Citizen’s income: The future for welfare?

Our benefits system is no longer fit for purpose. A new paradigm is required, and that paradigm is a Citizen’s Income, says Malcolm Torry

Systems evolve. As the palaeontologist Pierre Teilhard de Chardin has described it, each time the evolution of planet Earth reaches a plateau a new creative direction emerges, and that in turn leads to a plateau, and so on. Thomas Kuhn describes the evolution of science similarly.

A stable scientific consensus ceases to explain the evidence; a period of turbulence occurs; and then a new consensus emerges – a new paradigm – that explains what the previous consensus failed to explain: and then the process starts again.

The UK’s benefits system is a system that evolves. Stability is followed by turbulence as the system ceases to respond to new social, economic and labour market contexts: and then a new direction more in tune with contemporary society and economy might emerge.

The last major upheaval was during the Second World War when the Beveridge Committee was tasked with tidying up social insurance (contributory) and means-tested benefits: but it also set a new direction. William Beveridge wrote into the preface of his report an unconditional family allowance for second and subsequent children in every family.  This was a new direction that the social and economic conditions of the time required.

The system of universal, means-tested and social insurance benefits that the Beveridge report bequeathed to us has not changed for seventy years. Minor details have altered (for instance, means-testing has been extended to in-work benefits, and family allowance has been extended to the first child of the family and is now called child benefit), but Beveridge would have recognised the system that we are running today as the system described in his report.

To say that society, the economy and the labour market have changed during those seventy years would be something of an understatement. My grandfather worked for the same engineering firm from when he left school until he retired; my father worked for a handful of different local authorities in the same occupation – housing management – from when he left school until he retired; and my mother had a variety of part-time and full-time posts to fit in with childrearing.

The old system is in turbulence, and a new system

is required. That new system is a Citizen’s Income.

The majority of families that we knew had similar employment experiences and similar structures. All of our children, aged 31, 29 and 26, have already experienced diverse occupations and employment statuses; and the London communities in which we have lived during the past thirty years could not have exhibited more diverse household structures.

Our benefits system was built for my grandparents’ era, was struggling in my parents’ era, and is now an anachronism: and the sad thing is that this anachronism now serves far more people than Beveridge originally intended, and has dug many of them into an inescapable poverty trap. Many households keep only 4p of any extra £1 that they earn because their benefits are withdrawn as their earnings rise: so work search conditions and sanctions are applied to ensure that people apply for jobs that will not benefit their families financially.

It isn’t good for employees or for employers if increased wages don’t generate increased disposable incomes, or if the benefits system assumes that full-time employment is the norm. In a global economy, and in an increasingly global employment market, industry is going to need flexible employment contracts, and many individuals would prefer more flexible employment if it didn’t result in financial insecurity. The problem is that the benefits system makes such flexibility unsustainable.

The same households that suffer from the poverty trap and from the threat of sanctions also suffer the indignity of having to explain to officials the intimate details of their relationships, because if two people are cohabiting then they receive less means-tested benefit than they would receive in total if they were not; and because the benefits system can withdraw up to 96% of the additional earnings of the lowest paid, and the tax system withdraws only 47% of the additional earnings of the highest paid, inequality increases. Both of these mechanisms damage social cohesion.

It’s no-one’s fault. We should not blame the government, companies, political parties, civil servants, claimants, or taxpayers. It’s the fault of a system designed for an era very different from ours.

A new paradigm is required, and that paradigm is a Citizen’s Income: an unconditional and non-withdrawable income for every individual. Because it would not be withdrawn as earnings rose, much of the poverty trap would disappear, and families would be able to earn their way out of poverty. Citizen’s Incomes would provide a secure income floor for every family, so flexible employment contracts would become more of a possibility, and often a welcome one.

Citizen’s Incomes would be paid to individuals, so would suit families and households of any and every kind, without enquiring about anybody’s personal relationships. We would see less inequality because additional wages would have a more positive effect on disposable incomes; and lower inequality, the fact that everybody would receive a Citizen’s Income, and the fact that everybody would be treated the same, would increase social cohesion.

The remarkable thing about a Citizen’s Income is that it is entirely feasible. It could be paid for by adjusting tax allowances and existing means-tested and other benefits; the transition would be easy to manage; and, at the point of implementation, low-earning households would experience no losses and some gains, and households in general would experience either manageable losses or none at all – and any household suffering a minor loss would be able to make it up quickly through additional earned income.

Child benefit and the NHS are important forerunners of the evolutionary step that we now need to take. The old system is in turbulence, and a new system is required. That new system is a Citizen’s Income: an unconditional and non-withdrawable income for every individual.