UK Basic Income Costs 2013

Nick Margerrison from the UK asked me how Basic Income would be funded, so let’s consider the UK for a feasibility example. At first glance Basic Income can seem impossible. I felt very daunted by the requisite expenditure when I started considering how to implement Basic Income.

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The UK population, aged 15 and over, totals approximately 52 million. This means for a Basic Income of £13,000 ($20,853) the yearly Basic Income bill would be £678 billion.

The total UK Government income is only expected to to be £612 billion for 2013, furthermore the Government stated it must borrow an additional £108 billion. The benefits bill is £166 billion, which we can subtract from the hypothetical Basic Income bill thus we have a shortfall of £512 billion for our Basic Income expenditure.

How can we cover the shortfall? Let’s suppose we doubled income tax and corporation tax, then tripled National Insurance tax, which creates an extra £408 billion. Initially I contemplated doubling VAT but double VAT isn't an option because 40% VAT would impact too severely on people with the lowest incomes, thus we must triple National Insurance (NI) tax. Tripled income tax is also not an option because income tax is already high. Via double income tax, double corporation tax, and triple NI tax (£408 billion total), our shortfall is now £104 billion.

Maybe the current £166 billion costing for benefits is incorrect? Perhaps the yearly benefit bill could be increased to £220 billion? One Guardian report states the benefits bill is £166 billion and another report states “social protection” is £220 billion, which means we could perhaps knock £54 billion off our £104 Basic Income shortfall, if £220 is the current benefits total, thus our shortfall would only be £50 billion, which is closer to success but £50 billion is not insignificant. It seems £220 could be correct because it includes child benefit, tax credits (£29 billion), and other benefits not listed in the £166 figure.

How could the remaining £50 billion be raised?

If we limit Basic Income to people aged 20 and over (46.23 billion people) you could have a yearly Basic Income bill of approximately £598 billion, which eliminates the shortfall and leaves us with £30 billion spare.

The question now is how much Basic Income should be given to people aged 20 and under. What taxation or expenditure cuts to should be applied? £7,647 (0 - 20 age 100 billion needed) editing

Approx population age 0 - 20
Age 0 to 5 = 2.4 million 2k per yr (£38 per wk) = £4.8 billion
Age 5 to 12 = 2.8 million 3k per yr, £57 per wk = £8.4 billion
Age 12 to 16 = 1.6 million. 4k per yr, £76 per wk = £6.4 billion
Age 16 to 20 = 1.6 million. 9k per yr (£173 per wk) = £14.4 billion yearly budget.
Total expend £34 billion

Age 5 to 16 = 4.4 million. 4k per yr, (£76 per wk) = £17.6 billion yearly budget.
Age 0 - 16 = 6.8 million. 4k per yr, (£76 per wk) = £27.2 billion yearly budget.
I doubt people would accept cuts to military spending so perhaps we could increase corporation tax beyond our already doubled sum? Perhaps bankers could forgo their bonuses? Goldman Sachs typically rewards their workers with £8 billion in bonuses each year. Surely if all City of London bankers cut their bonuses by half this would solve the remaining Basic Income shortfall?

The Daily Mail and The Guardian reported in 2006 how total yearly bonuses for “investment bankers or financiers” was £19 billion. If we account for inflation perhaps half of total bonuses, regarding City of London in year 2013 would be at least £9 billion, thus Basic Income is not the impossible task I initially feared it might be?

City of London bonuses unfortunately appear to be lower due to the global financial crisis. The Guardian reported bonuses only totalled £14 billion in 2011, thus half of 14 deducted from our £13 billion shortfall means we remain short by £2 billion. There is £25 billion lost to tax avoidance to consider but good luck trying to retrieve that, chasing it will probably cost more than it is worth.

Would City executives surrender half of their bonuses? I am sure the majority of people will not object to "investment bankers or financiers" losing half their bonuses. I also think we would be able to find the remaining billions somewhere in the City of London, considering they apparently at least one large sum squirrelled away.

Would people be willing to accept a doubling of income tax, National Insurance, and corporation tax? Damage to the finances of average people, from doubling those taxes, should be wholly recouped via the Basic Income everyone would receive, in fact many lower paid workers would be significantly richer, so perhaps higher taxes would be acceptable? Basic Income would obviously be tax exempt.

◆ National Insurance Tax.

I am not entirely sure how National Insurance contributions work, for example one UK Government website states the NI tax is “12% on your weekly earnings between £149 and £797,” but oddly they state the tax significantly decreases for high earners thus the tax appears to be only "2% on any weekly earnings over £797."

A tripled NI tax of 36% is doable but perhaps it would be more sensible to apply a high NI tax rate to high earners who are receiving over £797 weekly. I  will however refrain from addressing the inequalities of the capitalist system where rich people pay very little tax. Yes a 2% NI tax should be increased to at least 12% but let’s work within the limitations of capitalism.

Basic Income costing regarding £25,000 salary.

What would the impact of tripled NI tax and doubled income tax be on someone earning a wage of £25,000? Income tax is currently 20% regarding the £25,000 pay range, and NI tax is 12%, thus the current take-home wage is approximately £19,818 (according to a couple of online tax calculators, which state, after accounting for tax free allowances, a 20% income tax is £3,112 and a 12% NI tax is £2,070).

Double income tax would therefore be an extra £3,112 and triple NI tax would be an extra £4140, which means the total extra taxes to pay for Basic Income would be £7,252, which means after adding the tax-free Basic Income, a person earning £25,000 would be richer by £5,748 (£13,000 minus £7,252).

According to the BBC the average UK wage in April 2012 was £26,500, therefore average wage earners would be very happy with Basic Income but what about people earning a higher wage, how would Basic Income impact upon them? Currently a £35,000 ($55,898) salary incurs £5,112 income tax and £3,270 NI tax. To fund Basic Income regarding this salary a person earning £35,000 would pay £5,122 extra income tax and £6,540 extra NI tax, which means their total extra tax of £11,662 could leave them £1,338 richer after they have received their £13,000 of tax-free Basic Income.

Basic Income is doable despite my initial fears. It seems people with incomes up to £35,000 ($55,898) would either receive more money or experience no change. Tax revenue for Basic Income would come from high earners, the extra taxes would only impact upon higher wage earners. Sadly despite the minority status of high earners I suspect governments will support the rich minority, so although BI is possible I fear Basic Income won’t be implemented soon.

Please feel free to provide a more precise costing. You can discuss Basic Income costing via the Post-Scarcity Warriors, or SOFF.

I am continuing to refine this page thus various tweaks are planned, some of which will be based on comments I made on G+.

In October 2013 the UK Treasury revealed £35 billion is lost via evasion, avoidance and fraud, but that sum does not include "...the millions of tax which some argue firms like Starbucks, Google and Amazon should pay in the UK," the Daily Mail wrote. The "public accounts committee chairman" stated £35 billion is the tip of the iceberg, which The Guardian also reported on: "The officials admitted that they do not include money earned in Britain by Google, Amazon and Starbucks – all accused of tax avoidance, but who reiterate that they abide by the law – in their tax gap estimate." One pressure group estimates lost UK corporation tax is in the region of £145 billion.

Note also how despite the financial crisis leading to so-called "austerity," UK energy firms increased their profits. The Telegraph wrote (25th Nov 2013): "Profits at Britain's 'Big Six' energy suppliers are five times higher than they were in 2009 as millions of households suffer record bills for their gas and electricity, regulators revealed today."

There are clearly various sources, for extra money, to fund basic income, which the following video highlights, if only the people in power are willing:   

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