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Practicalities of a
Basic Income:
levels, costs, funding & some questions
Dr Micheál Collins
NERI (Nevin Economic Research...
Outline
1. Introduction
2. Data
3. Basic Income: 3 scenarios
4. Assumptions & Costs
5. Some Funding Options
6. Next Steps ...
1. Introduction
• Increased interest in basic income
o Recession, precarity, persistent inequality, the viability of
the w...
2. Data
• Estimates built on various data sources:
o Population / composition: NISRA estimates mid-2012
o Welfare payments...
3. Basic Income: 3 scenarios
• Looking at a full-BI
o replaces all tax credits and allowances for all in employment
o repl...
• How much?
o A key decision...
o Three scenarios (weekly payment amounts)
Scenario 1 Scenario 2 Scenario 3
Age category W...
4. Assumptions & Costs
• 3 Assumptions
o Administrative savings of £25m per annum
o Employers national insurance continues...
• Costing approach
o Population in each age group * payment value (annualised)
o Minus administrative savings
o Establish ...
Scenario 1 Scenario 2 Scenario 3
Welfare rates Poverty line MIS/MESL
Annual cost 5,307,257,168 13,918,074,123 19,954,943,6...
• For a full BI:
o really scenario 1
o possibility (small) of scenario 2
Scenario 1 Scenario 2 Scenario 3
Welfare rates Po...
5. Some Funding Options
• A flat income tax
o A feature of the literature…why?
Scenario 1 Scenario 2 Scenario 3
Welfare ra...
• In context of current expenditure:
o Welfare: £4.9bn per annum
o Used tax credits: £945m
6. Next Steps – some questions
• Expensive reform
• Need to judge gains versus costs/losses
• But, it is a different model...
Practicalities of a
Basic Income:
levels, costs, funding & some questions
Dr Micheál Collins
NERI (Nevin Economic Research...
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Practicalities of a Basic Income - Micheál Collins (NERI)

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A presentation given by Micheál Collins from the Nevin Economic Research Institute (NERI) to the NICVA Centre for Economic Empowerment (CEE) Basic Income Masterclass on 16 May 2014. See http://www.nicva.org/news/basic-income-masterclass for more.

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Practicalities of a Basic Income - Micheál Collins (NERI)

  1. 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. 2. Outline 1. Introduction 2. Data 3. Basic Income: 3 scenarios 4. Assumptions & Costs 5. Some Funding Options 6. Next Steps - some questions
  3. 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. 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. 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. 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. 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. 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. 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. 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. 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. 12. • In context of current expenditure: o Welfare: £4.9bn per annum o Used tax credits: £945m
  13. 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. 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

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