The need for new ideas- even if they seem crazy at first

January 26, 2015 by
Filed under: Enterprise 

There is something that is quite corrosive in our public life. It is our reaction to new ideas. If we were societies facing few challenges, completely at ease with ourselves, in a state of domestic and international tranquillity then this might be explicable. But given the scale of political, social, economic and environmental challenges, now more than ever we need access to creativity. Sometimes this creativity will seem crazy and it may even, on an occasion, risk serious harm. But we have to find a way of allowing creativity into our democratic processes – we don’t even know all the possible answers as things stand.

It is in this context that two developments are particularly eye-catching- one of international significance and one that is more parochial. Yesterday, Syriza won the Greek election. The received wisdom is that this will be a complete disaster. And it could be. However, what is clear is that the EU (or Troika’s) Greek bailout put in place a debt maintenance plan but failed to establish an economic recovery plan. Consequently, you have a deflating economy with an enormous debt. You don’t need much by way of mathematical nous to see this as unsustainable.

This year the Greek Government is likely to be in primary surplus. Much has been to done to meet bailout conditions. However, this is unlikely to return Greece to the strong economic trajectory it would need to ensure debt sustainability. Therefore, a new plan is needed.

Whether Syriza’s combination of debt restructuring, linking repayments to growth, some public-led economic investment, reduction of tax evasion and corruption, and greater social protections is the right plan – or even a plan the rest of the EU could accommodate – remains to be seen. However, it is not something to be dismissed out of hand. A reformed Greece back on the road the economic recovery is vastly preferable to a defaulting Greece, potentially tearing up the Eurozone. You would have thought. So this crazy left-wing party might help to ensure that a realistic economic plan for Greece is not put in place.

Equally, it might fall apart as pragmatism becomes impossible within its own movement and the Greek people begin to turn on it as quickly as it was embraced. We don’t know. The point though is that we need access to new ways of thinking. That requires political creativity.

There are new voices and forces in our domestic politics too. Yesterday, the leader of the insurgent(-ish) Green Party, Natalie Bennett, appeared on the Sunday politics. The Greens support a Citizen’s Income. Let’s be honest, she did a pretty poor job of explaining the policy, especially how it would be financed. Actually, it’s relatively easily financed and wouldn’t necessarily cost more than the current system. The major challenges are two-fold: the distributional consequences (some of the losers compared with the current system are exactly those who you don’t want to be losers) and moral-political (we just can’t quite get our heads around a tax-benefit system that works in such a radically different way). A well-designed citizen’s income policy would create greater work incentives and would provide a far more stable foundation for people’s lives than the current highly complex system.

The simple fact is that people now live exceptionally complex and, in many cases, highly erratic lives. I would highly recommend Good times, Bad times by John Hills if you would like to understand this. We have evolved a highly complex welfare system to cope with this. It is bureaucratic, creates all sorts of perverse effects, fails to really lift people into a more secure situation, and, let’s be frank, is increasingly punitive and downright cruel. The welfare state is intruding into people’s lives in ways that we would be marching down Whitehall if it were the police or the secret services.

The work we are currently doing on basic income at the RSA is designed to use existing resources in a way that turns the welfare state into a foundation for people to create better lives rather than locking them into a highly unstable life-cycle. The disincentives to work of a well-designed basic income are at least half those of a negative income tax with a steep taper as the, to be introduced, Universal Credit will be. Yet, the idea was just waved away in reaction to the Bennett interview as the ramblings of fringe sect. The interview was poor but so was the reaction. And it says something about our ability to cope with creativity in politics.

There is something qualitatively different to new ideas that try to find better solutions to problems compared with some of the politics that has emerged in recent years. Policies such as ‘close down borders’ are not creative ideas. They are very old-fashioned political choices. It is new ideas applied to the problems of our time that are important – there are also many ‘ideas’ that involve running away from our problems and they should be called out as such.

Ultimately, the ideas of Syriza and its competence may mean it implodes. The basic income may prove to be a reform that is just too difficult to grasp or may involve choices and compromises we don’t want to make. But let’s arrive at those conclusions having given creative thinking a go. When we close down options, let’s do it on the basis of having given them proper consideration and analysis. Nor should we chase novelty for its own sake. Instead, we have be open, discursive and analytical. Then we might identify creative solutions to a very trying situation. Crazy-seeming ideas can sometimes become elegant solutions.

Anthony Painter and Adam Lent are currently looking at basic income as one aspect of a redefined citizen-state relationship. If you have ideas and analysis to contribute please don’t hesitate to email anthony.painter AT rsa.org.uk.

Comments

  • Tim Blackwell

    “The disincentives to work of a well-designed basic income are at least
    half those of a negative income tax with a steep taper as the, to be
    introduced, Universal Credit will be.The disincentives to work of a well-designed basic income are at least
    half those of a negative income tax with a steep taper as the, to be
    introduced, Universal Credit will be.”

    Could you point me towards a description of such a ‘well-designed’ basic income: one with enough detail to enable modelling?

    Much
    todo with basic incomes depends on whether you see welfare as a subsidy
    (to employers as much as anyone) or a safety net.

