Transition to Citizens Incomes (2018).

Alison Marshall, July 2018.

A Basic Income (UBI) is a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement.
( ). A Citizens Income is a Basic Income payable as a right of citizenship.

In May 2017, an academic study of a citizens income scheme used computer simulations to estimate its marginal effective tax rates (METRs). (Effective tax rates include benefit withdrawal, and the marginal tax rate is the rate on the last part of an income, and so on any increase in that income.)

With a small wage increase, about 3 percent, more people had very high METRs in the Citizens Income system than in the current UK system!
( ).

A low Citizens Income is messy. Lots of extras are needed to compensate people who would otherwise be losers, and the more means-tested extras there are, the higher the METRs are likely to be.

In June 2018 the National Audit Office reported that the new Universal Credit is costing more to administer than the six benefits it replaced, and is unlikely to ever deliver value for money. (Cahal Milmo, 15 June 2018, ).

The Guardian added that the NAO concluded that it would cost too much to halt the Universal Credit at this stage.
( ).

The Universal Credit should be replaced with a Guaranteed Minimum Income (GMI) as soon as possible. Housing, disability, and child benefits would be reinstated or retained as separate benefits. The withdrawal rate for the GMI would be at the level that set the rate of effective tax, that is income tax plus GMI withdrawal, equal to the top rate of income tax on high incomes.

The transition to a Citizens Income could be completed with an increase in income tax rates in the centre of the income range, so that the top rate of income tax is reached as soon as all of the GMI has been withdrawn. Benefit withdrawal would be redefined as income tax, so the GMI would become a Citizens Income combined with a flat rate income tax.

Alternatively, a lower flat rate tax could be achieved, at the level of the marginal tax rate in the centre of the income range, by reducing the GMI withdrawal rate and the other income tax rates. Revenue could be maintained by increasing carbon tax instead.

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