Monday 26 October 2015 12:00 am

Free market think tank the Adam Smith Institute calls for controversial welfare overhaul

The government should replace all major welfare payments with “nega­tive income tax”, an eyebrow-raising report from free market campaign group the Adam Smith Institute (ASI) has suggested.

The call to ditch tax credits, job­seeker’s allowance, and the univ­ersal credit system for a new sys­tem comes as the government has taken fire for changes to tax credits which critics say could cost the nation’s poorest an average of £1,300 a year.

The radical negative income tax would pay out to British citizens in decreasing amounts until they reach a certain wage, when they would begin paying tax.

Those out of work would receive the maximum amount.

The ASI says the scheme would be structured to encourage people into work, with the final “negative taxed” salary always higher if more hours were worked.