What next for a Citizens’ Income?

I am disappointed that the Green Party has dropped a Citizens’ Income from its manifesto, but on reflection not surprised. I have been a big fan of CI for ages. It has widespread support for more than a century and from varied political viewpoints.

The problem is that the introduction at the proposed rate, £3744 pa, would be a huge upheaval to the whole financial system, almost certainly with unforeseen economic and cultural side effects. I think there was the intention to fix the worst unfairnesses with “sticking plaster” money but the amounts involved would probably make this unfeasible.

There is also the big sticking point in selling the idea to voters: Many individuals baulk at the idea of their taxes being just “given away”. Others have an objection to some of their taxes going to the wealthy and would want to means test the CI.

I suggest way round this is firstly to start small, get the underlying machinery up and running, and only then gradually increase the amount. Secondly to make a point of paying the CI only from indirect taxes and make it clear that these payments do go only to the CI and are separate from general taxation which goes to one big pot at the Treasury.

For example we could start off by taking fuel duty entirely out of the tax system and putting it into this initial partial CI. I think it would amount to a bit over £400 per person per year. Initially would replace the same amount of existing benefits/child allowance/state pension. The idea is to set up the system without making significant changes to the overall money distribution, and with a low requirement for “sticking plaster” funding.

Once up and running things get interesting. An increase in fuel duty would result in a simultaneous increase of the CI, demonstrating how it works and giving voters confidence in the underlying fairness. I estimate that, for the average car owner, who does about 7900  miles pa, an increase in fuel cost would be about the same as the increase of CI. The majority of people who will be doing lower milages, will be better off.

Once people have accepted the new system  and seen how it works, other levies can be added to build up to a sensible CI. In particular a carbon levy in which the money raised could go entirely to the CI, providing a simple means of achieveing revenue neutrality.

Ultimately the CI system would replace the bulk of welfare and state pensions,  the NHS  could be treated as part of the CI, funded from levies and not income tax (currently it costs £1800 per person pa). All this would result in a big reduction in the role of the state.

Currently indirect taxes are regressive but, when contributed to a CI,  would be strongly progressive. It may be possible to make income tax less progressive!

We need to work out a long term plan for the introduction of a CI in a way that is cautious and acceptable across the political spectrum and to seek the necessary cross party support.

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One Response to What next for a Citizens’ Income?

  1. Charles Walker says:

    I don’t believe that the Citizens’ Income was ever in the Greens’ 2015 manifesto. It was and remains party policy, but is a long term aim and as such will not be in the manifesto this year.

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