May 24, 2015 Citizens' Income
Trust Book Review, Opinions & reviews
Donald Hirsch, ‘Could a
Citizen’s Income work?’ A paper commissioned by the Joseph Rowntree Foundation
as part of its Minimum Income Standard programme, and published in March 2015.
www.jrf.org.uk/publications/could-citizens-income-work
The Citizen’s Income Newsletter
usually mentions relevant think tank research and working papers in the ‘news’
section, or occasionally in the context of an editorial, but Donald Hirsch’s
paper is particularly significant and so demands a full review. Its importance
is twofold: it evaluates a number of Citizen’s Income schemes for viability;
and it identifies the changes that might be required in the ways in which the
public and policymakers think about income maintenance if a Citizen’s Income
were to be a possibility. The paper therefore tackles a number of different
feasibilities: financial feasibility, psychological feasibility, and what we
might call institutional or policy process feasibility.
The paper recognises that a
Citizen’s Income would address some very real problems experienced by the UK’s
current largely means-tested benefits system. For instance: a Citizen’s Income
would not be withdrawn as earnings rose, and so would not impose the employment
disincentives that means-tested benefits currently impose; no stigma would be
attached to a Citizen’s Income; and a Citizen’s Income would be simple in
structure and so would not suffer from the complexities of much of the current
system. The full list of arguments on page 4 of the paper is a model summary of
the case for a Citizen’s Income.
The major contribution of the
paper is the way in which it outlines the three ‘seismic shifts’ that would
need to occur in public attitudes if a Citizen’s Income were to be implemented.
The public and policymakers would need to be convinced
1. ‘that everyone should be given some baseline level of
financial support from the state, even if they choose not to do anything to try
to earn money for themselves;’ (p.5)
2. ‘that the basic marginal tax rate should be substantially
higher than it now is, since otherwise almost everybody’s net income from the
state would rise, and there is no obvious way to finance this.’ (p.5)
3. ‘potentially a reduced role of the state in ensuring that
each citizen can afford particular essentials, notably housing and childcare,
through income transfers, if a citizen’s income replaced means-tested payments
for these.’ (p.3)
Hirsch says of the first two of
these seismic shifts:
Politicians are likely to
perceive both of these as unacceptable to voters, a view supported by evidence
on social attitudes. It can be argued that both of these conditions could
become more acceptable under a regime with a citizen’s income than they are
now. Persuading the public and politicians of these arguments, however, would
not be easy. (p.5)
And he says of the third:
Under a system of largely
market-based rents, it would not be easy to include a simple rent element in a
citizen’s income payment without creating shortfalls for some or large
surpluses for others. (p.5)
Particularly in relation to the
first two seismic shifts, Hirsch’s conclusion is that ‘a debate about the
principle of a citizen’s income may thus contribute to a long-term
reconsideration of policies and attitudes towards state support’ (p.3).
The paper contains a useful
study of the differences between Universal Credit, Negative Income Tax, and
Citizen’s Income; a discussion of the ways in which Income Tax would have to
rise to pay for different levels of Citizen’s Income; an exploration of the
different ways in which Citizen’s Income schemes might tackle differing housing
costs; and a discussion of the way in which abolishing tax allowances, such as
the Personal Allowance, rather than simply raising Income Tax rates, could pay
for a Citizen’s Income. It also contains a description of the differences
between the levels envisaged in various researched schemes and the Minimum
Income Standards researched by the Joseph Rowntree Foundation ( – although it
has to be said, of course, that the current benefits system does not come
anywhere near to the levels of the Minimum Income Standards). Then follow
descriptions of the kinds of households to which a Citizen’s Income would tend
to redistribute income, and the important statement that ‘all the [paper’s]
calculations make the simplified assumption of no behavioural change. Knowing
what would actually happen to earned incomes as a result of a citizen’s income
is very difficult, but is likely to affect outcomes quite profoundly’ (p.16).
Then come discussions of household and individual assessment units, the effects
of different approaches to meeting housing costs, and lifecycle redistribution.
