Green party’s flagship economic policy would hit poorest hardest, say experts

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The Green party’s flagship economic policy, the £72 a week “citizen’s income”, would hit the poorest hardest unless it was made more complicated by including a means-tested element, the leading advocate of the policy has conceded.

The Citizen’s Income Trust (CIT), which has given advice to the Green party and been repeatedly cited by the Greens, has modelled its scheme and discovered it would mean 35.15% of households would be losers, with many of the biggest losers among the poorest households.

The trust’s research shows that for the two lowest disposable income deciles, more than one-fifth would suffer income losses of more than 10%, something one of the most leftwing parties in the election is unlikely to want to advocate.

Malcolm Torry, director of the CIT, a small charitable research body, said: “I am not sure the Green party has yet taken on our new research or the need to retain a means-tested element. We have only just published the new work.”

The criticisms of the scheme, as well as doubts about costings, have led the Greens to make a tactical retreat, with the party’s leader, Natalie Bennett, saying detailed costings for the policy will not be available in the manifesto in March.

She faced a difficult time when interviewed by Andrew Neil on the BBC’s Sunday Politics on the subject, repeatedly arguing that any extra cost would be covered by reductions in the administration of welfare.

Citizen’s income is an unconditional, non-withdrawable income for every individual, including children, given as a right of citizenship. The idea has won support in the past on both sides of the Atlantic from left and right, and was until 1996 a Liberal Democrat policy. It was finally rejected as utopian.

It replaces personal tax allowances, and most means-tested benefits including jobseeker’s allowance, child benefit, the basic state pension and tax credits.

The CIT, the charitable body that has done most to promote the policy in the UK, admits after modelling its proposal with the help of the Euromod model at the University of Essex that the complexity of the current welfare system has led to a major design flaw being revealed, including a big hit on the poor.

Writing in the latest issue of the CIT’s newsletter, Torry states: “It is a pity that such a large number of households with low disposable incomes suffer such large losses on the implementation of what otherwise looks like a useful and revenue-neutral scheme.

“But unfortunately, with that number of large losses, the scheme would be impossible for a government to implement, and we ought to look for an alternative.”

However, Torry argues almost regardless of the level at which the citizen’s income is set, the poor cannot be compensated for withdrawal of both the personal tax allowance and means-tested benefits without the scheme becoming too expensive.

In a bid to make the scheme more palatable, the trust has looked at retaining the central principle of a non-contributory scheme and the abolition of the personal tax allowance, but retaining other means-tested benefits such as tax credits, so depriving the scheme of the simplicity and administrative savings once promised.

The revised scheme hits the rich hardest, but also requires a substantial increase in the basic rate of tax to 30%, as well as lifting national insurance to 12% of all income. The scheme still costs £24bn.

Alternatively, the trust has looked at cutting the value of citizen’s income from £75 a week to just £50 a week, much closer to the value of a personal tax allowance.

Torry told the Guardian that citizen’s income still has substantial advantages since even under this scheme it replaces a proportion of means-tested and other benefits, and total marginal deduction rates would be greatly reduced.

The amounts of means-tested benefits received would be reduced through citizen’s income being taken into account when calculating benefits.

In addition, for many households the reduction would offer the option of adding additional hours of employment and so escaping from means-testing.

A Green party spokesman said: “The citizen’s income is one of the items the manifesto working group are looking at. The Green party manifesto will be launched at some point in March.”

Powered by Guardian.co.ukThis article was written by Patrick Wintour, political editor, for The Guardian on Tuesday 27th January 2015 20.05 Europe/London

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