The cost of the UK’s inadequate income support is huge. Paul Nicolson writes.
The UK has never been generous with its benefits system. In 2008, Tim Harford of the Financial Times reported on research by the Organisation for Economic Co-operation and Development that showed that member governments spent an average of 0.75% of gross domestic product on unemployment benefits. In 2006, France spent nearly twice this and Germany almost three times as much, while the United States spent a third of the average and the United Kingdom just a quarter. Germany spent more than ten times as much as the UK relative to GDP. With “austerity” it has only got worse.
In parallel with this, the government has been cutting the central funding for council-tax benefit. It reduced it by 10% in 2013.And 289 out of 326 local authorities in England have made the poorest cover the shortfall by taxing the very working-age benefits that national government has shredded by £18bn since 2010. The local authorities did not ask the better-off to pay anything towards the shortfall.
The inevitable result has been increasing debt among the poor. Some 3.5 million people were sue for council-tax arrears in the magistrates courts by councils in England in 2016. It will be worse this year, because working-age benefits are to be cut by another £12bn by 2020.
Meanwhile the standard benefit of £73.10 a week is, in any circumstances, incapable of providing a healthy diet and other necessities, in particular for a woman before and during the development of the brain of a child in her womb. It has been losing value since 1979. It is the cornerstone of the benefit system; all other unemployment benefits are added to it. It equals £317 a month under the newly introduced Universal Credit scheme. According to the ONS it is paid to more than 3.9 million people in the UK.
Why do we assume that others will steal from the state and then impose on the overwhelmingly large and innocent majority the most demanding active labour-market policy in Europe?
So in this context, there can be no wonder that people have been looking to overhaul the system and many are proposing a Universal Basic Income (UBI). This would remove all the conditionality from benefits. But the prospect of unemployed people sitting at home watching day-time television rather than looking for work is considered by some to be the moral knock-down argument against UBI’s introduction.
That argument ignores the immorality of assuming every unemployed person in the UK is a crook for the crimes of a few that cost 1.2% of the welfare budget. Why do we assume that others will steal from the state and then impose on the overwhelmingly large and innocent majority the most demanding active labour-market policy in Europe? At the same time we barely question the income that is parked offshore, tax-free, and the vast, unearned increases in private wealth accumulated as the value of UK land has soared since 1979.
The strongest moral argument in favour of the UBI is based on the damage done to mental and physical health by the inadequacy of the current lowest statutory minimum income, and the inevitable debts that it creates. The UBI could be based on the same Joseph Rowntree Foundation research as that is used by the employers’ Living Wage Foundation to determine the level of the real living wage.
The strongest moral argument in favour of the UBI is based on the damage done to mental and physical health by the inadequacy of the current lowest statutory minimum income
The question then is, how should we fund an adequate UBI? The answer staring in our face is the existence of huge amounts of unearned wealth sitting in land values. No one worked to gain these so why not tax them to sort out the disgrace of our benefits system?
Land Value Tax (LVT) is a secure, progressive source of revenue. A small percentage tax/rent on the value of all land could gradually replace inefficient and regressive taxes such as council tax, business rates and stamp duty. It is paid by the landlord not the tenant. It relieves low-income tenants of the council tax and its draconian enforcement. Exemptions can be arranged for high-asset, low-income households.
It is also practical. A land-value tax conference at the Royal Institute of Chartered Surveyors in September 2015 concluded: “the technical issues often quoted as providing reasons not to switch to assessing land rather than property, namely valuation methodology and data, are capable of solution within the UK context”.
The answer staring in our face is the existence of huge amounts of unearned wealth sitting in land values.
Land cannot be transferred tax-free via the internet to an overseas bank, so taxing it in the UK might even recover a little of the trillions shipped out to tax havens by the City of London.
LVT has been found to bring empty homes and unused land into use in Harrisburg, Pennsylvania and other US cities. It works in Denmark, Australia and Hong Kong,It would encourage the four big UK builders to release their bank of 600,000 plots of unused land.
So helping to alleviate the housing crisis, generating funds for a UBI that in turn would relieve some of the burden on the NHS from poverty-induced ill health while addressing an immoral imbalance in wealth makes for a compelling case for land value taxation.
Rev Paul Nicolson is the founder of Taxpayers Against Poverty; http://taxpayersagainstpoverty.org.uk/