A particularly important section is a discussion of a Partial Citizen’s Income
as a stepping stone towards a full one. A partial Citizen’s Income would be
likely to impose losses on low income families if means-tested benefits were
abolished, and to impose additional complexity if they were not. Hirsch
suggests that a Partial Citizen’s Income might be useful if it could be
implemented as one stage of an already agreed plan to implement a full
Citizen’s Income. There is much merit in this suggestion.
Hirsch describes the Alaska
Permanent Fund, and the Namibian and Iranian schemes, but not the more recent
Indian pilot project. He correctly points out that these schemes have not
reduced employment market activity, and might also have said that in the
Namibian pilot project a significant increase was in evidence.
Hirsch makes the important
point that income is different from such services as healthcare and education
because households generate income as well as require it. This means that it is
important to ensure that a Citizen’s Income scheme does not inadvertently
reduce the amount of income created, and that both removal of the Personal Tax
Allowance and higher Income Tax rates might have such effects on earned
incomes. In his concluding section, Hirsch suggests that a Universal Credit
with a lower taper rate might be a useful step in the direction of a Citizen’s
Income. He might also have pointed out that Universal Credit is not universal,
is not based on the individual, is not unconditional, is still means-tested,
and is regressive.
When it comes to the study of
particular Citizen’s Income schemes in the paper’s appendices, the paper makes
two valid points: that the immediate implementation of a ‘full’ Citizen’s
Income is unlikely to be feasible in the short term; and that, because a
‘partial’ Citizen’s Income would not fully replace means-tested benefits, it
could make the system even more complicated.
Following a description of the
Citizen’s Income Trust’s 2013 illustrative scheme, Hirsch proposes changes and lists
their additional costs, which is useful, but is not itself a criticism of the
scheme as published. He then studies the Institute for Social and Economic
Research working paper proposals (reprinted in the previous edition of this
Newsletter), and correctly recognises that in order to reduce losses in
disposable income, a means-tested system needs to be retained and that this
would create an additional level of complexity.
Hirsch’s descriptions of these
recently researched Citizen’s Income schemes are largely accurate. There are
places in the discussion at which a broader canvas would have been helpful. For
instance, the discussion of the higher rates of Income Tax that would be
required might have included consideration of overall gains and losses – for if
a household’s Income Tax rate rises, but the overall effect of the Citizen’s
Income, increased Income Tax, and alterations in other benefits, leaves the
household with the same disposable income, then for households originally on
in-work or out-of-work means-tested benefits, it really is no problem that
Income Tax rates have risen – except that, as Hirsch correctly points out,
Income Tax rates are a psychological issue as well as a fiscal one: and it is
in the area of the psychological issues related to Citizen’s Income that his
paper makes a most useful contribution. An additional important issue is that
where households are not currently on means-tested benefits, and Income Tax
rates rise, then even if there is no overall loss in disposable income at the
point of implementation of a Citizen’s Income, those households’ marginal
deduction rates will rise. This might result in behavioural change in the
employment market.
A further issue to which Hirsch
correctly draws attention is that of redistribution. For schemes in which
means-tested benefits are abolished, redistribution effects could be
substantial. Hirsch evaluates a particular scheme of this nature, and concludes
that
the overall distributional
effects would include, but not be restricted to, a redistribution of income
from better to worse off groups. There would also be a significant
redistribution from people without children to those with children among lower
earners, and also some losses for those with very low part-time earnings.
Finally, … among groups presently receiving transfers from the state, couples
would do relatively better than single adults (with and without children).
(p.15)
So either such redistributional
effects would need to be justified, or a different kind of scheme would need to
be selected. Hirsch does not study in detail the redistributional effects of
Citizen’s Income schemes that retain means-tested benefits, where those
means-tested benefits are recalculated by taking into account households’
Citizen’s Incomes as existing income. This would require the kind of
microsimulation work contained in the Institute for Social and Economic
Research working paper (Torry, 2015). The low levels of gains and losses
generated by such modelling of the alternative schemes in that working paper
suggest that redistributional effects would be far less significant than for
schemes that abolish means-tested benefits. Clearly further research is needed
in this area.
