The Citizen's Income, the Flat Tax and ID Cards.

I am strongly in favour of having a Citizen's Income (CI) in this country. A basic universal living allowance paid to every citizen, regardless of employment status that replaces all other government payments - benefits, tax credits, pensions etc. This will free millions from the benefits trap - where people are not financially rewarded for work because of a drop in benefits.

Free from this dependency on benefit, employment would be likely to grow. A CI will allow huge efficiency savings, by allowing benefits administration to be almost totally scrapped. It would also free millions from poverty and allow them a much bigger choice in the type of career and training they undertook. But a CI needs strict controls on identity fraud and this is why ID Cards and an NIR would be needed.

In an economy worth annually £1.2 trillion, the government currently spends almost £520 billion. We would need around £350 billion of this for a decent CI to cover all basic housing, food and energy costs etc. with every adult receiving around £150 a week and a smaller payment to under 16s. The present cost of social protection and related administration is around £150-£200 billion.

To maintain spending in other areas this would mean a total government spending budget of £670-£720 billion. The extra £150-£200 billion needed could be raised by introducing a flat income tax of around 39%. All tax allowances would be abolished and so would the NI ceilings and allowance. Total revenue raised in this area would rise from £220 billion to £400 billion as a result of these changes.

Just as the introduction of a CI would lead to massive simplification of the benefits system and huge savings in administration, the flat tax would be a massive simplification of the tax system and lead to massive savings in administration here as well.

Remember that the receipt of a CI would more than compensate most people for the tax rise and loss of tax allowances, with the poorest benefiting the most. Anyone on lower than median average earnings will be better off. Remember the median average earner is the exact middle earner, where half the working population earn less and half earn more. If anyone is in any doubt of the need for some redistibution, here is a reminder of the present situation.

Because of the massive progressive impact of a CI on redistribution, this will allow in the long term, a move away from progressive taxation on income and savings and a move towards more regressive taxation on expenditure. The advantage of this would be the ability to move taxation away from things we want to encourage, like working and saving and concentrate on taxing things we want to discourage, like environmental degradation and pollution. This is currently difficult because of the regressive impact, but a CI could be used to easily and efficiently compensate for this regressive effect.

Now I'm not saying any of this will be politically easy, there are lots of self interested parties to overcome, particularly the massive redundancies needed in the civil service and such a massive change could not be done overnight, it would take political consensus over 2 or 3 parliaments as it is gradually introduced, but without ID cards making ID fraud much more difficult, it would be virtually impossible to properly introduce a CI. There's more information on a CI at the Citizen's Income Trust.