Could Tax Credits bring the government down?

Osborne’s combative response to the Lords’ rebellion last night makes the prospect of a vote of no confidence in the government less remote than it was. A handful of Conservative MPs – are there seven? – have been told by constituents, not just the IFS that the supposed living wage etc. etc. is clap trap, and that losing Tax Credits will bring back the the Poverty Trap with a vengeance. We must use this possibility to the full. This is partly adapted from my post of 8.2.2015 suggesting how the Citizens’ Basic income should feature in the election manifesto. Last night it became urgent.

The role of a second chamber, whatever its faults and mistakes, is as a check on the more egregious decisions of the first chamber.  If the Conservatives insist on seeing this as a constitutional crisis, there is an answer. What our Parliamentary representatives can do at this crucial juncture, is remind those MPs that their party was not always nasty. A vote of no confidence would be a much better turn up for the book than Jeremy Corbyn. It is of course no more likely than that, but it should be realistic enough to force a government ‘U’ turn. That can then be consolidated by an informed debate on how to best to remove means testing, which is the unrecognized root of the crisis.

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A Citizens’ Basic Universal Income is necessary for three reasons: It will lessen any recession, and make a steady state economy –enemies will call that a recession – feasible if (the Green Party believes when) necessary to preserve the planet’s life support systems. Secondly, it will facilitate a rapprochement between workers and bosses. For example, Zero hours contracts can at present be an obscene form of slavery, but with a Basic Income when no one is forced to work, only mutually beneficial contracts can be offered.

But regardless of caring for the planet, or healing the divide between capitalists and workers, the Citizens’ Income is fair. The unrecognized problem underlying the Tax Credits issue is

Means Testing

Having explained in a blog post only two days ago, I will not go into details again. The principle is simple enough: taxes are paid to public bodies; benefits are given by public bodies. Therefore, to the individual the withdrawal of benefits is a tax on the poor, and tax cuts are a benefit given to the rich. Even without taking the Earth’s physical limits into account, in a future where automation is likely to become much more common, personal financial security can no longer depend reliably on conventional, full time employment.

Means testing is wrong in principle, but it cannot be removed on the cheap. It creates a work disincentive, but for the Green Party it is a benefits trap. Therefore our methods of removing means testing, and those of Iain Duncan Smith are diametrically opposed. IDS is just removing them – a cost saving, in theory. The Green Party will give a Citizens’, Universal Income to everyone, and recover it through the tax system, so that everyone is on the same level playing field. The cost will be described as ‘astronomical’ and I admit frankly that I do not know how much, but I do know that work cannot be made to pay for less.

Even IDS realizes that just abolishing benefits would cause a backlash, so the answer was supposed to be the Universal Credit, with a claw-back rate of 65%. But the UC has not happened. The next cheapest is Tax Credits, at £30billion.

The Green Party believes that once the public has seen that the Citizens’ Income at JSA levels is much fairer than the present, means tested system, as well as creating a work incentive, their sense of fair play will ensure that they accept that all means tested benefits should cease, whatever the cost to those on higher incomes.

That is for the future, but it is important now as the beginning of a vital cultural shift. Although the Citizens’ Income will be a practical policy, and will quite rightly be scrutinised in detail, at this stage it is important to see it as the foundation for a vision of a less  competitive, sustainable future, where the work disincentive is removed, but financial security can no longer rely on employment.

In case it seems strange at proposing higher taxes at a time of austerity, inequality is the key. The second world war forged a national consensus which would have been impossible at any previous epoch. By the 1970s British society was less unequal than it had ever been, but since then inequality has widened, regardless of who was in power.

The Green Party therefore invites the better off to pay more in taxes, What they will get for their money is a better prospect of a sustainable future for their grandchildren, but in the here and now what is needed is a return to that sense of one nation envisaged by Harold Macmillan.

The Green Party’s twin pillars for most of its 42 year existence have been sustainability and social justice, so from a conventional perspective it is unavoidably ‘left of centre’, and its recruitment has been largely from the ‘left’. Nevertheless, although the Conservative Party of the last 40 years has been lacking in any social justice element, that was present under Macmillan’s earlier leadership. The Citizens’ Income need only take from those with higher than average incomes what is necessary to ensure a sustainable future, and for every individual to have the basic requirements for a civilized life. Any individual with ability will be able to use that as a springboard for achievement.

At this stage the Basic income must be primarily a though experiment. The precise costing can come once the system is widely understood. But all kinds of benefits will come into play; entrepreneurs will be able to start a business, and possibly take on employees during that crucial early phase, with all of them working together for low or even no pay to try to make the enterprise work. This cannot happen at present. Any small business with abrupt changes in income can use the Citizens’ Income as a piggy bank: good times, they pay more tax; bad times, the CI is a lifeline. The CI will facilitate part time or intermittent work availability.

Green representatives have always insisted that they need foolproof figures before braving the likes of Andrew Neil or braying MPs. My blogs, note particularly 11th April 2013, gave Natalie Bennett sufficient briefing to use that Andrew Neil interview to launch the Basic income centre stage. Just shift the debate into means testing.

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