In relation to those same
alternative schemes, and to his discussion of housing costs on p.13, Hirsch
might have mentioned that the schemes researched in the 2015 Institute for
Social and Economic Research working paper are clear that housing costs support
would be left as it is under the current system. A further issue that Hirsch
might have discussed is that the ISER paper employed the Euromod modelling
software and Family Resource Survey data to generate entirely robust costings
and results on gains and losses. As he recognises on p.26, his own paper does
not calculate precise tax rates and income outcomes. It would have been able to
do so if his suggestions had been modelled using Euromod.
This review cannot do proper
justice to the detail contained in Hirsch’s well-researched and well-ordered
paper, but we hope that it will encourage our readers to read his paper for
themselves, to study his arguments, and to ponder his conclusions. Any future
study of the feasibility of a Citizen’s Income, and of particular Citizen’s
Income schemes, could do a lot worse than set out from the arguments of this
paper.
Hirsch has already done the
Citizen’s Income debate a significant service, and we hope to see further such
analysis and argument in the future. What would be particularly useful would be
to have a side-by-side evaluation of the current benefits system and of a
Citizen’s Income scheme (both with and without accompanying means-tested
benefits), treating the two systems as competitors on a level playing field,
and evaluating them according to a set of clear criteria. As Hirsch says,
the present system suffers from
strong negative perceptions and a consequent lack of political support, which
has helped the implementation of recent cuts in the real value of benefit
levels without obvious political fallout. If a citizen’s income or any other
reform could command public confidence, this would help strengthen the
underpinning of a system which ensures that nobody in the UK lacks a basic
level of income. (pp.4-5)
“I am Me. In all the world,
there is no one else exactly like me. I own everything about me: my body, my
feelings, my mouth, my voice, all my actions, whether they be to others or
myself. I own my fantasies, my dreams, my hopes, my fears. I own my triumphs
and successes, all my failures and mistakes. I know there are aspects about
myself that puzzle me, and other aspects that I do not know – but as long as I
am friendly and loving to myself, I can courageously and hopefully look for
solutions to the puzzles and ways to find out more about me. However I look and
sound, whatever I say and do, and whatever I think and feel at a given moment
in time is authentically me. If later some parts of how I looked, sounded,
thought, and felt turn out to be unfitting, I can discard that which is
unfitting, keep the rest, and invent something new for that which I discarded.
I can see, hear, feel, think, say, and do. I have the tools to survive, to be
close to others, to be productive, and to make sense and order out of the world
of people and things outside of me. I own me, and therefore, I can engineer me.
I am me, and I am Okay.” Virginia Satir
“My love, still I think that I
see her once more,
But, alas! she has left me her
loss to deplore—
My own little Kathleen, my poor
little Kathleen,
My Kathleen O'More!
Her hair glossy black, her eyes
were dark blue,
Her colour still changing, her
smiles ever new—
So pretty was Kathleen, my
sweet little Kathleen,
My Kathleen O'More!
She milked the dun cow, that
ne'er offered to stir;
Though wicked to all, it was
gentle to her—
So kind was my Kathleen, my
poor little Kathleen,
My Kathleen O'More!
She sat at the door one cold
afternoon,
To hear the wind blow, and to
gaze on the moon,
So pensive was Kathleen, my
poor little Kathleen,
My Kathleen O'More!
Cold was the night-breeze that
sighed round her bower,
It chilled my poor Kathleen,
she drooped from that hour:
And I lost my poor Kathleen, my
own little Kathleen,
My Kathleen O'More.
Bird of all birds that I love
the best,
Is the Robin that in the
churchyard builds his nest;
For he seems to watch Kathleen,
hops lightly o'er Kathleen,
My Kathleen O'More.”
— Kathleen O’More - James Nugent Reynolds
