Party will therefore base the right to vote and to stand in elections on residence rather than nationality. The residence qualification for a responsibility or right will depend on its nature and consequences if temporary residents and visitors will be excluded from some. Responsibilities and rights will be retained for a reasonable period by those normally resident in but temporarily absent from an area. 11 ONS 2012-based principal projection, available from (downloaded as wuk12singyear_tcm xls on 26 January 2014). 12 Pension age roughly calculated from the State Pension Age Timetables: (accessed 5 April 2015). 13 A source for the number is elusive. The Department for Work and Pensions at (accessed 5 April 2015) suggests that in May 2009 about 1.1 million pensioners were abroad or their whereabouts was not known. 14 See the section on eligibility above for the suggested long-term policy on pensioners abroad. 6 Cost of Citizen s Income in Weekly rate ( ) Annual rate ( ) Number (million) Cost ( billion) Children 50 2, Working age 80 4, Pensioners 155 8, Lone parents 80 4, Lone pensioners 25 1, Total In this table, the categories Children, Working age and Pensioners include all those in those age groups resident in the UK, plus, in the case of pensioners, pensioners living abroad. Lone parents and Lone pensioners represent the numbers who would be eligible to receive the supplements, and the monetary figure comprises only the supplement; the ordinary Basic Income or Citizen s Pension for Working age and Pensioners is included in the figures above. 25. However, for reasons set out above on disability and emergency Basic Income payments, we need to add perhaps 8 billion for transitional protection for people who are disabled and 2 billion for the emergency Basic Income scheme, making a grand total gross cost of 331 billion. The benefits to be abolished 26. The Department for Work and Pensions Annual Report & Accounts contains data on what DWP expects to spend on each benefit in To that are added two items from HM Revenue and Customs (HMRC): - existing Child Benefits, estimated to cost 12.5 billion in ; - all tax credits, estimated to cost 31 billion ( 24 billion Child Tax Credits and 7 billion Working Tax Credits) in We make the following broad assumptions about what benefits we are abolishing and what we are keeping: - We will keep Housing Benefit. - In the rest of the working-age group we will save all the working-age benefits and the employment programmes apart from statutory sick pay and statutory maternity pay. - In the pensioners section we will save all the cost of State Pensions apart from the contribution-based State Second Pension, which people 15 Department for Work and Pensions Annual Report & Accounts (London: The Stationery Office, 2012), Annex 1, Table These estimates are from figures for 2013 in HM Revenue and Customs, Annual Report and Accounts (2014), Table 1, p. 77; available at pdf (accessed 12 April 2015),. 7 have paid for unless they have contracted out into a private pension scheme. We will also retain the Winter Fuel Payment and the free bus pass scheme. Free TV licences for the over 75s will become irrelevant because under our manifesto we intend to abolish the TV licence. - We will save nothing on disability. - We will keep the Carer s Allowance because in our view it is payment for work done rather than income replacement. 28. Employment and Support Allowance (ESA) requires special treatment. The current long-term rates for ESA are higher than the basic Jobseeker s Allowance level ( 73.10), at up to pw in the work-related activity group and up to pw in the support group. Thus, if those in receipt of ESA just got Basic Income, they would lose pw. To make this up, 20% of the current ESA budget must be retained (rather than abolished) to pay this supplement as a disability payment. We will want anyway to consider our whole policy on ESA (see the section on disability above). 29. The total savings we would make are listed in the table below. Because DWP figures don t include Northern Ireland (whereas the rest of our calculations do), 3% (based on relative population) has been added to the DWP figures: Benefits, etc. saved with Citizen s Income 2015 ( million) (Letters in brackets are DWP section codes) Child Benefit 12,500 Child Tax Credits 24,000 Children total 36,500 Children total including Northern Ireland 37,595 Working Tax Credits 7,000 Student grants and loans 4,000 Severe Disablement Allowance (O) 180 Universal Credit 354 Jobseeker s (P+AG) 5,353 A percentage of Employment and Support Allowance (Q+AH) 8,900 Income Support (R ) 2,347 Other benefits (AC) 229 Financial Assistance Scheme (S) 0 Maternity Allowance (AI) 414 Council Tax Benefit (Y) 4,224 Jobseeker s Allowance (AE) 785 Bereavement benefits (AK) 563 Maternity Allowance (AG) 426 Working age total 34,775 Working age total including Northern Ireland 35,818 State Pension (AJ) (less State Second Pension) 80,739 Pension Credit (S) 6,666 8 Social Fund 317 Pensioners total 87,722 Pensioners total including Northern Ireland 90,354 Total benefit savings including Northern Ireland 163, Here is the list of benefits in the DWP Annual Report & Accounts whose costs have not been put towards funding Basic Income: Benefits kept million Attendance Allowance (V) 5,901 Disability Living Allowance (V) 11,342 Severe Disablement Allowance (M) 169 Industrial Injuries Disablement Benefit (N) 913 Part of Employment and Support Allowance 3,113 Housing Benefit (Y) 18,500 Rent rebates (AA) 5,868 Carer s Allowance (X) 2,373 Personal Independence Payment 2,882 Earnings-related State Pension 10,148 Pensioners' free bus pass 1,000 Support for Mortgage Interest 368 Allowance for Winter Fuel Payment 2,000 Statutory Sick Pay and Statutory Maternity Pay (AB) 2,438 Total 67, We would not necessarily keep all these benefits in their present form, partly because DWP are proposing to phase out some of them anyway, and more importantly because the whole area of disability benefits will need review in the light of the introduction of the Basic Income (see above). The exis
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