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Citizen's Income Financing..

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It seems to come up a lot in discussions of a Citizen's Income about what it would cost.

Thought I'd go through the numbers..

Starting assumptions:

- It will apply to UK citizens only.

- It will be £6k a year.

- It will replace pensions, benefits, tax credits, and housing benefit.

Population data here

I think there is a prerequisite as well:

- Housing costs MUST be brought down to somewhere sane. But that's a prerequisite for any reasonable economy..

Total population is 63 million, of whom 15 million are under 20. This gives the first problem: How do we treat kids? If we give everyone a CI from birth, then there's a massive incentive to have lots of children. If we give none then you will be putting single parents into serious poverty (and this applies to accidental single parents as well). I'm going to choose a 50% rate, which is probably at the generous range.

This gives a raw CI bill of £333 billion.

Now.. Pensions come in at £144 Billion. Roughly speaking, £30 billion of this is public sector pensions, the rest is standard pensions. So that gives us £114 billion of the cost.

Welfare as a general category comes in at £110 billion. I'm going to include all of this..

So.. Take This off of the 'Raw' bill and we have about £110 billion to find.

The current total of NI and Income tax is about £260 billion per year. I'd assume that part of the big CI overhaul would be to merge them (nb: Employer's NI is a problem here..I see it as an anachronism, but it might be tricky to force employers to pay staff with it if it's scrapped, rather than just keep it themselves. ). The main thrust here is that we can significantly hike tax rates - because it's offset by people receiving CI; a flat rate of perhaps 45% might be needed, after some allowance.

I'll assume that efficiency savings would be swallowed up by extra costs below:

Remaining issues..

- Childcare. The principle of Ci is that 'work always pays'. Not if you have to put kids in day care.. so do we have to provide free daycare?

- Disability. Like it or not, some people are genuinely disabled. Help will be needed there as well.

- Housing. As above, cheap housing is a prerequisite.

- Minimum wage. I would not want to scrap it, because then the CI might end up subsidizing extremely low wages indeed, but there might be a reduction.

- Is £500/month viable to live on? 'just about, if housing is cheap' is probably the answer..

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The CI income levels purposed by the main CI supporters on this forum are less generous than your figures, the idea is that a CI should be high enough to pay for the very basics but not enough to reduce the incentive to work.

Assuming CI levels of

An adult - £350 per month

pension rate, starting at 70 years - £600 per month

Severe disabled person - £600 per month

1st Child - £170 per month

2nd Child - £110 per month

3rd Child and above - £0

I've getting a total of £260BN - £280BN depending on source of the demographic information I'm using.

I can understand the attraction to a CI but I agree with Damik, I'm not 100% convinced that it is viable due to

1. Affordability

2. loose border controls

I would like to be convinced otherwise because the current system is appalling.

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I can understand the attraction to a CI but I agree with Damik, I'm not 100% convinced that it is viable due to

1. Affordability

2. loose border controls

I would like to be convinced otherwise because the current system is appalling.

If it's not affordable, then our current system isn't affordable, or our current system is leaving too many people without enough money (and I don't mean the tax-payers).

Anyone earning enough won't see any benefit - they will pay out more in tax to support CI than they get from it. The trick is to taper to ensure that work *always* pays. Border controls and discouraging people from having kids *just* to get the CI can be handled with the same measure - state that initially you get 0%, increasing by 5% each year of residence (i.e. birth or date of arrival).

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The CI income levels purposed by the main CI supporters on this forum are less generous than your figures, the idea is that a CI should be high enough to pay for the very basics but not enough to reduce the incentive to work.

Assuming CI levels of

An adult - £350 per month

pension rate, starting at 70 years - £600 per month

Severe disabled person - £600 per month

1st Child - £170 per month

2nd Child - £110 per month

3rd Child and above - £0

I've getting a total of £260BN - £280BN depending on source of the demographic information I'm using.

I can understand the attraction to a CI but I agree with Damik, I'm not 100% convinced that it is viable due to

1. Affordability

2. loose border controls

I would like to be convinced otherwise because the current system is appalling.

As above, I don't think that affordability is a huge issue, most of the cost comes from existing benefits. Which is really the principle, the benefits system is trying to get similar results, but going about it in the most difficult and unpleasant way possible.

