Matthew in the comments here said:
The problems I foresee are two. First is that people's needs just aren't very similar, and some people will just need more and as Sobers says that immediately brings back form filling, inspectors, admin, etc (1). Also regional differences will present problems with no housing benefit - of course people can move away from London (2), and aggregate housing costs will decline a bit, and it will encourage them to get jobs etc, but these things will either be slow or limited in their effect. I'd probably keep a type of housing benefit (3).
The major problem though is political acceptability. The headlines about people getting something for nothing, families with 10 children (4) spending it all on fags, blah, blah. And of course anyone who earns more than about £17,500 will get (net) nothing after taxes, and it that will be extremely transparent, won't help "Assault on middle classes". (5)
Of course this will mostly be nonsense, but that doesn't stop anything. Which means the only real chance it ever has of being implemented is the first term of a landslide government. Nothing in 1997, I fear 2010 is the last chance then until about 2023. (6)
(1) Then get a job, just like anybody else. The CI payments continue whether you are working or not and there is no means-testing, so there is no disincentive to take on a job, however low-paid or short-term.
(2) I don't believe in London weightings, it just adds fuel to the fire and ultimately makes life more expensive for people who live in London, so requiring an even higher London weighting ...
(3) Most Housing Benefit claimants are in social housing, so that can be dealt with by scrapping rents/Council Tax for social tenants and giving them a PAYE code with a [twenty per cent] higher rate of tax; the extra PAYE then gets reallocated to the local councils in which social tenants live.
And to hell with Housing Benefit for the minority of claimants who live in private rented accommodation, which is not only a subsidy to property ownership but a massive incentive for fraud and distortions - it's far cheaper to build more social housing (which is a break-even at worst) than to pay Housing Benefit to private landlords.
(4) I'd restrict Child Benefit to the first three children per mother.
(5) As Ed says: "Would the transparency of this system not be an advantage in selling the idea to the middle classes? Plus the fact that they will benefit most if the current income tax+NI is replaced by a flat rate 30% income tax."
(6) Let's pencil in 2023, then, shall we?
Bayard asked: "CI is just an extension of Child Benefit. How much Child Benefit fraud is there?"
Answer: next to nothing. The amount paid out is ever so slightly less than you would expect by multiplying the number of children by the legal entitlement. And the administration costs are barely measurable as it is nearly all paid directly into bank accounts.
Wednesday 19 August 2009
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24 comments:
In your previous post you suggested a CI level of £70 per week for an adult. I don't see the purpose. It's too low for somebody unemployed (would barely cover the rent for most folks) and not necessary for somebody in employment. So if you think there are people unemployed despite their best efforts to work, who deserve state assistance, you're not helping them. If you don't think anyone requires state funding, just abolish the benefits altogether and be done with it. I have no idea what a flat rate of £70 is supposed to achieve. Have I missed something?
Mark - you're arguging that, e.g. a severely disabled person should just 'get a job, just like anybody else'.
I just don't think you've really understood the difficulties here and also - as a supporter of a CBI - I think this kind of thing would politically damage it beyond repair.
Ian - what it's meant to do is a) provide no disincentive to work other than income tax, and b) reduce administration costs and complexity.
I agree though that the level just doesn't work (which is why when thinktanks propose it they always give a ludicrous figure like £200/week). Mark's figure is affordable, and he is making many things in life free - education, health, social housing - so it's not as bad as it seems.
IanB - see Matthew's second comment. JSA is currently £64 a week and Incapacity Benefit about £80, so £70 seems a fair mid figure. As to housing costs, see my bullet (3), that's that fixed.
"if you think there are people unemployed despite their best efforts to work, who deserve state assistance, you're not helping them."
Firstly CI would help them, as it removes all the artificial barriers to work (de- and re-registering for benefits; means-testing etc), which makes life much easier for employers as well. Secondly, the CI is for everybody - stay-at-home-mums, students, people looking for work or between jobs, the downright lazy, voluntary workers, trophy wives of millionaires ...
Matthew: "Mark - you're arguging that, e.g. a severely disabled person should just 'get a job, just like anybody else'."
No I'm not, never have done, never will. As the earlier post says, there are 363,000 on [severe] disability benefits. The existing Disability living allowance (not to be confused with 'Severe Disablement Allowance!) is perfectly adequate for these purposes elegant, it's a flat-rate, non-contributory, non-taxable amount of between £18 and £70 that is not intended to be a replacement for income from work as a contribution towards the additional costs associated with the disability.
By all means, continue to give these people an average of £50 a week each, that'll cost £1 billion, so what?
It's too low for somebody unemployed
It's higher than the Jobseeker's Allowance, so they are no worse off, plus they would have better incentives.
not necessary for somebody in employment.
Remember the income tax is completely flat rate. This is instead of a personal allowance.
(4) I'd restrict Child Benefit to the first three children per mother.
How about the first three children per father instead? Discuss.
ED "How about the first three children per father instead?
Discuss."
Because who the mother is is far easier to identify/verify. They make a note of the mother's name on the Child Benefit form that they give you in the maternity hospital, which you then complete with bank details and send off by post.
It wouldn't be any different for a child's CI - the DWP can then cross-refer how many children that woman has already claimed for.
Why tyhe first 3, i'd say the first 2 (with the usual caveats).
The problems I foresee are two. First is that people's needs just aren't very similar, and some people will just need more and as Sobers says that immediately brings back form filling, inspectors, admin, etc (1). Also regional differences will present problems with no housing benefit - of course people can move away from London (2), and aggregate housing costs will decline a bit, and it will encourage them to get jobs etc, but these things will either be slow or limited in their effect. I'd probably keep a type of housing benefit (3).
