Basic Income Admin Costs

Until recently we had an unconditional benefit. The child benefit was paid out to everyone with children regardless of their earnings. It was a very cheap benefit to administer costing 0.58 pence for every pound of benefit paid out. Of course now that we have a tax on children for people earning in excess of £50,000 collected through the tax return, the administration cost is liable to go up and it also opens up the possibility of fraud.

Unconditional Basic Income would be at least as cheap to administer as child benefit. If we replaced our other means tested benefits with Basic Income, how much would we save?

I'm finding it difficult to get a figure out of the DWP accounts but it could be as much as 3.4% which is how much the HMRC spend on admin for administration of tax credits and child benefit combined.

What I have found is that 2.1% of the total budget is wasted on errors and fraud. The fraud rate for a basic income would probably run at around 0.1% which is around the same as the fraud rate for pensions.

So if we are generous and say that the admin costs for the DWP are 3% and add in fraud at 2% then we can say that the running costs of the current system is around 5%

Compare that to an estimated 0.58% admin and 0.1% fraud rate for basic income and you can see that potentially there could be some pretty good savings to be made.

If we were to go for a revenue neutral scheme like that proposed by the citizen's income trust, then we could be saving around 7 billion that could go to providing welfare instead of bureaucracy

Don't just take my word for it that means testing is inefficient. The DWP's own annual report is critical of means testing.

Source: DWP Annual Report and Accounts

The report also explains the significant challenge the Department faces in administering a complex benefits system to a high degree of accuracy in a cost effective way. Some benefits, mainly those with means-tested entitlements, are more inherently susceptible to fraud and error due to their complexity, the difficulties in obtaining reliable information to support the claim and the challenges of capturing changes in a claimant’s circumstances. These more difficult to administer benefits, such as Pension Credit, tend to be the ones exhibiting the highest estimated fraud and error rates. The Department is limited in the total resources it can devote to the administration of the complex benefits system, and has to make trade-offs between accuracy checking, customer service and maintaining productivity. We recognise that the Department needs to strike a balance between the need to provide sufficient scrutiny over claims and doing so in a way that is not overly burdensome, otherwise administration of the benefits system would become impractical

Not only is Basic Income cheap to run, but because it is so simple, the effects of raising or lowering it are cheap too. For instance implementing universal credits has costs many millions with no returns.

See what the DWP report has to say on implementation of Universal credits

Source: DWP Annual Report and Accounts

On-going implications for value for money

As noted above, in my report “Universal Credit: early progress” (HC 621) published in September 2013, I concluded that at this early stage of the Universal Credit programme the Department had not achieved value for money. I consider this judgement is reinforced by the Department for Work and Pensions Annual Report and Accounts 2012-13 Information in the Department’s 2012-13 Annual Report and Accounts. Up to 31 March 2013, the Department had developed assets with an initial value of £196.1 million for the delivery of Universal Credit. In these accounts it has written off £40.1 million of those assets as it will never use them. It also now expects to write down £91.0 million of the remaining assets to nil value by March 2018, due to the considerable reduction in their expected useful life. While this is the appropriate accounting treatment, it should not detract from the underlying issue that the Department has spent £91.0 million on assets that will only support a limited service for 5 years, with clear consequences for public value.

Basic income can be administered in much the same way as child benefit and possibly could use the same computer systems with a few modifications. It would be great value for money.


Not only that, but the impact of basic income on people's net income is so much easier to calculate because it is simple. The DWP have made such a hash of Universal Credits that some families will actually have less money in their pockets from working extra hours and will in many cases be worse off than under tax credits. This means that they will have less incentive to work.

The Joseph Rowntree Foundation have looked at this in detail.

Source: Joseph Rowntree Foundation

A couple with two young children, where one person works full time on the minimum wage, after receiving universal credit, would have disposable income of £346 a week. This falls £103 a week short of what the family needs for an acceptable standard of living according to the public.

