Why @natalieben and @johhnyvoid shouldn’t mention the CI

I don’t think either @natalieben or @boycottworkfare should mention the Citizens’ Income. No, I have not gone back on what I have been saying ever since I started blogging. It is only a matter of tactics. Long term, I hope to halt the headlong rush to trash the planet. Medium term, we need to bridge the unbridgeable chasm between Green Old Labour and  Green Old Conservatives (or Lib Dems). But here and now we have to prevent Iain Duncan Smith’s Workfare (oops) Welfare Reform Bill from reaching the statute book, or if the worst comes to the worst, as with the Poll Tax in 1990, use it to discredit its authors, and get it repealed pronto.

I am under the impression that neither Natalie Bennett, @boycott workfare, or for that matter @johnnyvoid have yet answered my pleas to look at Dynamic Benefits (2009)

www.centreforsocialjustice.org.uk

Their suspicion is understandable. It is one of the pillars on which IDS’s workfare plans rest. It proposes  the ‘Universal Credit’ which is supposed to remove the serious work disincentive which exists due to means tested benefits.

The immediate task I have set myself was to put a powerful weapon in the hands of key people who want to defeat workfare. It turns out it would take up several blogs, but I shall try to cut a very long story short by quoting a few choice chunks from Dynamic Benefits, and repeating my urgent request for readers to access the report direct.

The key point is that we don’t need to mention the Citizens’ Income, so there is no need to have reservations about committing to it. All I am asking Natalie and the anti-workfare protesters to do is publicise Dynamic Benefits. Our enemies will have to bring in the CI if what I do suggest achieves publicity. They will think they can make us look ridiculous, but all we have to do is mine Dynamic Benefits for quotes and passages. Here is the gist of our possible reply to counter-attacks, which I expect Natalie can improve on:

“What is your answer to the problems so clearly set out in Dynamic Benefits?. IDS’s Workfare Bill??? Even if the Bill followed the report’s recommendations it would be inadequate. Instead of asking “What is the fairest and most efficient response to this awful situation?”, the report answers the question “What is the least we must do to prevent workers being worse off than those who can’t find work?”. But the Workfare Bill does not even do that. Instead of the mis-named ‘Universal Credit’ being withdrawn at a tax rate equivalent of 55% as per Dynamic Benefits, The Bill sets it at 65%. Dynamic Benefits makes several references to work as necessary for a sense of personal worth. For example on page 82:

John Wheatley of the Citizens Advice Bureau (CAB) recently complained to the Work and Pensions Select Committee:

For many people, the only reasons for moving into work are the non-financial ones, about it being good for your self-esteem, and being good to go and mix with adults for a change, and being good in the longer term for your career and hope that you might progress.

If the government really believes this, then what is the sense, at a time of high unemployment, of trying to force everyone to find a job, in the process pitting the disabled in competition with the able bodied? A Citizens’income would replace this draconian nonsense with a work incentive which as Dynamic Benefits explains, does not exist at present. If you don’t think the CI is the best way to replace force with persuasion, then what is?”

I could go on, but you, Natalie, and you @johhnnyvoid and @boycottworkfare with thousands of Twitter followers are the ones to take this forward.

Now for something completely different. Just to comment that the new Pension plans announced this week are just another example of the quagmire you get into if you try to ignore the true ‘Universal’ principle embodied in the Citizens’ Income.

You can stop reading now. The rest is a series of cuts and pastes from the first 82 pages of Dynamic Benefits.

This report argues that reform of the benefits system is the crucial plank for any agenda that places the reduction of worklessness and poverty at its heart.p43

Our analysis begins, as it must, by looking at the nature of poverty among working-age households. Later chapters will explore how the benefits system has failed to improve the situation and in some cases worsened it. p45

The number of children living in severe poverty has increased by 100,000 in the decade up to 2007/8 (BHC).16 In line with our research, a report for Save the Children in 2005 concluded that there had been little or no improvement in the percentage of children living in severe poverty in Britain. P45

1.2 Earnings poverty

There are around 23.5 million working-age households in the UK,18 which approximates to 37.9 million working-age adults. Of these, 8.6 million households are in earnings poverty: households, workless and working, whose gross earnings are insufficient (without benefit income) to escape the Government poverty threshold of 60% of median net income. These households in earnings poverty are at the heart of our benefits system: individuals and families who rely on the state to lift them out of poverty. Benefits are the main source of income for three in ten households in the UK, and many more rely on them to keep them out of poverty. Only 13% of workless households escape net income poverty through their benefits. In total, there are some 4.7 million workless households left in income poverty by the current benefit arrangements.

