Tuesday, 16 October 2007

Citizen's Income versus Child Benefits versus Stakeholder Grants

I'm a big fan of citizen's income schemes. Having read this, though, I also really like the concept of stakeholder grants. So I'd like to see a fusion of the two schemes, thus:

Most CI schemes seem to only apply to those over 18. Well, I'd like to see a CI that's paid from birth. Part could go to the parents in order to help with childcare, food, clothing, etc. The remainder would be invested in a trust fund that would become accessible to the child once they became an adult.

At today's suggested CI rate of £5-6k, one might consider it reasonable to pay a child's CI at half rate. Presuming that the child retained roughly 50% of the CI in a trust fund, at age 18 they would receive a windfall of ~£45k in today's money (presuming a 5% interest rate).

Alstott and Ackermann are explicit about their $70k stake being possibly used for a "college" education. So in the UK, one could abolish the state funding of universities (at least for undergraduates), taking the state out of another sector of industry. Off the top of my head, here are the things that the government would no longer need to provide:

- Child Support Agency (or whatever it's called this week)
- Child Benefits
- Management & funding of universities
- Student loans

Furthermore, the percentage awarded to parents can be fine-tuned to ensure that baby production is not an activity that is preferential to work: at the moment, it seems that in a lot of poorer areas, there is a choice between working a shitty job for long hours and low pay, or having a baby and living on benefits. If I was an unskilled, working-class teenage girl, I know which option I'd choose.

(It should be noted that one of the alleged benefits of a CI is to remove such a poverty trap by awarding a flat rate of benefits to all, so perhaps this problem would sort itself out anyway.)

Further, second and additional babies could be paid a greater proportion of their CIs - perhaps 75% for the second baby, and 100% for successive babieS), in order to discourage population growth, if one believes, as I think I do, that there are really too many people in the world already, and we would be individually a lot better off if there were less of us.

On top of that, it may be that having a large family becomes the mark of a rich couple, rather than as it currently is, the mark of the poor. This is a good thing if you believe that children born in wealthy families have a better quality of life and are more likely to be more successful adults.

Your thoughts?


Mark Wadsworth said...

The fiscally and politically neutral CI scheme that I helped out on works like this.

Selling the concept is the big problem, arguing about the CI level (and the tax rate needed to fund it) is another. This 'defer until you're 18' idea is nonsense of course. It will be 'pay as you go'.

sanbikinoraion said...

What exactly do you mean by that last comment?

Mark Wadsworth said...

Pay as you go = government collects tax and dishes it out as welfare or pensions.

Rich people will be free to pay some or all of the CI for their kids into a separate account. Poor people need that money now to live off. There is a risk that they would overspend in the vague hope of repaying the debts once child turns 18. On a practical note, what happens if a child dies or the family moves abroad?

To try and segregate some into a notional account is doomed to failure, as Nye Bevan said "The secret is there ain't no fund".

sanbikinoraion said...

Interesting. I was coming to it with the view that by paying a fraction into a fund, the child will get a stakeholder grant upon reaching the age of maturity. Since according to your CI leaflet, you'd give a smaller CI to children anyway, the difference is that my proposal would do what your CI does, and then puts a bit more aside for the future, give or take a little in the split.

Mark Wadsworth said...

Basically yes.

As a libertarian, the idea is to have as few rules as possible, while hacking off as few people as possible.

Once you have stakeholder grant stuff, the arguments break loose, should it be at 16, 18, 21, when you get married, what if child dies or moves abroad. Can a child borrow from a bank or credit card company on the strength of what he or she is likely to get etc etc.

Too many rules, too much quibbling.

Jock Coats said...

I hadn't noticed this discussion until you mentioned it in your latest post on Tax SImplification. I'm with Mark - the system I worked out on the back of a fag packet would give a declining proportion of an adult CI to children below 18 - from 80% at 16 down to c 20% at birth and is roughly based on the "McClements Scale" which was calculated to work out roughly what proportion of an adult a child at any particular age costs.

However I do agree that since the bringing up of a minor, even to a libertarian, is a combined trust agreement between parent and state - since the state does not want the burden to fall upon it later in life because of parental neglect earlier, you could insist that a certain proportion of it as a minimum would be spent on, say, education and health fees.

If someone needs more (say, perhaps, that they have teh opportunity to go to some specialist school that costs a bit more but is likely to give them significant future benefits - or more likely might be the case in university fees) there could be an interest free loan fund that woudl be repayable only out of income over and above the CI level.