Basic Income Northern Ireland NICVA
14
Practicalities of a Basic Income: levels, costs, funding & some questions Dr Micheál Collins NERI (Nevin Economic Research Institute) Dublin [email protected] @ MLGCollins www.NERInstitute.net NICVA Basic Income Masterclass, Belfast 16 th May 2014
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Transcript of Basic Income Northern Ireland NICVA
Practicalities of aBasic Income:
levels, costs, funding & some questions
Dr Micheál CollinsNERI (Nevin Economic Research Institute)[email protected] @ MLGCollinswww.NERInstitute.net
NICVA Basic Income Masterclass, Belfast16th May 2014
Outline1. Introduction2. Data3. Basic Income: 3 scenarios4. Assumptions & Costs5. Some Funding Options6. Next Steps - some questions
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
2. Data• Estimates built on various data sources:
o Population / composition: NISRA estimates mid-2012o 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
3. Basic Income: 3 scenarios• Looking at a full-BI
o replaces all tax credits and allowances for all in employmento replaces state welfare supports for those not in employmento likely to keep some special welfare payments…
• 3 scenarios for the level of BI payment1. Linked to social welfare rates2. Linked to poverty line values3. Linked to Minimum income standards benchmarks
Possible to examine other iterations, but these will provide a benchmark
• 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 £82.9916-23 yrs £38.90 £172.00 £106.7024-64 yrs £57.35* £172.00 £273.8665+ yrs £113.10 £172.00 £238.46
4. Assumptions & Costs • 3 Assumptions
o Administrative savings of £25m per annumo 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….
• Costing approacho Population in each age group * payment value (annualised)o Minus administrative savingso Establish net cost of each BI scenarioo Deduct from this:• social responsibility tax revenue• additional consumption tax revenue
o Establish amount needed to fund BI
Scenario 1 Scenario 2 Scenario 3Welfare 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
• For a full BI:o really scenario 1o possibility (small) of scenario 2
Scenario 1 Scenario 2 Scenario 3Welfare rates Poverty line MIS/MESL
Total in £m
£4,299
£12,565
£18,360
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%
• In context of current expenditure:
o Welfare: £4.9bn per annumo Used tax credits: £945m
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 microdatao judge versus objective of poverty reduction; stability and reducing
inequalities.
Practicalities of aBasic Income:
levels, costs, funding & some questions
Dr Micheál CollinsNERI (Nevin Economic Research Institute)[email protected] @ MLGCollinswww.NERInstitute.net
NICVA Basic Income Masterclass, Belfast16th May 2014