That's hardly an issue. CBI is a fallback which is hardly meant to provide but be a failsafe, should one's ventures not come to fruition. Well handled and set at the right level, it very much encourages people to get out and get gainfully employed
There's a post in the pipeline.
Because who the mother is is far easier to identify/verify.
Exactly. I was thinking about limiting by father to encourage the mother to not only know and name the father, but to care about how many kids he should already be supporting.
Usual caveats
What are they? We are making the scheme complicated again. May be better to just pay for any number.
4) I'd restrict Child Benefit to the first three children per mother.
Why? we need children to pay taxes when they are older to fund the CI. So what if three mothers have one each and one has five? So what if the three women with one are rich and the one with five is poor, we still have only an average of two potential workers per woman. Or is this becoming a moral issue?
Mark, you deleted from my comment (for clarity, I realise) the reference to the other comment, which was exactly on disability. So you can see why i assume we were still referring to it.
The first ZERO children would be the best number.
Parents should also pay for their children's education. The government should loan them the money to do this if necessary, with the interest taken from the dividend.
Re: number of children. The magic figure of three is arrived at by the following logic:
1. CI for children should be considerably less than marginal cost of a child (to prevent 'baby farming' and subsidising religious minorities who would have loads of children anyway).
2. The marginal cost of a child is less and less for each successive child.
3. The bulk of the marginal cost of a child is the loss of the mother's earning capacity. It falls quite sharply with one child, it falls again with the next and a bit more with the next, but after that it makes little difference.
4. Other marginal costs go down for each child as well, as they can share toys and wear hand-me-downs, sit on the back seat of the same car, most holiday resorts give discounts for large families etc.
5. Three quarters of families have three or fewer children, even though marginal cost of fourth child is quite small, so that seems to be a natural upper limit.
6. The replacement rate for a stable population is slightly more than two; we are currently at 1.8, so let's go on the safe side and call it three.
@ AC1, don't be such a spoilsport! I'm sure your mum claimed Child Benefit for you.
5. Three quarters of families have three or fewer children, even though marginal cost of fourth child is quite small, so that seems to be a natural upper limit.
I suspect that the marginal cost of the 4th child is larger than the 3rd. Three children fit in a normal car, whereas four require a minivan. Four children starts to get rather crowded in a "normal" family home - larger homes only really exist at the luxury end of the housing market, so your housing costs start to go nonlinear.
(Is your 3 child limit a lifetime limit or a concurrent claim limit? If a mother has a couple of kids, then has a couple more 20 years later, do you pay benefit for #4?)
Anon, assuming you're right on the higher marginal cost of the fourth child, that's all the more reason to cap the benefit at three children, yes?
If people are going to behave economically irrationally, then they will do so with or without the extra benefit (and the key to a good benefit system is to change people's behaviour as little as possible - neither to subsidise things that people are going to do anyway or pay people to do things that otherwise wouldn't have done).
As to your second question, the answer is "No".
> neither to subsidise things that people are going to do anyway or pay people to do things that otherwise wouldn't have done
Don't bother with the subsidy then!
'Child benefit' should be immediately and comprehensively scrapped. Don't bother means testing it, just abolish it (or maybe phase it out at 33% a year to 2011). Why should I pay for your offspring? If I have any of my own I don't expect them to be subbed by perfect strangers. It would save ten digits a year into the bargain, which in an economy as thoroughly buggered as the UK's ought to be a slam-dunk argument.
@DG why do you assume that scrapping child benefit will result in lowering of taxes, instead of increased government spending elsewhere? More quangoes anyone?
You assume they won't just create more quangoes anyway and create more taxes?
Round and round and round we go, where it stops nobody knows.
If you make CI to low, it doesent help the people that need it, and is giving money to people who don't.
If you make CI to high, it stops their motivation to work.
I suppose it's better than the mess we have now, but it seems to be full of it's own fualts.
A lot of the argument here assumes that the only incentive to work is financial. It is an important one, but people work for all sorts of reasons not just money.
A lot of people currently spending their lifetimes on benefit would actually work if it made financial sense to. But there is also a lot of people, maybe more people than on benefits, that work despite either having no financial need to or despite being better off financially on benefit.
I believe Mark is right that the millions currently not working will decrease if we get rid of the 'benefits trap'.
Why not just scrap welfare and then not bother with a CI?
Firstly, the social unrest would destroy society however moral we think our actions, plus letting people starve is not very moral. We have to recognise that at times - there might not be enough decent paid jobs to go around and that might not be any fault at all of the people looking for them.
Secondly, It would actually cost more in dealing with the social unrest and crime than issuing a CI. A CI is also cheaper than the present welfare state. Basically a CI is a much more simple, cheaper and efficient method of redistribution of income than the present hotch-potch. I would also have a Citizen's inheritance to tackle wealth inequalities - or a high enough Land Value Tax. Another of Mark's favourites.
Oh forgot on the first point, the lack of jobs is one of the reasons I think a CI would have to be higher than £70. Otherwise only decent paid workers (or those lucky enough to be in social housing) could afford shelter in the South East - something that obviously is not going to happen unless we have some Stalinist system. We would need millions of houses in too short a time scale.
I think one of the most important aspects of an equal citizens income is that it has a pressure from everyone for the government to spend less.
Anon: "If you make CI to low, it doesn't help the people that need it, and is giving money to people who don't."
You might as well argue that cutting taxes on higher earners is "giving money to people who don't need it".
NH, 60% of social tenants occupy for free anyway (once you deduct HB and CTB). So why not just make it free (but give them a PAYE code with an extra twenty per cent tax)?
As to Stalinism, I am so hard-right that I have now gone round the clock. I think that there should be a lot more state-owned housing (let at market rents and managed for a profit share by private businesses of course), and the more they build the better - it gets rents down and increase state revenues for miminal outlay (so we can cut other taxes). What's not to like?
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