£350/month seems unviable to be honest, if you have to find rent as well.

Border controls are interesting. Obviously this has to be a UK citizen only thing - and the combination of higher tax rates plus competing with subsidized local labor may work against immigrants. And a key advantage: An unemployed person can take a few weeks' casual work without having to go through bureaucratic hell with the benefits system.

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Ultimately, logic says that it must be affordable. We currently have an inefficient system that guarantees that nobody starves or (in theory) goes without shelter. A more efficient system that achieves the same thing cannot fail to be affordable if the sums are done correctly!

As an aside, I'd also like to see more of the taxation burden shifted from earned income to resource consumption.

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Ultimately, logic says that it must be affordable. We currently have an inefficient system that guarantees that nobody starves or (in theory) goes without shelter. A more efficient system that achieves the same thing cannot fail to be affordable if the sums are done correctly!

Precisely. Can any of the CI nay-sayers give as logical an argument as this?

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If it's not affordable, then our current system isn't affordable, or our current system is leaving too many people without enough money (and I don't mean the tax-payers)..

The current system is both unaffordable AND leaving many without enough money to live, some people are receiving far too much money (tax credits, combinations of disabled/child benfits etc.), others are receiving too little (unemployed people who are under 25 for example).

... Border controls and discouraging people from having kids *just* to get the CI can be handled with the same measure - state that initially you get 0%, increasing by 5% each year of residence (i.e. birth or date of arrival).

I've mentioned this before but I did voluntary work at a charity, helping people fill in DLA forms. A very high number of those were from eastern europe and many of them went back to their home countries while still receiving DLA.

Unless the Government starts to record people entering and exiting the county, a CI won't work. You'll have people emigrating to another country, earning and paying tax aboard and not informing the UK Government so that they can continue to receive CI.

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The CI income levels purposed by the main CI supporters on this forum are less generous than your figures, the idea is that a CI should be high enough to pay for the very basics but not enough to reduce the incentive to work.

Assuming CI levels of

An adult - £350 per month

pension rate, starting at 70 years - £600 per month

Severe disabled person - £600 per month

1st Child - £170 per month

2nd Child - £110 per month

3rd Child and above - £0

I've getting a total of £260BN - £280BN depending on source of the demographic information I'm using.

I can understand the attraction to a CI but I agree with Damik, I'm not 100% convinced that it is viable due to

1. Affordability

2. loose border controls

I would like to be convinced otherwise because the current system is appalling.

I think those figures are about right and if we got a CI would be what we would get.

Youd change some of the tax thresholds as well so the cost above now would be around £30-£40 billion.Id expect the higher GDP growth from a CI to pay for that very quickly.

The key to CI compared to benefits is to make it very very difficult indeed to survive on CI alone.Without any means test though it makes all work pay and would give everyone a chance.

I understand why people think a CI will never come in,and it does have it own problems.Many people would lose a massive amount of money.

However long term it really is the only solution to the welfare problem.

Welfare would be far better if it paid families much less (not single people,they are already minimum) but with less conditions and brutality.

As ever the main block is house prices and rents.However government shouldn't be considering that when setting a CI.They should set it at a level where people have to live with other family.Councils would all probably have to be funded to provide some kind of emergency shared accommodation as well.

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This gives a raw CI bill of £333 billion.

http://www.ukpublics...x.php?year=2012

in 2012 we spent about £244 billions on all state paid pensions and social care

problems:

- you are missing £89 billions

- you still have the annual deficit of £120 billions

- all state pensions would be flat rate ignoring if person was working, not working, high/low earner in his/her life

- all of this (like pensions, care homes, job centers, council support programs) would be terminated (public staff fired) and replaced somehow by the CI receiver direct payments

----------------------------------------------------------------------

and even if house prices fall you would still need to pay same £333 billions. however if the house prices fall now you would immediately save e.g. 50% of the current £16 billions spent on HB

----------------------------------------------------------------------

so where are these £89 billions going to come from? And I do not think we should see more growth as you will have to increase somehow the taxation and redistribute wealth 37% more (333/244) than now ???

