Natalie Bennett
Natalie Bennett, leader of the Green Party, advocated a basic income for everyone in the UK.BBC/YouTube

As most people laughed at Natalie Bennett's car-crash interview with Andrew Neil this weekend, in which the Green Party leader appeared to have no grasp of any of the numbers behind her policies, a few unlikely viewers were wincing.

Her craziest-sounding policy, to give a "basic income" of £72 a week to everyone in the country regardless of income at a cost of £280bn to the Exchequer, has some surprising supporters on the free market right.

Many free marketeers, including Nobel laureate Milton Friedman, favour a form of welfare known as a "Negative Income Tax". This would replace existing benefits aimed at alleviating poverty like tax credits and jobseekers allowance with a single automatic payment that is tapered off according to earnings.

The intention is to eliminate "benefit traps" that exist when people stand to lose more (or almost as much) in benefits as they would gain from working pay and hence disincentivise work. By eliminating complexity in the system we can eliminate perverse incentives too.

To illustrate how the taper would work, I sketched out a scenario in a 2013 post:

For example, we could set a basic income of £10,000/year by using a cut-off point of £20,000/year, and withdrawal rate of 50%. The basic income supplement would be equal to 50% of the difference between someone's earnings from work and the £20,000 cut-off point. A person with no earnings would get a basic income of £10,000/year; a person who earned £10,000/year would get a supplementary income of £5,000; a person on £15,000/year would get a supplementary income of £2,500; and a person on £20,000 would get nothing (and begin paying tax on the next pound they earned).

Note that these numbers are strictly hypothetical – the level of payment, rate of taper and cut-off point could be adjusted to make this a revenue-neutral replacement for much of the existing benefits and tax credits systems.

Because the payment would only look at income, not whether the recipient was in work or not, it would top-up low paid work as well. That would be a significant improvement on the existing British welfare state, which was designed to act as a short-term insurance to people out of work for a brief period, not to supplement the wages of the low paid in perpetuity.

This Negative Income Tax might sound a lot more restrained than the Green Party's £280bn splurge, but in fact there is not much difference between the two ideas, at least in principle.

Although a "basic income" is given to everyone regardless of income, its advocates typically suggest that it will be paid for with higher taxes. This effectively means that a 'taper' will still exist, but it will act through the tax system rather than through the payment system.

A Negative Income Tax gives a worker £2,000, say; a basic income may give a worker £4,000 and tax £2,000 of that away.

Natalie Bennett's big failure (beyond not knowing any of the numbers behind what she was proposing) was to not make this clear, and indeed many basic income supporters do not seem to have recognised this. I am not sure she even intends for her basic income to replace many existing benefits, since she proposes huge corporation tax hikes and wealth taxes to fund it.

The Green Party's basic income policy may be a mess, but the Citizen's Income Trust have proposed (PDF) a revenue-neutral basic income model that is reasonably close to a Negative Income Tax and would achieve some of the same goals of welfare simplification.

It would be a shame to let one bad version of the policy – and one bad advocate – put us off what could be a big improvement to Britain's benefits system.

Sam Bowman is the deputy director of the libertarian Adam Smith Institute thinktank.