• If the second earner works 1.5 days a week on the minimum wage they would have disposable income of £369, £80 short of an acceptable standard of living.
• If the second earner works 3 days a week (twice the hours) it would make little difference, with the family only £8 a week better off. Their disposable income would be £377, £72 short of an acceptable standard of living.
• If the second earner works 5 days a week they would actually be worse off. Their disposable income would be £375, £74 short of an acceptable standard of living.

Basic income is much easier to work the impact of changes because its extremely simple. Basic income guarantees that anyone who works even part time will be better off working than if they stayed at home unlike other costly schemes I could mention.


Sign the initiative and more importantly tell everyone you know to sign it.

A Return to Full Employment

Will we ever have full employment again? I think it is pretty unlikely for a number or reasons.

The most controversial reason harks back to an observation by Karl Marx that the capitalist society requires a reserve army of unemployed to provide cheap labour. There is certainly some evidence that there is no real intention to have full employment again. There is even an economic metric called the NAIRU or Natural Accelerated Inflation Rate of Unemployment. The OECD has set the rate for the UK at 6.9% and possibly by complete co-incidence the bank of England recently said that if unemployment drops below 7% they may need to increase interest rates.

The theory behind the NAIRU is that if unemployment drops below the NAIRU then it will cause inflation . Nobody wants inflation least of all the people with all the money. No government is ever going to admit to having a lower target for unemployment, but that said, Norman Lamont let the mask slip in 1991 when he said.

Rising unemployment and the recession have been the price that we have had to pay to get inflation down. That price is well worth paying.

Norman Lamont-Hansard, HC 6Ser vol 191 col 413 (16 May 1991)

Less controversial is the idea that automation is taking our jobs. The acceleration of IT and associated technologies like electronics and robotics continue to be highly disruptive. The first jobs to go will be the low skilled and we are already seeing burger flipping robots, self service kiosks, online ordering and soon to join that list will be driving. Amazon is even considering using drones to deliver parcels. Have a look at Federico Pistono's Ted x talk for some figures.

All this automation will cost jobs,but I don't think its all doom and gloom just yet. Because quite often automation creates new opportunities and new jobs. But the disruption to jobs and the necessary reskilling of the workforce will leave structural gaps that will take time to fill. If the workforce don't have the right skills, jobs will go unfilled.

Another reason why we will not see unemployment drop in the near future, is that there is a big world out there full of people who are getting educated and taking a bigger slice of the pie in the service industry. Why pay British software engineers and project managers when you can outsource to Mumbai? I've seen it at first hand. We were even bringing programmers over from India on special visas while BT was making people redundant. I have news for bankers and captains of industry, even your jobs are not safe.

Wage stagnation and increases in the cost of living will also cost jobs. If we start seeing people take multiple jobs or working longer hours to make ends meet, it will be at the expense of someone else having a job. But lets not also forget that if all the wealth is concentrated in the unproductive parts of the economy we are going to see less and less money spent on the high street and with small business that too will cost jobs.

So given all these reasons why full employment will not happen, why the hell are we treating the unemployed as if they are all lazy and good for nothing. Why do we have to find excuses not to pay them the money they are entitled to and to badger them endlessly to find work that simply isn't there?

Yes there are people who will be happy living on handouts but if we haven't enough work for everyone then why drag them unwilling to jobs. Let the people who want to work do the work.

An unconditional basic income will provide a floor on which people can stand.If they have their basic needs met, then they will have that little bit of extra security, that little bit of extra freedom that will let them look for that better paid job or start a new business or train for a job that would otherwise go unfilled.

With a basic income they don't have to worry that taking a temp job will lead to weeks without money while they have their benefit claim re-processed.  A Basic Income will free people to work.

Maybe it will also allow those of us who are already well-off to work less hours and give someone else a chance to earn some money.


Sign the initiative and  more importantly tell everyone you know to sign it we are running out of time to get the votes in.