Gordon Brown and the Treasury might be right to argue that tax credits are a more cost effective way of fulfilling the welfare function than lower tax rates or higher tax allowances. However that analysis takes no account of the dynamic benefits that come from cutting marginal tax rates or the damaging consequences of the very high effective tax rates that tax credits have introduced.”.p51

The combined effects of the tax and benefits system serve to create a destructive financial gradient that restricts the life choices of the most vulnerable people in our society; and that reinforces dependency and worklessness across generations. p51

We review different aspects of the system, and identify objectives for reform:

“Why should we work?”: : high benefit withdrawal rates and levels of income tax and national insurance create an unacceptably high financial disincentive to work for those with the lowest levels of earnings. P52

2.1.6 The flawed welfare state

We will return to discuss two features of JSA. The first thing to note is the withdrawal rate, which is set at 100%. Once work is found, JSA is lost pound for pound with earnings. The second is that there is a sizeable financial bias against those who would live with another claimant. This occurs because, in a household of two, the second earner has JSA withdrawn as the first person’s earnings exceed the limit for their own JSA to be fully withdrawn. This provides a big disincentive to living together. P61

“The single biggest financial disincentive to work is Housing Benefit, in particular the tapers.”

Quoted from: Off the Streets and Into Work, response to the Welfare Reform Green Paper ‘A New Deal for Welfare’, April 2006 p70

2.5 Passported benefits: benefits ‘in-kind’

Out-of-work benefits and Child Tax Credits currently act as a ‘passport’ to various in-kind benefits. These benefits are removed when people cross an hours/earnings threshold. Often the decision to work (and especially to work more hours) can precipitate the loss of passported benefits. The family that qualifies for Income Support also qualifies for free school meals, free prescriptions, dental care and sight tests and the Surestart Maternity Grant. These are all withdrawn as one. The effects of these withdrawals on work incentives is discussed in section .3.2 below. P71

A recent survey of those helping people get into work emphasised that:

when the financial benefits were low, these could easily be

outweighed by factors including low motivation, in-work costs, the

withdrawal of benefits (in particular passported benefits) and the

financial risks involved in entering what could often be temporary

or insecure work.

Off the Streets and into Work, December 2006 p72

Common passported benefits (with the ‘passport’ in brackets)

Free school meals (IS/JSA/ESA/CTC)

School clothing grant (IS/JSA)

Prescriptions, dental and hospital fares (IS/JSA)

Health costs (IS/JSA/CTC)

Home Energy Efficiency Scheme (IS/JSA/DLA/WTC/HB/CTB)

Bus pass (DLA)

Free car tax (DLA

Blue parking badge (DLA)

Railcard (DLA)

Taxi Card (DLA)

Legal Aid

Housing grants

Social Fund Payments

P72

2.6 In-work benefits and the Working Tax Credit

The UK labour market has evolved over the last 40 years. In that time, in-work benefits have played an increasing role in supporting those in earnings poverty

According to Conservative MP David Willetts, this is desirable:

There is a particular case for such a system [of in-work benefits] in Britain because our flexible labour market means that we have a greater range of earnings than the more heavily regulated labour markets on the Continent, where low-paid jobs have been regulated out of existence so that people are unemployed instead. If that is the alternative, it is better that people should be in work even if it is low-paid and we can then top their incomes up to ensure they are not living in poverty p72

chapter three

‘Why Should We Work?’:

(Dis) incentivising Work

3.1 A question of economic incentives

If you are on Income Support and in council accommodation you are laughing. If you are in a rented accommodation there is no way in hell that you ever will go back to work because the rent in private property is too much money. It is just ridiculous. They would never be able to get a job that pays enough to cover the rent, let alone be able to afford other things the family needs. Why would anyone go and get a job when the benefits pay the rent. There are places where you pay rent of £200 to 300 a week – and you will never be able to pay that.

Benefit Claimant1

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