Practicalities of a Basic Income - Micheál Collins (NERI)
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The document discusses the practicalities of implementing a basic income in Northern Ireland, focusing on levels, costs, and potential funding sources. It outlines three scenarios for basic income payments based on social welfare rates, poverty line values, and minimum income standards, estimating overall annual costs and necessary funding. The presentation concludes with considerations for future research and the trade-offs between the efficiency of basic income reform and existing welfare models.
Practicalities of a Basic Income - Micheál Collins (NERI)
- 1. Practicalities of a Basic Income: levels, costs, funding & some questions Dr Micheál Collins NERI (Nevin Economic Research Institute) Dublin mcollins@NERInstitute.net @ MLGCollins www.NERInstitute.net NICVA Basic Income Masterclass, Belfast 16th May 2014
- 2. Outline 1. Introduction 2. Data 3. Basic Income: 3 scenarios 4. Assumptions & Costs 5. Some Funding Options 6. Next Steps - some questions
- 3. 1. Introduction • Increased interest in basic income o Recession, precarity, persistent inequality, the viability of the welfare state and the current system… o BIEN, Citizens Income Trust, Basic Income UK • This presentation • First outing on costing a basic income for Northern Ireland • Therefore, tentative… • Research questions: o level of the payments* o how much would it cost* o Financing this* o Impact analysis
- 4. 2. Data • Estimates built on various data sources: o Population / composition: NISRA estimates mid-2012 o Welfare payments values (current) o Poverty threshold data: DWP Households below average income 2011-12 (2013) o Minimum income standard estimates: NI (2008) & UK (Hirsch, 2014) o Cost of a child in 2013 (Hirsch, 2013) o HMRC – tax decomposition for Northern Ireland (2013) o ASH data for 2013 (average earnings) o Most recent NI Nat. Insurance Fund a/c 2011-12
- 5. 3. Basic Income: 3 scenarios • Looking at a full-BI o replaces all tax credits and allowances for all in employment o replaces state welfare supports for those not in employment o likely to keep some special welfare payments… • 3 scenarios for the level of BI payment 1. Linked to social welfare rates 2. Linked to poverty line values 3. Linked to Minimum income standards benchmarks Possible to examine other iterations, but these will provide a benchmark
- 6. • How much? o A key decision... o Three scenarios (weekly payment amounts) Scenario 1 Scenario 2 Scenario 3 Age category Welfare rates Poverty line MIS/MESL 0-15 yrs £20.50 £51.60 £82.99 16-23 yrs £38.90 £172.00 £106.70 24-64 yrs £57.35* £172.00 £273.86 65+ yrs £113.10 £172.00 £238.46
- 7. 4. Assumptions & Costs • 3 Assumptions o Administrative savings of £25m per annum o Employers national insurance continues as a ‘social responsibility tax’ • £771.3m per annum (estimate based on fund data and composition of payments) o Some benefit to consumption taxes will emerge • assume that 4% of BI cost recovered through additional consumption tax (VAT) revenue • eventually will sensitivity test this….
- 8. • Costing approach o Population in each age group * payment value (annualised) o Minus administrative savings o Establish net cost of each BI scenario o Deduct from this: • social responsibility tax revenue • additional consumption tax revenue o Establish amount needed to fund BI
- 9. Scenario 1 Scenario 2 Scenario 3 Welfare rates Poverty line MIS/MESL Annual cost 5,307,257,168 13,918,074,123 19,954,943,695 Admin savings 25,000,000 25,000,000 25,000,000 Net cost 5,282,257,168 13,893,074,123 19,929,943,695 - employers NI 771,283,498 771,283,498 771,283,498 - recovered VAT 212,290,287 556,722,965 798,197,748 Funds needed for BI 4,298,683,384 12,565,067,660 18,360,462,449 Total in £m £4,299 £12,565 £18,360
- 10. • For a full BI: o really scenario 1 o possibility (small) of scenario 2 Scenario 1 Scenario 2 Scenario 3 Welfare rates Poverty line MIS/MESL Total in £m £4,299 £12,565 £18,360
- 11. 5. Some Funding Options • A flat income tax o A feature of the literature…why? Scenario 1 Scenario 2 Scenario 3 Welfare rates Poverty line MIS/MESL NI total tax revenue £m 10,518 10,518 10,518 Total income tax £m 2,754 2,754 2,754 Assumed effective rate* 17% 17% 17% Estimated income tax base 16,201 16,201 16,201 Estimated effective income tax rate to fund BI 26.5% 77.6% 113.3%
- 12. • In context of current expenditure: o Welfare: £4.9bn per annum o Used tax credits: £945m
- 13. 6. Next Steps – some questions • Expensive reform • Need to judge gains versus costs/losses • But, it is a different model… • Choices: o full BI or conditional BI (partial BI) o flat income tax often proposed, but not feasible; progressive taxes? o funding sources beyond income taxes • Further work: o Simulate using FRS microdata o judge versus objective of poverty reduction; stability and reducing inequalities.
- 14. Practicalities of a Basic Income: levels, costs, funding & some questions Dr Micheál Collins NERI (Nevin Economic Research Institute) Dublin mcollins@NERInstitute.net @ MLGCollins www.NERInstitute.net NICVA Basic Income Masterclass, Belfast 16th May 2014