Lindsay Mitchell: UBI for kids

Here's a group advocating a universal basic income for all children of $40 a week.

Lowell Manning, President of Basic Income New Zealand (BINZ) is calling for a Universal Basic Income for Children. “I like to call it a Kids’ Basic Income” he says. Mr Manning said that a Universal Basic Income for Children would work much better than tax cuts, substantially reducing child poverty in New Zealand and boosting the economy where it is needed.

Referring to reports (Radio New Zealand 27th May on Nine to Noon), that Prime Minister John Key and Finance Minister Bill English would like to cut taxes by about $2-3 billion*, Manning says, “if we are serious about eliminating child poverty here in New Zealand, the Government is well placed to lead the world in 2017 by implementing a Universal Basic Income for Children”.

“The Kids’ BI would be similar to the old Universal Family Benefit that ended in 1991 after 45 years of continuous use”, he said, “so the idea is neither new nor radical. What was radical was abolishing the Universal Family Benefit in the first place”.

“A Kids’ basic income of $40 paid weekly in addition to all existing income support to every child under the age of 18 irrespective of family income or assets would return about $2.6 billion annually to the productive economy excluding establishment and administration costs”, he continued. “That’s about the same as the tax cuts the Government is considering. It creates a clear choice between substantially reducing the rapidly worsening child poverty that is causing widespread concern throughout the country and tax cuts that poorly target child poverty.”

“Moreover, the $2.6 billion a year spent on the Kids’ Basic Income would generate more government revenue because the Kids’ Basic Income will increase national output, GDP, by about 1%, and the tax on that extra output will increase Government revenue more than tax cuts will”, said Mr Manning.

“The Kids’ Basic Income is about the wellbeing of children, not family size or structure, ethnicity or social status” he concluded.

I'd like some expert economic comment on that bit of maths. Sounds like the impossible task of standing in a bucket and trying to life yourself up by the handle. We cannot tax ourselves into prosperity etc.

That not insignificant matter aside, I see a number of problems.

The income would be paid to the parent. If it's like the old Family Benefit it would be paid to the mother. In other cases to whoever has legal custody I guess. But it'll be that person who decides how it is used. Yes, poorer parents will tend to spend it but the wealthier might choose to save it towards future costs eg university fees.

So it cannot assumed it will automatically add to GDP.

Second, the behavioural effect on those who would rather breed than work for an income is a worry.

Third, how can it be fair to anyone who isn't  a parent and aged 18 and over? They don't get any tax relief because proposed cuts would be going to parents with dependent children only. So those just starting out, many already burdened with student debt, become relatively poorer.

Fourth, to really quibble, if all families with children receive the income boost, median household income rises as does the poverty threshold. On paper, relative child poverty persists.

Finally, the universal family benefit was stopped in favour of targeting poorer children. This is a reversal.