Thursday, March 07, 2013

Costing the Green Wage Subsidy


The motion on GWS to the Green Party Conference had a note attached to it by Policy Comittee to the effect that it was uncosted. It was referred back. I was not advised that motions should be costed, but no matter, I have done some very rough costings here, and they are interesting. 
Bottom line: if only half successful, GWS could add something like another £10,000,000,000 (£10 billion) to the annual income of UK plc. 

The Green Wage Subsidy (GWS) aims to move towards full employment and stimulate the Green Sector of the economy by transforming existing benefits (primarily unemployment benefits, termed “JSA” at the time of writing 2013, but any other benefits may also be involved) into a wage subsidy by allowing them to behave as though they were Citizen’s Income.

Executive Summary
Conservative cost-benefit estimates of the effects of a GWS working to 50% of full capacity suggest that for an outlay of £34.5million pa, the nation as a whole could benefit to the tune of some £10 billion per annum, possibly more.

Tribunal Costs

Tribunals will be set up in the  346 Local Authorities (LAs) in England and Wales to adjudge the economic groups that will qualify for GWS.

Tribunal: 3 officers at £30k pa each, total £90K pa, add office costs (can be lodged in council buildings) say £100K per tribunal, so total is £34.6million pa.

In doing this we have created about 30,000 admin jobs already – but there will be job losses from administration in other areas, since there will be less pointless activity in  Job Centres chivvying and chasing claimants, putting them through training for jobs that don't exist. But we can let that pass.

Note that the activity of the tribunals will be intense in the first few years of GWS, and will fall to maintenance levels as time passes, so these costs may fall.

Health savings

The NHS will not have to treat as many cases of anxiety, depression, heart attacks, domestic violence, smoking related illness, obesity and alcohol abuse as a result of higher employment levels. In 1996 Bills of Health calculated the health costs of unemployment to the NHS at £17 million. Let us round that up to £20 million now.
The NHS should not have to pay this money back to the Treasury, but in that waiting times will fall, there will be a net benefit accruing to the general economy since people will be off work for a shorter time waiting to be treated, so it is not unfair to set the £20 million off against the admin costs.

So we only £14.6 million to go until we break even on the tribunals’ outlay.

Increased tax revenues

Let us make a conservative estimate, and assume that only 1million extra jobs are created in the early years of the GWS scheme.
National Insurance Contributions (NIC) will be paid by the employer. Say £80 per week times 50 weeks a year times a million = £4 billion.
Then there is the extra tax take from the increased output and profitability of green SME's. This is impossible to quantify, but they would probably be in the region of the NIC take, but let's be conservative, say £1 billion.

Legal Costs Foregone

Monies saved in police, court, prison probation and social service costs are difficult to estimate.
Bills of Health shows that unemployment is related to minor crime such as car theft.
It is reasonable to assume that many unemployed people must supplement their meagre income with fraud and drug dealing. Workless youths will also inevitably be drawn into street gangs.
Let us be really conservative and put these costs foregone at £14.6 million, in order to eliminate the irritating remnant of the admin costs.

National Morale

There is an the effect on general morale which will lift as litter disappears, gardens are planted, the street furniture is brightened up and the neighbourhood starts to buzz. Business confidence will increase.
That must be worth 0.001% on GDP. Another £6 billion. Say five, to be conservative.

Obviously there is more detailed work to be done here, but at this stage I make it we're about £10 billion per annum better off as a result of GWS, working at 50% of maximum (1million jobs created, not the full 2 million).

Medium and Long Term costs

Of course, if the economy picks up, the claimant bill will remain high instead of falling as people go back into conventional work.

But in fact the JSA is a fairly trivial part of Govt spending, so we can argue that point with Tories when (if?) we get to escape from recession.

If the GWS continues, natural unemployment churn will mean that gradually the proportion of people on working on GWS in the green sector of the economy will grow, so that the system will be taking on the characteristics of a full Citizen’s Income. At that stage, public perception of CI will have changed radically, and instead of being seen as an outlandish Hippy’s Charter, CI will be seen as the sensible and efficient measure that it is.


I fully accept that these calculations lack the rigour that a paid firm of consultant accountants would bring to the task, but I would draw to the attention of the Policy Committee the costs that such an consultancy would bring to the Green Party, and I would argue that the margins suggested by this broad brush estimations are large enough to contain any but the most absolutely oppositional criticisms.

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