A few years ago, when I first heard about the concept of a Citizens Income – also known as a Universal Basic Income – I was very sceptical. My initial reaction was that this was unaffordable and of doubtful benefit – why should we pay people to do nothing?
I quickly saw the benefits of removing people from a welfare trap – where claimants are discouraged from taking on basic employment or starting a business as they would lose some or all of their existing welfare payment. Replacing the existing complicated and conditional welfare payments with a simplified, universal and unconditional payment would guarantee existing levels of welfare payments while providing an opportunity to earn additional income.
But that still doesn’t address the issue of affordability – especially as the payment would be made to everyone – not just the disadvantaged.
The first consideration is how much should a UBI payment be?
Pensioners already receive a Universal Basic Income – in the form of the State Pension – although there a few strings attached. I suggest that a similar amount should be used as the basis for a UBI paid to every adult in Wales. UBI payments for pensioners would clearly be cost neutral – the payment strings would be removed, but so would the bureaucratic costs of administering these payments.
However, I would initially start at 50% for 18 year olds, ramping up to 75% at age of 21 and 100% at age 25, which reflects the reduced needs of younger people who are often living at home.
The unemployed would receive UBI in place of unemployment benefits or Job Seekers Allowance (or whatever the complicated welfare credits system is currently called). By removing all of the restrictions and conditions associated with these payments, then more people would receive these payments. But the increased cost of this should be reduced by removing the army of Social Security bureaucrats who currently administer these schemes, and so the payments to the unemployed would be near cost neutral.
Of course making a universal payment to every employed person would be very expensive – and arguably unnecessary – but this should be funded by reform of the existing income tax system. By removing all existing personal income tax allowances, then every pound of earned income above the UBI payment would immediately attract tax payments. The rate of income tax would need to be adjusted to keep the overall cost neutral – but the overall effect would be a very fair and progressive tax. The poor in our society would immediately benefit – including lower paid workers as well as unemployed – who would be able to supplement their ‘welfare’ income by taking on paid income. Meanwhile employers should find they can more easily fill those lower paid jobs and zero-hours contracts as the labour pool increases. UBI payments would also provide a safety net to anyone trying to start their own business.
But in order to avoid Wales being swamped by ‘welfare tourists’ from over the border, a set of eligibility rules would need to be established – for example a minimum residency requirement of say 3 years living in Wales – and measures would need to be in place to counter fraud, but these will be much simpler than the existing systems. The simpler the system, the less opportunities to cheat it!
Establishing a Citizens Income or Universal Basic Income will not be easy, but it should be achievable at little or no cost, and with huge benefits for society. Independence will give us a once in a lifetime opportunity to create a better and fairer Wales.