Observations on Universal Credit - and why Citizens Income with Flat Tax is better.

An extra 32 hours for £50? Really?

Universal Credit is an attempt to replace a number of benefits with one single benefit - simplifying the system so saving time and money.

As with all big state IT projects, the implementation is a shambles
http://www.bloggers4ukip.org.uk/2013/09/universal-credit-public-sector-it-merry.html
http://www.bbc.co.uk/news/uk-politics-23963867

But if it pays of in the long run, that will be forgotten, I just saw the figures in that story and thought I'd do a little analysis...



Which looks to me to say:-

The unemployed 20 year old gets £500 a month.

If he works 48 hours a month (12/week) at minimum wage (£6.25 an hour) he earns £300 a month (more than his rent!).

But with UC he will have a total of £700 a month so his 48hrs work have made him £200 better off - thats an extra £4.17 for each hour worked.

If he works 80 hours a month (20/week) at minimum wage he earns £500 a month (almost double his rent!).

But with UC he will have a total of £750 a month so his *extra* 32 hours have rewarded him an extra £50 a month... or a measly £1.56 an hour(!).

Or :-

Monthly
Hours	Payslip Rate	Payslip Total	UC	Monthly Total	Reward Per Hour Worked	Reward per Extra Hour Worked
0	n/a	0	£500	£500	n/a	n/a
48	£6.25/hr	£350	£350	£700	£4.17	£4.17
80	£6.25/hr	£500	£250	£750	£3.13	£1.56

An extra 32 hours for £50? Really?

How about this instead?

With a real 'citizens income' the figures would look something like this:-

Monthly
Hours	Payslip Rate	Total	Tax (30%)	Take home	CI	Monthly Total	Reward Per Hour Worked	Reward per Extra Hour Worked
0	n/a	-	-	-	£500	£500	n/a	n/a
48	£5.25/hr	£252	£76	£176	£500	£676	£3.67	£3.67
80	£5.25/hr	£420	£126	£294	£500	£794	£3.76	£3.67

So a fixed citizens income and a flat rate tax means workers keep 70% of every single £ they earn.

To simplify even further why not just tax the employer the 30% of their total wage bill - make the wage £3.67 and not tax the employees at all? I'd like to see people try to dodge their taxes with that in place!!


First Published at http://free-english-people.blogspot.co.uk/2013/09/observations-on-universal-credit-and.html