Opinion: should the Government give everyone in Britain a basic income?
As Finland settles into its pioneering pilot scheme, Sarah Coles looks at whether the concept of giving everyone a universal income to live on could work in the UK.
What economic policy unites Margaret Thatcher’s economics hero Milton Friedman, Labour’s John McDonnell and Caroline Lucas from the Green Party?
If you need more of a clue, it’s an idea that has become the subject of governmental experiments in the US, Canada, Finland, the Netherlands and Namibia – and gained so much ground in Switzerland that the country held a referendum on it on June 5 last year : it’s the notion of universal income.
There are an enormous number of variations of the model, and almost as many names (it’s variously known as Universal Basic Income (UBI), Guaranteed Basic Income, Citizens Income and even Negative Income Tax), but essentially the idea is to give every adult in the country the same guaranteed basic income – regardless of whether they're working or not.
If people want to work, they can earn more, and if people can’t work – or choose not to – they can live off the basic income. In some versions of universal income this system replaces welfare benefits entirely, while in others it’s an added extra. And in some proposals the money would gradually be withdrawn as people earn more, but in others it would be paid to everyone, regardless of their income.
Finland started trialling basic income on January 1. As part of the two-year nationwide pilot, 2,000 unemployed Finns aged 25-58 will be paid a sum of £475 each month. This is intended to replace their existing social benefits but it'll still be paid even if the recipient does find work.
The country's unemployment rate is sitting at 8.1% and Kela, its social security service, hopes that scheme will help to bring this rate down as well as cutting poverty and red tape.
Supporters of the idea come from both ends of the political spectrum: it holds appeal both for socialists trying to reach the poorest in society, and free market capitalists who want to remove Government interference in people’s lives. However, it’s fair to say that, in both cases, support has typically come from the fringes.
Would people still work?
In a society where we have accepted a means-tested welfare state as a cornerstone, and a work ethic as a moral duty, the idea of getting an income for nothing makes many of us uncomfortable.
As Malcolm Torry, director of the Citizen’s Income Trust (which has backed the idea for more than 30 years), says: “For many people it remains psychologically unacceptable.”
There are concerns that with a guaranteed minimum income, people would have no incentive to work.
Former Government social policy adviser, Declan Gaffney, thinks the system is entirely unworkable, and argued in the Guardian last year that. “The risk that unconditional payments would encourage some people to drift into long-term worklessness can’t be discounted.”
He added on Twitter: “I do think the single parents/JSA reform is evidence towards labour market withdrawal,” which referred to changes in 2008 that required single parents to look for work in order to receive Job Seekers’ Allowance, and saw the number of working single parents increase dramatically.
This argument has been countered by supporters of a Universal Basic Income (UBI). They cite the fact that in the late 1960s, both the US and Canada conducted experiments offering a guaranteed minimum income.
They found that with this income floor, the main breadwinners hardly reduced their working hours at all. There were three groups of people who worked less: mothers with very young children, men who chose to go into higher education instead of straight into work at 16, and those who lost their jobs and spent marginally longer looking for a new one.
Arguably in many of those cases, choosing not to work for a period may be no bad thing.
Torry argues that the system is in fact more likely to incentivise work than the current one, where means testing means benefits are withdrawn as people increase their working hours, so that they gain as little as 4p extra for every pound they earn.
Move to the mainstream
The inherent weaknesses of the current system are being increasingly exposed, and have played a key part in bringing this fringe debate closer to the mainstream. The complexity and rigidity of the current system means it’s unable to cope with recent changes to the employment market.
Take zero hours contracts, for example, Torry argues that the problem people employed on this basis face has less to do with an inherent evil, and more to do with the fact that the welfare system can’t cope with people on them.
At a recent launch of a Compass report on UBI, Labour MP Jonathan Reynolds said: “As our economy and the jobs in it have changed, the welfare state has struggled to keep up… This is a welcome report into what could be the cornerstone of a modern welfare state.”
In the UK the Green Party officially backs the idea of a UBI. Caroline Lucas tabled an Early Day Motion in its support in the House of Commons earlier this year, and argued it should replace “a welfare system that is too complex to work effectively.”
Is it the future?
Labour’s John McDonnell highlights that the approach would also enable us to deal with what could be the next big change to the labour market.
At the Compass report launch, he said: “Central to the case for a UBI is the way it would help prepare us for a world in which the new technological revolution, driven by artificial intelligence and robotics, will, over time, transform the nature of work and the type and number of jobs.
“A UBI offers a powerful way of protecting all citizens from the great winds of change to be ushered in by the fourth industrial age, and of sharing the potentially massive productivity gains that it will bring.” He added that it was “an idea Labour will be closely looking at over the next few years.”
In Silicon Valley, this is an increasingly common position. Sam Altman of the boutique incubator Y Combinator has launched a study into how effectively a guaranteed income could replace the need to work in an environment when robots take most jobs. In announcing the study he added: “50 years from now, I think it will seem ridiculous that we used fear of not being able to eat as a way to motivate people.”
With the need to ‘work to live’ removed, some argue that it will bring back a generation of people ‘living to work’. Torry points out: “When people have a guaranteed secure income, it frees them up to be creative and productive.”
Can we afford it?
Obviously all of this guaranteed income comes at a price.
In Switzerland, the referendum in June was never going to pass, partly for this reason. The wording of the referendum never laid out what the basic income would be, but the organisation behind it had said it wanted 2,500 Swiss Francs a month (around £1,815).
This was such a huge sum that it required too large a leap of faith – especially when there were no details of how it would be funded.
Supporters of the idea cite instances where the system would be cheaper than the one that currently exists.
Would it work?
Of course, when cutting welfare benefits, it raises the issue of what people would do with the money if it arrives with no strings attached – and whether redistributing wealth and then letting people get on with it would be enough – or whether some people will still struggle.
The Citizens Income Trust and the RSA have tackled this by proposing models where people would continue to receive disability benefits and housing benefits alongside the basic income.
However, for free market libertarians, this would make the whole endeavor less attractive, because some of the complexity and Government intervention would remain.
There are arguments on both side of almost every aspect of the debate, which draws attention to what may be a fatal flaw: it’s very difficult to tell what would happen.
As Torry admits: “There are so many aspects involved, and they are so interlinked, that modeling the effect of changes is very hard and quite inaccurate.”
Take the effect on lower-paid jobs, for example. Logically you could argue that having a secure income would mean people were able to live on lower pay.
Equally you could argue that having this income would enable them to refuse a low wage job, so would force wages up.
The Citizens Income Trust suggests one solution would be to introduce it at a low level – like £60 a week – to measure the impact without causing too much disruption. There are those who argue that a gradual introduction may be what we are already seeing in the UK – just by another name.
Back in 1990, former Pensions Minister Steve Webb co-wrote a report proposing a Basic Guaranteed Income.
As pensions minister he went on to oversee a seismic change in the UK’s state pension system – towards an across-the-board, flat-rate payment.
There are many ways in which this resembles a Universal Basic Income for pensioners. And if that successfully supports the poorest, while keeping a lid on welfare bills, and encouraging people to either work in retirement or build their own private pension incomes, it may help bring the idea of a guaranteed minimum income even closer to the mainstream.
What do you think. Would a UBI work in the UK? Vote in our poll and share your thoughts in the comments section below.
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