Recently Tim Harford, in an
article in the Financial Times, talked about the idea of a 'basic income' -
a much vaunted idea in some circles and a much deprecated idea in others. It's
not even an idea that's more popularly left or right - figures as far to the
right as Friedrich Hayek and Milton Friedman, and groups as far to the left as
the Green Party have both come out in support of it, although as you'd expect they
differ on the nuts and bolts of the mechanism.
But can it work? Obviously,
as most people would concur, it's ridiculous and absurd to offer a basic income
universally, because lots of middle and high earners don't need it. However, a
basic income given to people who have no work-based earnings or low earnings from
work would be okay, as long as it tapers out according to a certain threshold
of earnings, but in a way that doesn't disincentivise work either.
Whether there is a basic
income system that could get the balance right between managing the varying and
complex needs of a whole range of people and not being too expensive and
bureaucratic, I'm not sure. I'm even less sure about whether our politicians
are intelligent enough to devise such a system.
If such a thing were to
work then off the top of my head I could envision it being along these lines. The
government could set a basic income of x per year by using a cut-off point of y
per year, and a withdrawal rate of 50%. That means that a basic supplement to a
person's income would be equal to 50% of the difference between annual income
and the y cut-off point. So a person out of work would get the basic income of
x, and a person who earned an amount lower than y would get a supplementary
income, and this keeps narrowing as earnings increase up until y.
So, picking a figure for
simplicity's sake (a proper study would need to be done by people with all the
facts to hand to find the optimal figure), if y = £17,000, and the basic income
is £8,000, someone earning nothing gets a basic income of £8,000, someone
earning £11,000 per year gets a £3,000 supplement (half the difference between
his or her earnings and y), and someone on £15,000 per year gets a £1,500
supplement, and so on, and then when y is reached (£17,000) there is no supplementary
income, and y is the point at which every pound earned thereafter is taxed. There are still serious issues about how any basic income would be paid for - because simply raising taxes to cover the costs only adds to some of the problems the government would be looking to solve.
Whether it's with a basic
income, or other kinds of change, something needs to be done to revise our
welfare system - it is anachronistic and has evolved far beyond the original
scope of its intention, in a country that's very different from the one at the
time of its inception in the late 1940s. The method of tackling a diverse range
of welfare needs in a one-size-fits-all fashion is now entirely unworkable, as
is the perverse conflict between whether a claimant is better off working or on
benefits. Basic income or no basic income, the UK