Edited by Damik

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http://www.ukpublics...x.php?year=2012

in 2012 we spent about £244 billions on all state paid pensions and social care

problems:

- you are missing £89 billions

- you still have the annual deficit of £120 billions

- all state pensions would be flat rate ignoring if person was working, not working, high/low earner in his/her life

- all of this (like pensions, care homes, job centers, council support programs) would be terminated (public staff fired) and replaced somehow by the CI receiver direct payments

----------------------------------------------------------------------

and even if house prices fall you would still need to pay same £333 billions. however if the house prices fall now you would immediately save e.g. 50% of the current £16 billions spent on HB

----------------------------------------------------------------------

so where are these £89 billions going to come from? And I do not think we should see more growth as you will have to increase somehow the taxation and redistribute wealth 37% more (333/244) than now ???

You would need to get a grip with corporate taxation which I think brings in £40BN a year. Its not enough.

My thinking would be that CI would have to be around current JSA single rate per person plus say something around the LHA rate for a single room in a shared house, around £100-120 a week, but this is probably a bit too high to be affordable.

There would in theory be big savings in admin and civil service. For example I'd get rid of the Jobcentre network which almost costs to run what it gives out in JSA and doesn't really get people jobs. I'd keep the online presence.

Not sure what would be done with NMW. Would this remain and employers paying NMW less CI? Or would that create bizarre disincentives again? If employers wage bills were reduced the difference could be captured through CT.

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Not sure what would be done with NMW. Would this remain and employers paying NMW less CI? Or would that create bizarre disincentives again? If employers wage bills were reduced the difference could be captured through CT.

I can't see any reason to have a NMW if you have a CI.

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You would need to get a grip with corporate taxation which I think brings in £40BN a year. Its not enough.

in majority of markets there is a quite aggressive competition between the corporates and the profit margins are slim

so any increased taxation would mainly go to the end consumer price

perhaps we would hit a bit the shareholders if we are lucky. but the largest shareholders these days are the pension funds

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I can't see any reason to have a NMW if you have a CI.

No I can't but would all wages fall to take into account CI?

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No I can't but would all wages fall to take into account CI?

Yes they would. They'd fall to whatever level would create a balance between supply and demand for particular jobs.

This would also have the effect of making it viable for companies to take on people on low wages to do jobs that would otherwise not be worth offering. It's what tax credits currently aim to achieve, but without the Byzantine complexity.

Edited by snowflux

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so where are these £89 billions going to come from? And I do not think we should see more growth as you will have to increase somehow the taxation and redistribute wealth 37% more (333/244) than now.

This has already been explained.

Most people in work would see little change, because they would pay more in taxes, but receive it back as CI.

Having house prices (and rents) drop means that a person can realistically live on CI.

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This has already been explained.

Most people in work would see little change, because they would pay more in taxes, but receive it back as CI.

Having house prices (and rents) drop means that a person can realistically live on CI.

it was not. so where are these missing £89 billions going to come from?and also there is still the deficit of another missing £120 billions

Edited by Damik

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Not sure what would be done with NMW. Would this remain and employers paying NMW less CI? Or would that create bizarre disincentives again? If employers wage bills were reduced the difference could be captured through CT.

In theory, CI removes the need for a NMW.

In practice, I think there would be a danger of marginal wages collapsing to almost trivial levels, because people could afford to work for very low wages, so a reduced NMW would help.

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...My thinking would be that CI would have to be around current JSA single rate per person plus say something around the LHA rate for a single room in a shared house, around £100-120 a week, but this is probably a bit too high to be affordable.

Rough calculations - an adult CI of £100/week increases CI cost to approximately £300Bn, an adult CI of £120/week costs increase to £340BN.

That's with making no changes to pension/disabled/child rates in my first post.

...There would in theory be big savings in admin and civil service...

I don't know the answer to this for sure, but isn't the administration figures already included in the DWP budget? If so, then there is no extra saving to be made.

I can't see any reason to have a NMW if you have a CI.

I agree but guess NMW would need to frozen to avoid any sudden shocks to job market?

