I’m a member of the Liberal Democrat policy working group looking at our welfare policies (consultation paper due for discussion at the York conference). I have been keen that we discuss the idea of a citizen’s income, aka basic income or universal basic income, as it used to party policy back last century and also is clearly a bit of a coming thing once again.
That said, the more I have looked at the policy, the more I have gone off it, at least for a country such as ours in which housing costs vary so much around the country. The simplicity of a flat rate for everyone is certainly appealing in terms of reduced errors, reduced costs and – most importantly – reduced stress for recipients. There’s also some promising evidence that the reduced stress brings better health.
Citizen’s income: not quite so simple
But once you probe into what a ‘flat’ rate really means, the practical application of it starts looking rather different.
First, there’s the complexity of child costs. These are often shared within a household, so how do you factor in extra support for the costs of parenting? If all the money goes to one person, a way needs to be found to determine who that should be (hello complexity), whilst sharing the support between more than one person then means needing to know who is involved in raising the child in practice (hello double complexity).
There there is the question of extra support for people with severe health and disability challenges – and hence the need for some criteria to judge this by (hello once more complexity).And all of that is fairly simple compared to the housing costs issue. With hugely varying housing costs around the country, a flat rate on paper is far from a flat rate in reality.
Which means a flat rate system drives people away from, say, living in Hampstead and towards living in Hartlepool. There are possibly some benefits in moving away from the country’s south eastern dominance, but enforcing large scale population movements via the welfare system is, shall we say, brave (and not simple either if there is to be any financial support for people with few if any savings being required to move to the other end the country). Or if there is an allowance for varying housing costs, that would also once again add in complexity.
Universal credit better than citizen’s income?
If you end up with a flat rate system that still has add-ons for children, health and housing you end up with something remarkably like a souped-up version of universal credit. (Side note: contrary to 38 Degrees’s attitude towards universal credit, I don’t think it’s helpful to muddle up the principle of universal credit with the specific levels for it that George Osborne is keen on. One of those is a good thing, the other is not.)
An advantage of souped-up universal credit, expanded to include more benefits within its remit, is that it is amenable to step by step expansion, testing the systems as you go at each stage. Which given who loses out when big bang welfare plans go wrong, is rather attractive to me.
Incremental simplification, rather than a citizen’s income, therefore looks the way ahead to me at the moment.
UPDATE: A few years on, I returned to this topic in a podcast discussion.