Those on the left (and authoritarians generally) say that a flat rate UBI of £4,000 a year, payable to each UK resident (or whatever the rules are) working age adult on a no-questions asked basis would a) leave existing claimants worse off (it wouldn't actually, if you leave Housing Benefit as a separate payment) and b) it't not right to pay it to wealthy people/high earners.
Fair enough. That does not change the basic principle, which is to get marginal withdrawal rates down as far as possible.
I set up a spreadsheet with HMRC's figures for taxpayers' income percentiles and my estimate of incomes of non-taxpayers. For a given total payout, there is of course a mathematical trade-off between how high the basic amount is and what percentage would have to be clawed back via PAYE codes. This reflects the political trade-off (low earners should/should not get more than £4,000) and the economic trade-off (the lower the marginal withdrawal/tax rate, the better for everybody, unless you are loony left wing).
The answers are:
£4,000 - zero %
£5,000 - 5%
£6,000 - 10%
£7,000 - 16%
£8,000 - 23%
£9,000 - 30%
Even paying £8,000 a year with a 23% withdrawal rate would be a vast improvement over the Universal Credit headline withdrawal rate of 63%, which is on top of any PAYE/NIC you have already had deducted.
And at £8,000 a year basic entitlement, there is clearly no need for Housing Benefit any more, win-win.
Debate Magazine
