Payment would cover bare basics

By Steve Hart

A basic income scheme was almost adopted in the US in the 1970s, is to  be introduced in parts of Holland, is likely to be adopted in Finland.
A basic income scheme was almost adopted in the US in the 1970s, is to be introduced in parts of Holland, is likely to be adopted in Finland.

Although Labour's announcement that it is considering the merits of a universal basic income may have come as a surprise to many, the concept is not new.

Labour's finance spokesman Grant Robertson says the party is considering a scheme that involves paying every adult $211 a week. But before you get your hopes up, it won't happen unless it is pushed through parliament, and there's no prospect of that happening under a National government.

A supporter of giving everyone aged 18 and over a guaranteed, no-questions-asked weekly payment is Susan Guthrie. She's an economist and former Reserve Bank worker now employed by the Morgan Family Foundation.

The foundation has been researching and formulating changes to the tax and welfare system for years, and has so far garnered support from the Mana Party, the Green Party, and now the Labour Party.

Guthrie says four years ago the foundation did extensive research to come up with a figure of $10,000 as a universal basic income for Kiwis, but with inflation she reckons $12,000 - or $230 a week - is probably nearer the mark today.

She says the figure is "bare basics" based on what an unemployed couple currently receive. Adding that while $460 a week for a couple would barely cover rent in Auckland, an unemployed couple in the Super City currently receive $390 from WINZ.

"As for the costs, let's look at the loans we hand over and can't claim back," says Guthrie. "And the $1 billion a year spent just to administer the welfare system - that just pays for WINZ staff to go through 20-page manuals about giving people benefits of around $200 a week.

"Then you have the IRD that administers tax credits. They also have a headache because people who may work part time... may earn slightly more by the end of the tax year than they thought and then the Working For Families tax credit has to be clawed back, and they chase people for these debts. It can get incredibly messy."

She says the drain on the tax system to fund a basic income system will be minimal, with any shortfall coming from widening the tax base to include land - she says capital gains on undeveloped land should be taxable.

"That capital gain is not captured in our tax system at all," she says. "So some people might pay slightly more tax, but that is the trade off for society - a universal basic income is a plausible policy."

While coming up with some figures is all well and good, any change to introduce a basic income will need to be made in Parliament, so generating political support is key.

"Politically, the sticking point will always be broadening the tax," says Guthrie. "Affected people will be vocal critics of such a scheme. But I think attitudes are changing in favour of basic income.

"My personal view is we need an independent tax authority that would take those long-term views. Unless we have someone working at arms length, I don't think the problems of our tax system will be addressed."

In short, Guthrie reckons the whole of WINZ could be closed down, and there'd be less work for IRD staff. Affected staff and their unions might have something to say about that.

"They might," says Guthrie. "But on the other hand I think it does give indebted students a say and for them not to be exploited and desperate for work."

Utopia The concept of a universal basic income is centuries old -- it was popularised in Thomas More's book Utopia, published in 1516.

He wrote: "No penalty on earth will stop people from stealing, if it is their only way of getting food. It would be far more to the point to provide everyone with some means of livelihood."

A basic income scheme was almost adopted in the US in the 1970s, is to be introduced in parts of Holland, is likely to be adopted in Finland -- there's talk of the Fins being given 800 a month - and Switzerland is to hold a referendum about it. In Namibia, President Hage Geingob hopes a basic income scheme will eradicate poverty there by 2025, and there's talk of it being introduced in Ontario, Canada.

Guthrie says: "I feel more optimistic than I did that tax reform is coming."

Pointing to New Zealand's Super scheme, she says we have a basic income scheme already - only it is for people aged over 65.

"It is not means tested in any way, so even if you are a millionaire you are entitled to it," she says.

Currently the Super schemes pays around $19,475 a year after tax for a single person on the M tax rate.

Guthrie says: "One of the reasons the Super scheme came about for the elderly was that in the 1930s there was a means tested scheme but the people were to embarrassed and ashamed to front up and collect it.

"Today, our elderly population is one of the healthiest mentally and physically, and I think it is because Super is an unconditional payment. All we are suggesting is that we take that same approach and apply it to everyone aged 18 and over."

Worth reading: The Big Kahuna by Susan Guthrie and Gareth Morgan.

- NZ Herald

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