Basic Income for Students

Many years ago students used to get a grant from the government to study at university. It was seen as an investment in our future. Grants quickly went by the wayside and were replaced with student loans.

Recently in the news we have seen that  the government has sold £890m of student loans to a debt management consortium for £160m.

Some might argue that this was unrecoverable debt and a shrewd move by the government. While others might argue that they have taken away the student grant and simply given it to private enterprise.

This may just be the start of it. According to the Huffington post the government wants to sell off even more of this debt to raise money in the short term.

They are talking about raising 10 Billion. If they are selling at 20% of the total debt, this means that they are handing over 40 Billion of public money into private hands. When I say public money I mean your money that you have to pay back with interest.

But given that we want people to go to university, why shouldn't we just give them the money? You could argue that they will earn more with higher education than without, but its also true that they will pay more taxes so why pay twice?

So am I arguing for a return of grants? Not really. I would like us to have an unconditional basic income for everyone. If you choose higher education you get your basic income. If you find a better way of getting your training like an apprenticeship or internship, you still get your basic income. If you choose to go to work you still get your basic income and if you are unable to find a job you still get supported.

There is no administrative overhead of supplying grants or chasing repayments because you will simply receive a monthly deposit in your bank account.

Doesn't it make more sense than having the government give your loans to a debt collector?

Sign the initiative and  more importantly tell everyone you know to sign it

Stupid Sanctions vs Basic Income 23: Late again

There is a website called A Selection of Especially Stupid Benefit Sanctions filled with stories of ways in which our broken benefits system hurts people. I thought it would be good to compare what would have happened with welfare replaced by Basic Income Guarantee.

Of course its not terribly exciting because basic income doesn't judge people or make mistakes.

Our Current Welfare System	What if we had basic income?
You are on a workfare placement and your job centre appointment comes round. The job centre tells you to sign on then go to your placement – which you do. The placement reports you for being late and you get sanctioned for 3 months.	You go to work for a company that is offering a proper secure job because workfare doesn't exist and you don't need to sign on because you automatically receive your basic income.

Stupid Sanctions vs Basic Income 22: Running Late

There is a website called A Selection of Especially Stupid Benefit Sanctions filled with stories of ways in which our broken benefits system hurts people. I thought it would be good to compare what would have happened with welfare replaced by Basic Income Guarantee.

Of course its not terribly exciting because basic income doesn't judge people or make mistakes.

Our Current Welfare System	What if we had basic income?
You are a mum of two, and are five minutes late for your job centre appointment. You show the advisor the clock on your phone, which is running late. You are sanctioned for a month.	You are five minutes late for an appointment. You continue to receive basic income

Stupid Sanctions vs Basic Income 21: Form Fail

There is a website called A Selection of Especially Stupid Benefit Sanctions filled with stories of ways in which our broken benefits system hurts people. I thought it would be good to compare what would have happened with welfare replaced by Basic Income Guarantee.

Of course its not terribly exciting because basic income doesn't judge people or make mistakes.

Our Current Welfare System	What if we had basic income?
You apply for more jobs than required by your jobseeker’s agreement, but forget to state on the form that you checked the local paper (which you’ve been instructed to do by a jobseeker’s direction). You’re sanctioned.	You apply for jobs and continue to receive basic income

Stupid Sanctions vs Basic Income 20: Big Brother

There is a website called A Selection of Especially Stupid Benefit Sanctions filled with stories of ways in which our broken benefits system hurts people. I thought it would be good to compare what would have happened with welfare replaced by Basic Income Guarantee.

Of course its not terribly exciting because basic income doesn't judge people or make mistakes.

Our Current Welfare System

What if we had basic income?

Your job centre advisor tells you that emailing your CV to a company is not enough; you must physically hand over a paper copy too. You must also provide printouts of all emails to your advisor. You cannot afford this - you do not have your own printer - so are told to give the advisor access to your personal email account. You check with another advisor who tells you to do as the first advisor required.

You email your cv to a company and continue to receive basic income