Minimum Income Guarantee Level Modelling

Annex 2 – Minimum Income Guarantee taper rate

This annex outlines the design options for a Minimum Income Guarantee taper that were considered by the Expert Group and helped to inform their decisions around recommending a tapered approach and a time-limited approach. These examples were produced by the Expert Group and refer to examples in the analysis undertaken by WPI Economics on^[4] their behalf.

How could a Minimum Income Guarantee top-up be structured?

In developing proposals, the Expert Group looked at international models that share characteristics with a Minimum Income Guarantee.^[5] In broad terms, these fall into three categories: flat Minimum Income Guarantee-style, tapered Minimum Income Guarantee-style and time-limited systems.

Flat Minimum Income Guarantee-style models

Some countries have implemented systems that can be described as a flat-Minimum Income Guarantee, operating a simple top-up to incomes that fall beneath the relevant minimum income level. Figure 1 outlines a simple illustration of a flat-style model. An example of this the Expert Group considered was Spain’s Minimum Vital Income^[6] - see box below for further information.

Note: This illustration shows the example of a single adult household. Earnings are gross income set at the 2025/26 minimum wage. The MIG level is set at £11,500 for illustrative purposes.

The drawback of flat systems in theory, and arguably in practice where they have been introduced, is around the negative work incentives they introduce. For those beneath the minimum income level the system works by topping people up to the same income level regardless of how much they work. The top-up payment is fully withdrawn as soon as someone’s income reaches the minimum income level. Therefore, whether someone is in paid work or not, they receive the same income level after the top-up. This flat model risks reducing the employment rate for those under the minimum income level. Given what we know about the importance of work incentives, we have not recommended this as part of the design of a Minimum Income Guarantee.

Tapered Minimum Income Guarantee-style models

An alternative is a tapered-Minimum Income Guarantee-style model. This works by offering a top-up to those with incomes beneath the minimum income level which gently reduces as income increases. This ensures work incentives are positive and that the same household will always have greater income if they work compared to if they do not. Figure 2 offers a simple illustration of a tapered Minimum Income Guarantee style model, showing how a Minimum Income Guarantee top-up reduces gradually as earnings increase. An example of this would be France’s Active Solidarity Income (RSA).^[7]

Note: This illustration shows the example of a single adult household. Earnings are gross income set at the 2025/26 minimum wage. The MIG level is set at £11,500 with a 55% taper for illustrative purposes.

The drawback of a tapered Minimum Income Guarantee style model is that gradually reducing a top-up means many more people receive a top-up, potentially increasing the costs of the system overall and/or constraining the payment to a lower level. However, tapered models have the advantage of ensuring work will always pay, all things being equal. Given the importance placed upon work incentives the MIG Expert Group proposes this style of taper as part of the Minimum Income Guarantee’s design.