The bloggers giving chapter and verse details of the workfare regime being imposed by the government on increasingly desperate victims are missing a crucial trick. They are understandably focussed on the grim reality of the workfare Jobmatch scams farce and ATOS ‘fit for work’ quotas, so that even if they have read my blog, they have difficulty in seeing it as relevant.
The Citizens’ Income principle gives them powerful ammunition, supported by of all things, a report commissioned by Iain Duncan Smith. The anti-cuts boycott workfare movement are demanding simply that the clock be put back. But in doing so they fall into a trap set by the government and the ‘anti-scrounger’ press. The welfare state always had a serious flaw. The ‘Poverty Trap’ and ‘Scroungers’ Charter’ are both possible descriptions of this fault – depending on your agenda. The withdrawal of means tested benefits is a form of taxation. This creates the poverty Trap, but it creates a serious work disincentive at low incomes. The graph above is from an Iain Duncan Smith think tank report commissioned whilst he was still in opposition: Dynamic Benefits: Towards Welfare that Works (2009)
I have been advocating a Citizens’ Income for 40 years now, but Dynamic Benefits makes the social justice side of the case for a CI far better than I have done. Throughout I have been saying:
Taxes are paid by individuals to public bodies;
Benefits are given to individuals by public bodies
Therefore, to the individual the withdrawal of a benefit is the same asa tax – it is a tax.
There is of course no mention of a Citizens’ Income in Dynamic Benefits, nor any link to the environment. It is after all an important part of the basis for the government’s ‘reforms’. Even so, incredibly, this report by the Economic Dependency Working Group of a right wing Think Tank spends the first 150 pages making a devastating and thorough critique of the effect of the withdrawal of means tested benefits. Dynamic Benefits explains:
“Those who avoid entering the labour market due to the withdrawal of benefits are making a rational decision”
Draw a vertical line at any point on the graph above, and it will show the total proportion of income clawed back from the individual by tax or tax equivalent (benefit withdrawal). Those who earn just too much to qualify for benefits lose a larger part of their income than bankers or premier league footballers. The extremely important point which gets missed is that everybody who does not qualify for JSA or Housing Benefit pays this tax on the first part of their income. This only matters for the unemployed, or those on low incomes. No one else notices. All the Citizens’ Income does is change this disguised tax – on everybody – into a real tax just on higher incomes.
If all you do is demand the restoration of benefits, you allow those with the workfare agenda to assert that some are indeed making that rational decision. Even if the actual statistics show that despite generations having been in this position, the numbers actually doing so are relatively small, the work disincentive lets those with an anti-scrounger agenda portray it as a recipe for idleness, and so a justification for workfare.
The workfare strategy is nasty. The Citizens’ Income principle exposes it as unnecessary and a fallacy. There are two ways of removing the malign effect of benefit withdrawal. One is to stop giving benefits in the first place, which makes poverty worse. Regardless of the information in Dynamic Benefits, that is exactly what the government is doing. The other way is to give benefits to everybody – a Citizens’ Income – and just take it back in tax. Even with a ‘flat tax’, the highest incomes would pay the most.
The anti-cuts movement is rightly angry, but their demand just to restore benefits is a mistake exploited by the gutter press and the present government. They get away with jibes about closed curtains and daytime TV as a pretext for the changes in the Chancellor’s 2012 Autumn Budget statement, which in practice will reduce the incomes of low waged workers.
IDS will no doubt claim that the planned ‘Universal Credit’ is based on Dynamic Benefits. But the tepid recommendations in the later part of that report fall far short of its own logic. The Centre for Social Justice is after all a right wing think tank. Having discovered that the poor are paying more in tax or tax equivalent than the rich, it even has a passage attempting to justify that! Dynamic Benefits suggests that those on benefits should retain 45% for a period on obtaining paid work. As just explained, this would still amount to a tax rate of 55%. IDS’s white paper as Minister for Work and Pensions, Twenty-first Century Welfare is a pale shadow even of Dynamic Benefits. The retention will be 35% (65% tax), but even this will be hedged in and of limited scope, and of course you must be internet literate. The blogs to which I have made links show the reality of the government’s workfare agenda. See for example:
They could use a few choice quotes from Dynamic Benefits to totally discredit the whole workfare ethos. At this stage it is not even necessary to mention the Citizens’ Income directly, but the attack on workfare will be more powerful if it is. The logic will move irresistibly towards it in due course. A Citizens’ Income combines a guarantee of security with a previously missing work incentive. So there is no need for compulsion. This exposes what is wrong with workfare, which is incomprehensible when unemployment is high. There has always been something illogical about insisting that everyone should have to work as long as there is any unemployment whatsoever. But this government is pitting the lame, the halt and the blind in competition with the able bodied for jobs which do not exist, or are bogus, which is even worse.
I discuss some of the detailed consequences of the Citizens’ Income in my blog page ‘The Citizens’ Income and the cuts’. The very concept of unemployment can be consigned to the history books. Many disabled people are capable of work, but to open up the possibility of this being at a lower rate of pay, or part time, must surely be preferable to the inhuman ATOS quotas introduced by a Labour government, and enthusiastically pursued by their successors.
I must close by reminding readers that I want to save the planet for my grandchildren. But first things first. The Citizens’ Income will have to start as a thought experiment. The public need to realize that in an economic recession, seeing means testing as a massive tax on the low paid makes more sense than forcing people into non-existent work. So the first step is demonstrations by tens of thousands carrying banners showing the graph on p.88 of Dynamic Benefits. Use IDS’s own advice against him.