    High
    marginal deduction rates are a disincentive to work, and this is talked
    about a very great deal. Few people talk about the obverse, that when
    incomes fall, *low* marginal deduction rates provide little by way of social security.

    • anthonypainter

      Hi Tim,

      The best online resource is the Citizen’s Income Trust – they have done a huge amount of modelling:

      http://www.citizensincome.org/

      Your final point is a key one- there is an element of balance in this but this is about design. Too often, elements that are technical challenges or policy options are treated as adaptive challenges.

      Anthony

      • Tim Blackwell

        Kudos to the Citizen’s Income Trust for providing some figures. Unfortunately I’m not sure their scheme works at all well for anyone with housing costs.

        Crucially, the CIT assume that housing benefit and council tax support remain in situ – pretty much as they were in 2012. Unfortnately this leads very quickly to a problem.

        Suppose I am a tenant responsible for rent and council tax. I have my citizen’s income, intended to cover my basic needs other than housing. I then receive means-tested housing benefit and council tax benefit on top. Because I don’t have any other income, my housing and council tax are covered in full.

        I get a part time job and my income goes up by £100 gross on which I pay £32 tax (employee’s NI is bundled into income tax in the CIT scheme, personal allowances are abolished.) This leaves me with £68.00. Assuming my housing benefit and council tax support are calculated as they were in 2012, my housing benefit is then reduced by 65% of this, ie by £44.20, and my council tax support by 20% of this, ie by £13.60. Total deductions are £89.80, making me just £10.20 better off. This compares rather poorly with universal credit (plus the separate council tax reduction), and is little different to the pre-universal credit schemes.

        People with inherited property and modest trust funds would do well from the CIT scheme. Lone parent tenants in need of childcare would do very badly. As far as I can see, the CIT scheme offers no support for:

        * childcare costs

        * owner occupier housing costs

        * disablement elements of means-tested benefits (it does assume that non means-tested disablement benefits will continue).

        More generally, CI schemes conflate five different things:

        * removing conditionality (no need to sign on, etc)
        * low marginal reduction rates: CIs *are* means-tested in practice, it just happens via income tax
        * removing couple penalties – all entitlements are individual
        * income redistribution (popular on the left)
        * payment in lieu of government provided services (popular on the libertarian right)

        These need to be unravelled when considering the merits of any particular scheme.

        • anthonypainter

          Just two quick points on the fly:

          i) you have to include the basic income as well- that doesn’t decline as tax credits do.

          ii) It’s a bit cheeky to pin the existing housing benefit system on. That needs major reform too- it just can’t be done within the framework of basic income due to v.significant regional variation. That’s another discussion but again one that needs some fresh thinking (as many have done),

          • Tim Blackwell

            Under the CTI scheme the basic income stays the same, but the tapers in housing benefit and council tax support, coupled with the immediate impact of income tax mean that the effective penalty for taking up work is very similar to the current tax and social security system (the current system has so many chaotic interactions that it’s possible to cherrypick scenarios supporting quite wide ranging perspectives, of course.)

          • anthonypainter

            But it’s HB/CTS that’s creating any distortion not BI. So your criticism is of HB/CTB not basic income- fine but that’s a different (and important) parallel discussion. There is, however, an issue with particular groups such as the one I’ve listed. We are looking into that.

          • Tim Blackwell

            It’s the CTI CBI + HB/CTS together that make the distortion – and all their costings depend upon it. One possible residual benefit from the CTI scheme is the removal of conditionality. This could easily be acheived in our current benefits system or under a modified universal credit. The CTI scheme simply transfers money from those who need it a lot to those who need it less, mitigated somewhat by increases in taxation.

            If the CTI had a magic money pot from which they could pay everybody’s rent, council tax and mortgage interest then, yes, their scheme would meet the claims they make for it. But you absolutely cannot waft away housing costs in any practical scheme – people have an exasperating propensity to want somewhere to live.

            If I get the time I’ll generate some example cases to illustrate how this works.

            Tim.

          • anthonypainter

            Thanks Tim. It’s not a question of waving it away. It’s a matter of treating as a separate challenge (though related). The other points you raise are part of our research.

            You could equally throw labour market regulation in the pot but one step at a time. The important thing is basing a system on some clear principles then building it technically.

          • Tim Blackwell

            I absolutely agree with your last sentence and will be fascinated to see what you come up with.

            Tim

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  • globalman

    I have been supporting a Citizen’s Wage as part of a much broader change in society that we need both to enhance societal cohesiveness , but also as an essential part of living within the planets means, and having a more friendly footprint on the environment and the planet’s ecosystems as a whole.

    It will need to be only a part of a much broader change to the taxation, based on protection of the environment.

    A complete reform of the tax system away from the existing type to a tax on all natural resources based on the actual and potential damage their use causes. This collected as near to source as possible and collected at a rate depending on the damage each resources use can and does cause and collected at a rate to fulfill all the governments needs.

    All the citizens wage and tax reform needs to be linked to a reform of the benefit and welfare systems , so as to encourage self and society responsibility and pursue a preventative mentality to all aspects of life .

    Doing one thing without the others will cause unrest as it fails to simplify the problems and only increases costs and mistrust in a final out come which has not been laid out.

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