A Basic Income Grant (BIG) is a monthly cash grant (e.g. N$100) that would be paid by the state to every Namibian citizen regardless of age or income. The money, which is paid to people not in need, is recuperated through the tax system. The main benefit of the grant is its ability to improve everyone's life by eradicating destitution and reducing poverty and inequality.
The Namibian Tax Consortium (NAMTAX) made the proposal for a Basic Income Grant for Namibia in the year 2002. The consortium was asked to review the current tax system in Namibia. The proposal for a Basic Income Grant is part of their recommendations to redistribute income in Namibia.
The proposal recommends to pay a cash grant to every Namibian. The Consortium has drawn on the debate in South Africa, where a wide range of groups - including the trade unions, NGOs, churches and a government's expert panel on comprehensive social security - have proposed a Basic Income Grant.
Every Namibian would receive such a grant until s/he becomes eligible for a state pension at 60 years. In the case of children aged 17 or younger, the care-giver would receive the grant on behalf of the child. In practice this means that if there are 6 people living in a household and the level of the grant is set at N$100, this household in total would receive N$600,- per month from the state.
About two thirds of all Namibians live below the poverty line. Furthermore, Namibia has the most unequal distribution of income in the whole world. The reduction of inequality - one of the greatest legacies of Colonialism and Apartheid - is not only a justice issue, but also has been identified as a prerequisite for economic growth and investment in developing countries.
Classic welfare programmes using a means-test to target beneficiaries have been proven to be more expensive, wasteful and also ineffective to target people and to limit social assistances to specific groups and people. If targeting is applied by means of added administrative requirements - the poorest are actually those who are least likely to get benefit from the programmes, as they by nature are the most disadvantaged in terms of access to information, infrastructure, and administrative services provided. Instead, by giving a grant to everyone one is can be sure that all people in need receive support. The BIG is thereby self-targeting without having to rely on an administratively difficult means-test with adverse economic incentives.
With a BIG the rich will at first also receive the grant. However, through adjustments in the tax system the money is gradually recuperated. The adjustments in the tax system are made in such a way, that middle-income earners will receive the grant, but at the same time their tax is increased so that they pay back the amount of the grant The rich, however, will be paying more in taxation than what they receive through the grant. They become net payers and income is effectively redistributed. By doing so, social assistance becomes a right, not labelling people as poor, and at the same time an effective tool in redistribution.
The main benefit of the grant is its ability to improve everyone's life by reducing poverty and inequality. All Namibians would benefit from the BIG and there would be nobody without a baseline support. Everybody would at least get some money to support him/herself. In addition, a BIG would redistribute income from the rich to the poor people in Namibia and by doing so would make Namibia a more just and equal society.
Research shows that an increase in income, also increases peoples capacity to look for work and also increases their chances of finding work. A BIG would therefore not only be a safety net but it would be more like a springboard for people to find jobs and earn money.
Furthermore, a BIG is a universal grant, that means that everybody receives it. It is not means-tested, people do not have to prove that they are poor or do not have a job. Means-tested grants penalise people for getting a job or earning money in other ways because they lose the grant if their income increases. Thereby through means-testing, well intended cash grants can become a poverty-trap creating dependency. On the contrary a BIG, as a universal grant, would not discourage people from looking for work but instead would enable people to get out of the vicious circle of poverty and look for work.
There are three basic options or a combination thereof, out of which a BIG can be funded:
First, adjustments in the income tax structure. Higher income earners would bear the cost in form of a solidarity levy to finance the benefit to the poor.
Second, the NAMTAX consortium proposed to fund the BIG through an increase of 6.5% in VAT. This would entail that people would pay more for their daily goods but at the same time would also benefit from the BIG. The model prepared by the consortium shows that 85% of the people would benefit more from the BIG than paying more on daily goods. The increase in VAT would finance the BIG by making rich people pay for it, hence it would distribute income more fairly in society. In addition, one can think of other funding methods, like increasing taxes on luxury goods like cars, tobacco, alcohol etc.
Third, through reprioritization in the budget.
The BIG could be paid out just like the other current grants. Ideally, the consortium proposed to use smart cards and fingerprint identification like they are used for some of the Old Age Pensions. In the long run, this is a cost-effective way and does not leave room for corruption. In the beginning, the setting-up of the system would need additional funding.
The initial costs and the setting up of the delivery system are the main difficulties of the BIG in the beginning. However, once the delivery system is set up, the costs will go down. In addition, the BIG is likely to stimulate economic growth as people have more money to spend and to invest within the Namibian economy. This will not only improve the living standard of people but also increase the tax revenue of the government.
Honestly, you can't. You can also not prevent people who currently receive money from government from wasting their money. However, poor people cannot afford to waste their money and the majority of people use their money responsibly and wisely - the people themselves know what they need most. Namibia has the experience that the state pensions are- by the overwhelming majority - spent to the benefit of the poorest people in society, including grandchildren.
Following an extensive review of the relevant literature and an analysis of possible alternative strategies, the NAMTAX consortium found that by far the best method of addressing poverty and inequality would be a BIG (NAMTAX, 2002:60) There are alternatives, like only supporting children up to the age of 17. However, these alternatives are less effective and many people would still be left without any support. There are also more expensive alternatives, like 'workfare', which requires people to work in order to get support from government. However, these programmes are very expensive and are not able to reach all people in need. Other programmes of government like school feeding schemes etc. should not be seen as alternatives, but as being complementary.
Poor people are dependent on assistance from other people - relatives and friends who have some sort of income. A BIG gives people an income source of their own, which they can count on and which enables them to take their own decisions. It also lessens the burden on the working poor who currently have to support relatives and friends with their limited incomes. Therefore, a BIG in fact reduces dependency, freeing resources for economic investment.
Local and especially rural markets benefit greatly from these transfers as they have the potential to kick-start the economy in the underdeveloped rural areas. The Basic Income Grant, by providing a universal, stable, and continuous income source, has the highest developmental potential as the people can count on it and better plan their economic activities.
In September 2003, the Synod of the ELCRN stated that Namibia faces the problem of poverty and inequality. In this context, it welcomes the proposal of a BIG by the NAMTAX commission. It believes that a BIG has the ability to lift people out of poverty, enabling them to become economically active. Furthermore, it acknowledges that a BIG can facilitate the redistribution of wealth. The synod has made a resolution to work with the Namibian government to further investigate and implement this proposal. In November 2004, the ELCRN organised an international conference on income security where the idea of a BIG for Namibia was discussed between many different stakeholders, including churches, unions, NGOs, and Government representatives. This conference resolved to launch a BIG coalition in Namibia. On April 27th 2005, the coalition was officially launched in Windhoek and the Council of Churches, the National Union of Namibian Workers, the National NGO Forum, the Namibian Network of AIDS Service Organisations, the Legal Assistance Centre, and the Labour, Resource and Research Institute started the coalition. The aim of the coalition is to work together with Government to make the BIG a reality in Namibia.
From January 2008 to December 2009 the BIG Coalition implemented the world-wide first Basic Income Grant Pilot project in Otjivero - Omitara, Namibia. (BIG Pilot Project)
© 2012, Claudia & Dirk Haarmann - BIG Coalition