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Basic Income Northern Ireland NICVA
This document summarizes the key findings of a study examining the practicalities of implementing a basic income in Northern Ireland. It outlines three scenarios for basic income payment levels, estimates the annual costs and potential funding sources under each scenario. The study finds that a basic income equal to current welfare rates would cost £4.3 billion annually, while one set at the poverty line would cost £12.6 billion and one at minimum income standards would cost £18.4 billion. Potential funding sources discussed include maintaining employer national insurance contributions and increasing income tax rates substantially under some scenarios. The document raises questions around choosing a full or partial basic income model and other funding mechanisms for further analysis.
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Basic Income Northern Ireland NICVA
- 1. Practicalities of a BasicIncome: 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 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 • Increasedinterest 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 • Estimatesbuilt 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? oA 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 oPopulation 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 Scenario2 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 afull 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 FundingOptions • 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 contextof 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 BasicIncome: 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 16th May 2014