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http://www.ukpublics...x.php?year=2012

in 2012 we spent about £244 billions on all state paid pensions and social care

problems:

- you are missing £89 billions

- you still have the annual deficit of £120 billions

- all state pensions would be flat rate ignoring if person was working, not working, high/low earner in his/her life

- all of this (like pensions, care homes, job centers, council support programs) would be terminated (public staff fired) and replaced somehow by the CI receiver direct payments

----------------------------------------------------------------------

and even if house prices fall you would still need to pay same £333 billions. however if the house prices fall now you would immediately save e.g. 50% of the current £16 billions spent on HB

----------------------------------------------------------------------

so where are these £89 billions going to come from? And I do not think we should see more growth as you will have to increase somehow the taxation and redistribute wealth 37% more (333/244) than now ???

I think the best way to plug the gap would be:

make the total citizens income about $200Bn. That will reduce the deficit massively.

hire more police and open more prisons to take care of the resultant crime wave.

eliminate the minimum wage entirely. Give corporations a tax rate of 15% but without allowing them to be "tax efficient", enforce it with a special tax police.

Make the citizens income about:

£80 per week per adult (including the pensioners) (not sure if this adds up!)

£30 per week for the first child

£25 per week for second child

£10 per week for third child

£0 per week for any more children

(above numbers are rough... they can be played around with, but eliminate all other "benefits" like housing, disability, pensions, SMA etc...)

Restrict this to British Citizens only (although I am not sure if EU rules allow this?), if not restrict it people who have been resident for a minimum of 15 years unless their parents are UK born.

Provide free childcare for all children from 6 months on, fund this from the education budget by suitably reducing state wages and pensions.

Limit all civil servant to a maximum of 200% of the mean salary within the country.

have a fixed 30% tax rate above 20k income.

eliminate VAT and kill off carousel fraud once and for all... that should help people adjust to less income.

This way the UK can attract manufacturers to begin working in the UK, attracted by the low salaries and taxes... it would reinvigorate the north, and provide a "minimal" income so people (the long term unemployed) can at least survive between jobs and they don't have to play cat and mouse with the byzantine "social security" rules and regulations...

it would also "normalise" house prices to their true value.

slash the cost and complexity of planning regulations. Let people hire contractors buy a plot of farmland and build a house on it. have "easy to use" zoning by say allowing 30% of a field to be constructed on near a town, and this reducing the further out you go. allow houses up to 3 storeys to be built with an "expedited" planning permit costing £200 on farmland, with the owner having to pay connection fees for water/elec and fund their own access road (to a minimum standard).

Eliminate the deficit and maybe allow the govt to actually begin paying down the national debt... that little thing in the corner.

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The current system is both unaffordable AND leaving many without enough money to live, some people are receiving far too much money (tax credits, combinations of disabled/child benfits etc.), others are receiving too little (unemployed people who are under 25 for example).

I've mentioned this before but I did voluntary work at a charity, helping people fill in DLA forms. A very high number of those were from eastern europe and many of them went back to their home countries while still receiving DLA.

Unless the Government starts to record people entering and exiting the county, a CI won't work. You'll have people emigrating to another country, earning and paying tax aboard and not informing the UK Government so that they can continue to receive CI.

Border control is only an issue if the funds are raised involuntarily.

If you have a subscription based model, then it doesn't matter where people live.

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If the Citizens Income was as taxable as any other income, then there would be an automatic increase in income tax take.

£6000 would take up a huge chunk of the personal allowance, and push many people into higher tax brackets. Thus while in theory everyone gets the same amount, in practice those more in need would get to keep more of the money, and the costs might not be as astronomical as suggested.

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In theory, CI removes the need for a NMW.

In practice, I think there would be a danger of marginal wages collapsing to almost trivial levels, because people could afford to work for very low wages, so a reduced NMW would help.

Why would anyone bother working for such rates?

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In theory, CI removes the need for a NMW.

In practice, I think there would be a danger of marginal wages collapsing to almost trivial levels, because people could afford to work for very low wages, so a reduced NMW would help.

Why would this matter? If a job is only worth a trivial amount of money to the company, why prevent the company from offering it? Since CI would ensure that the basics are provided for, no-one would be forced to take the job, but it would be available for anyone who did wish to take it.

This really is the beauty of CI. It nicely separates the obligation to support the weakest members of society (the government's job) from the business of creating wealth (the companies' job). The current system inefficiently and uncomfortably mixes these roles.

Edited by snowflux

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Why would anyone bother working for such rates?

I'm sure there are plenty of people who would work for less than the current minimum wage if their income was added to their CI rather than replacing their benefits!

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