Natalie Bennett’s recent interview with Andrew Neil was the sort that politicians try to avoid. Neil, one of the UK’s best political journalists, understands the detail of policy and asks difficult questions about how it is to be implemented. This was no exception – Neil began by acknowledging that the Greens now had a range of other policies that went beyond the environment – before tearing into them, and demanding to know how they would be paid for. While some have described the interview as a ‘car crash’, Bennett actually did pretty well – giving clearer and less evasive answers than most politicians, and showing a grasp of detail that is rare for a leader of a small party.
One section of the interview was particularly interesting; focussing on the Green policy of a Citizen’s Income (CI) – a payment of £72 per week to every citizen, without question and without means testing. I suspect that, while technically Green policy, they had not intended to focus on it during the election – preferring to talk about their headline pledge to raise the minimum wage to £10 an hour. It is journalists who are forcing the party to discuss this more complex and radical policy – firstly Andrew Marr and now Andrew Neil.
The section began with Neil declaring that the policy would cost £240billion a year. This figure is not found in Green documents – Neil had invented it, presumably by multiplying the annual value of the Citizens Income per person (£3,744) by the latest UK population figure: 64.1 million. Natalie Bennett’s first mistake was to accept this figure. She should have instead showed why it would be much lower – firstly by excluding under-18s, who already receive a small CI in the form of Child Benefit (paid to parents or guardians), and then by excluding pensioners, as pensions also constitute a non means-tested CI. So the actual number of people that would receive a Citizen’s Income would be nearer 37million, making the cost approximately £138.5billion per annum.
Neil demanded to know how the policy would be paid for: the test any smaller party must meet if it is to be viewed as credible. Natalie protested that their full costed manifesto would soon be available – a get out of jail card that Ukip has frequently relied upon – but Neil pushed for concrete answers. At this point Bennett should have explained that by definition the Citizen’s Income ‘costs’ very little – it is in fact a rearrangement of existing benefits and tax allowances. The main difference is that it gives each citizen those benefits and allowances automatically, without making them jump through hoops and subjecting them to complex means testing that frequently misses those who need help most. Bennett should have said up front that the biggest chunk of the £138.5billion would come from the abolition of the income tax personal allowance. Thanks to the coalition’s policy of increasing this year on year – government figures cost it as £86.3billion in 2014-2015 – abolishing it and making tax payable on all earned income would cover 62% of the cost of the CI. For many people this is simply a different way of receiving payment – the £2,000 value of the personal allowance (based on the £10,000 that is not taxed at 20%) is instead given to them as a weekly payment. But those who earn substantially below £10,000 would see a real benefit – instead of an allowance which doesn’t help them, they would get a guaranteed weekly cash payment, without means testing.
To reach the rest of the cost, Natalie rightly mentioned abolishing Job Seekers Allowance – worth £72 a week – which saves £4.91billion. She could have added Income Support – saving another £6.92billion, as well as assuming around £2billion of administrative savings, as the cost of means testing would be considerably reduced. This takes us up to around £100billion – roughly £38billion short. To meet that we could look to make cuts to the £30billion annual cost of tax credits and the roughly £40billion cost of pension relief – the latter being a subsidy that primarily benefits the wealthy. Reducing the cost of both by just over half takes us to our £138.5billion – demonstrating that the Citizen’s Income is eminently affordable and realistic.
The Citizen’s Income Trust – a leading organisation promoting the Citizen’s Income – has expressed concern that some methods of funding the CI could make the poorest (the very people the scheme is designed to help) worst off – if the value of the benefits withdrawn are higher than the value of the new income received. That would indeed be unacceptable – and Bennett was right to emphasise that this would not be allowed to happen. But there are good ways round this problem – many of the means tested benefits could be phased out gradually (especially if the value of the CI increased over time), and the Citizen’s Income counted as income in the means testing of those benefits. This would lead to less people receiving those benefits (making them cheaper to fund) whilst ensuring that no-one loses income. Alternatively, we can make the scheme more progressive by funding the CI through more redistributive taxation rather than via the abolition of tax credits and Income Support. There are various possibilities: dropping the threshold for inheritance tax to £80,000 would raise approximately £15billion per year and removing the upper cap on National Insurance so that high earners pay the same percentage on all their earnings would net at least £12billion. Coupled with reductions to Pension Relief, these measures would easily meet our target.
Whatever approach they choose, the Green Party needs to lay out a clear a fully costed scheme, so that the credibility of the Citizen’s Income is clear to all and so that next time Natalie faces challenging questions she knows exactly what to say.