What would you do if your income was taken care of?

The government’s response to Covid-19 suggests that a Universal Basic Income is feasible. Could we afford it, and could it be the radical solution which many people have been looking for to tackle our big social and economic problems?

Universal basic income
“What would you do if your income were taken care of?” Photo by Generation Grundeinkommen on Flickr (CC BY 2.0)

Covid-19 has overturned many assumptions about what kind of changes we can manage as a society. One of the most dramatic was the decision of the government to pay the wages of 9 million people to stay at home. This prompted discussion about the idea of a universal basic income, including an investigation by the Parliamentary Work and Pensions Committee in 2020. If we can do it in a pandemic, why not in normal circumstances?

The idea of a universal basic income (UBI) was first proposed in the 18th century, but has been under active discussion more recently, with experiments around the world, from India to Alaska.

The principle

The principle is simple: the government makes a regular payment to all citizens, without conditions, and regardless of any earnings. This would replace many (but not all) elements of our welfare system. Payments would not allow people to live in luxury, but be enough to guarantee a minimum level of independence.

Why do it?

Advocates of UBI argue that it could:

  • give people dignity. It would remove means testing, and we would all be paid because we are citizens, not because we had proved that we are needy or ‘deserving’. It would end the division of people into ‘strivers’ and ‘skivers’.
  • give people security. All of us would know that some income would always come, regardless of pandemics, redundancy, accidents, fire, or flood. Because it would be paid to individuals (not households, like Universal Credit), it would enable people to escape abusive relationships.
  • reduce inequality. The big benefits would go to the poorest, while the richest would pay it back in tax. This would stimulate local economies because the poorest are more likely to spend the money locally.
  • encourage good work, and discourage exploitative work, by giving people the power to say no to bad employers and poor working conditions, and enable them to take time out to retrain.
  • recognise unpaid work. People would be more able to take on valuable unpaid work as carers, creatives or in community activities.
  • reduce administrative costs. It would reduce the massive costs government now spends on means testing and investigating fraud.

Countries which have tried UBI in some form have identified other benefits. A short term, limited, pilot in Finland found improvements in education, nutrition, and health, and reductions in domestic violence and divorce.

UBI would replace much of the current welfare system, including Universal Credit. However, there would still be a need for a system to meet other costs, like those associated with disability and housing, which vary greatly according to individual circumstances and location. Different rates would be needed for children and retired people.

Could we have a Universal Basic Income?
Could we have a Universal Basic Income? Photo by GoSimpleTax on Flickr (CC BY 2.0)

Can we afford it?

In some ways we already do this. Everyone who pays income tax is entitled to a ‘tax allowance’ of £12,500 a year.  To a basic rate taxpayer, this is worth £48 a week.  But this is regressive: a higher rate taxpayer gets £96 a week, while those who earn too little to pay tax, get nothing.

A variety of models have been suggested. The New Economics Foundation have proposed replacing the income tax allowances with a ‘Weekly National Allowance’. Every adult would receive £48 a week, paid for by abolishing the income tax allowances. They would top up this payment by retaining a number of existing welfare payments.

The Compass think tank have proposed a ‘Partial basic income’. Their model would involve a universal weekly payment of £60 to every adult under the age of 64; £40 for every child; and £175 for every adult over state pension age. This would be paid for by replacing existing welfare payments; abolishing the income tax personal allowance, and raising income tax rates on the richest.

The Scottish government have taken the idea a step forward.  They have supported a study to review the worldwide evidence on UBI and make proposals for a Citizen’s Basic Income pilot project. This proposed a pilot of two models, one based on a payment equivalent to current welfare benefit levels, and the other using the Joseph Rowntree Minimum Income Standards (which is based on what people in general think is an acceptable minimum).

What are the objections?

Critics of UBI raise a number of important questions:

  • Free riding and solidarity: Does UBI undermine the principle that everyone is expected to contribute to society through paid employment? Will a lot of people choose to do nothing? Pilots suggest that this is a real, but small, effect. Most people want to make a contribution and earn more money. In any case, no UBI scheme pays enough to live in luxury.
  • Cost: To pay UBI at a realistic minimum level will be expensive. Conventional economists argue that it would require the state to create unsustainable debt. Modern Monetary Theorists see it not as a debt but as a redistribution of society’s resources.
  • Alternatives: Could the same money be better used to provide targeted benefits? All alternatives fail tests of dignity and efficiency because they involve expensive means testing.
  • Exclusion: How do you determine who is eligible, especially in relation to immigrants? UBI could be limited to citizens, with citizenship dependent on a test of residence and contribution.
  • Administration: How do you get the money to everyone, especially those in greatest need? Neither HMRC nor the National Insurance Number system covers everyone eligible. They would need to redesign the system to provide a basis for making payments to everyone. But in the long term, both would be seriously simplified.
  • Taxation: If some of the money is to be raised through taxation, how do you get the very rich, and global corporations to contribute? This is not a problem peculiar to UBI.
  • Level of payment: How do you determine the level of payment? The simplest, revenue neutral, option pays around £50 per adult per week (55% of single adult Universal Credit, or 76% of a couple on Universal Credit).

Is there public and political support?

There is clear evidence of public support in principle for UBI, though whether that would remain when the full implications are explained is less clear.

Opinion polling shows a clear majority of people in the UK in favour, across age groups, regions and educational levels, although it is highest among the young. Support is strongest among Green and Labour voters, but in the last four national polls, there is usually a small majority in favour even among Conservatives. The most recent poll shows 59% in favour, against 17% opposed.

In 2020, following a petition signed by over 114,000 people, Parliament debated the idea, which has been supported, for different reasons, by politicians on the left and right. In 2020, the Welsh Senedd passed a motion in favour of a trial, and the Welsh government now proposes to carry out a limited pilot.

Can we do it?

Around the world, there have been many UBI experiments, mostly with positive effects. However, it is very difficult to predict how people’s behaviour would change with full scale implementation, and how this might impact on the working of the economy. The experience of Universal Credit shows how complex this kind of change is, and the Scottish study suggested that there would be serious difficulties in coordinating the funds and workings of many government departments, especially in a devolved context. However, the response to Covid-19 showed that radical change of this sort is possible when the conditions are right. The advocates suggest that this could be the transformative social and economic change which many people have been looking for? Are they right?

Can you help us reach more readers?