This article by me on Universal Basic Incime was in the i online yesterday:
Being paid to do nothing is an idea that appeals to many, and sounds too good to be true. But that is exactly what the payment of a basic income, which is now attracting attention in many countries including the UK, involves.
Of course, it is a little more complicated than that. This issue is all about how to make the benefits system work when we have a rapidly changing economy, an ageing population, and a tax system that interacts so badly with benefits that some people earning no more than £15,000 a year can pay tax at up to 80 per cent on each additional pound they earn in this country.
The proposals for a basic income vary. The latest is from Howard Reed and Stewart Lansley, working for the Compass think tank, and it is apparently being considered seriously by John McDonnell, the Labour Party Shadow Chancellor. This proposal suggests that every person in the UK should, without exception and whatever their other income, be paid a sum by the government each week. If they were a child this would be £49 a week. It would then be £51 until the age of 25, £61 until retirement and then be £41 for pensioners, over and above their state pension payment.
Simplification
There would, of course, be a cost. The annual tax personal allowance of £11,000 a year would disappear. Every penny we earn would then be taxed and tax rates would also rise: the Compass authors suggest a basic rate of 23 per cent and not 20 per cent as now. That said it's very easy to see how many households on lower incomes would be much better off as a result of this arrangement. A couple who both work with two children might, for example, pay £5,060 of extra tax but get a basic income of £11,440 in exchange.
So why do it? There are many reasons. First, a lot (bit not all) of state benefits would roll over into the basic income and that would simplify the whole benefits system, saving a great deal.
Second, work would always pay, but the tax rate when taking work and losing benefits would fall to a much more acceptable level, which would end the poverty trap that still ensnares far too many people in the current system.
Child poverty
Third, because it is universal many who will not claim benefits will get the support they need. This will relieve poverty, especially for children, which is vital.
Fourth, because it is universal it should enjoy widespread support.
Fifth, it will provide real cash flow support for those wanting to start a business, and so will boost the economy.
And sixth, the fact that this cash will be available to anyone will help lure those who now work in the unrecorded cash economy into the tax and benefits system, so increasing the tax take.
But best of all, the suggestion is cost neutral, fair, cheap to administer and will always mean work pays fairly. Those are goals all political parties say they share. That is why a basic income should appeal to everyone.
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The other advantages; it is very difficult to fiddle and so simple that people would know their entitlement (current benefits can’t be checked because they are so complex)
Something has to be done to offset unemployment due to the “rise of the robots”. Regrettably, i can not see the elite comprising a disproportionate number of sociopaths and psychopaths, many of whom believe they serve “the god of this world” allowing this.
Switzerland, who now appear to celebrate the opening of a tunnel with a “bizarre” (occult) ritual (http://www.bbc.co.uk/news/in-pictures-36428799) voted this down by a resounding majority.
The elite’s preferred method of dealing with this situation is population “control”, which is being done incrementally and by using all avenues possible (there isn’t space here to list everything) however suffice to say these fall in the three broad categories war, disease and famine.
I saw that tunnel ‘celebration’ it was rather weird – I head about the referendum result but don’t know much about the background to it.
I’m sorry to be so pessimistic, but I think millions if not billions will die first before there is a chance of “re-writing the social contract” in favour of the 99.99%!
This will work if it’s only available to UK citizens as it would become a big magnet to EU members (it’s one of the reasons why Switzerland just rejected Basic Income.) Even if can be negotiated with the EU not to include EU members, that wouldn’t stop a lot wanting to come over and seek UK citizenship. For this to work properly, it would have to be applied across the whole EU. In fact if it was, it might actually decrease the mass migration from the Eastern European countries into the West. It’s not something I think the neo-lib run EU would have the whit to contemplate unless they were pushed into it, but we can try to live in hope!
That is not true: there are limitations on benefits now
Richard – Your one-line response to Alan’s post does not deal with the point he raised, and entitlement issue needs to be very clearly defined before any meaningful schemes and costings for UBI can be developed.
The U.K. IS. a magnet.
A higher living wage and/or UBI will exacerbate this and so whether what this is what Brits want has to be very much part of the equation and consequential debate.
A post-Brexit scenario would deliver the ability to operate a “Uk citizens only” , qualifying residence tested version of UBI which may well fall short of many peoples’ ideals, but could be realistically “sold” to the Brits.
I should look for some online resources on that: ‘benefit tourism’ is plausible rhetoric for Brexiteers – and some other, deeply unpleasant, people I won’t name – so credible figures and pithy rebuttals would be useful.
A well reasoned and comprehensive response.
Before Osborne’s tapering didn’t we have a minimum income for people with kids in the form of Child benefit? Uncontroversial, popular and an almost negligible fraud rate. Before the EU was consumed by the Euro crisis there was a clunky sounding concept coming out of Scandanavia; flex-security. The welfare state’s role would be to see citizens had a smooth economic transition from one job to the next including training needed to meet fast-moving economic changes. The present system of signing-on is almost designed to humiliate, degrade and suck peoples’ confidence as a consequence of trying to weed out “the undeserving poor.” The minimum income is not even an exclusively lefty concept, even Ian Duncan-Smith understands the welfare poverty trap but seeks to blame claimants for their moral turpitude rather than seeking a pragmatic humane solution. Which Milton Freidman, for example, advocated back in the early 80s.
Richard, I fear a major obstacle to the implementation of such a Citizen’s Income will be the attitude of capital as instanced in employers.
For they will see their major instrument – the “stick” made up of employers’ power over the workforce in the form of control over wages – replaced by the “carrot” of REAL freedom of choice forcrhe workforce, who will be able to tell an employer to “stick his job where the sun don’t shine”, forcing employers to compete for labour, instead of workers competing for work.
Would help
Apologies- pressed submit too early, and was going to say:
Would Sports Direct or Amazon be able to get away with their employment practices in an economy where the Basic Income applied? I doubt it, and very Much hope not. It isn’t only neo-liberalism that needs to be sweated out of the economy: we also need to do the same to the “Victorian sweatshop” mentality of far too many big employers.
The fly in the ointment, as usual, Andrew, will be housing which reduces the value of the basic income. It will mean that some form of housing benefit (Landlord Benefit!) will still have to exist as Richard mentions in the ‘Joy of…’
This could mean that even with a Basic Income there would be fear of losing your job in relation to housing especially if packing a job in entailed conditionality around housing benefit.
A basic income would ease things a great deal but the housing bubble, inflated for 40 years hobbles all.
Accepted
You have put forward the most effective – and the most frightening – argument for Universal Basic Income: it removes desperation from a worker’s calculation of his need to work for bad employers.
The phrase “I’d rather sweep the road” or “I’d rather do the bins” was a real choice and a powerful rebuke to a bad employer, back in the days when local councils were an employer of last resort with a liveable wage for any man willing to work.
Those days are gone and the minimum wage has proven to be ineffective in maintaining basic living standards.
You will note that I describe your argument as frightening: it is clear tgat you know who is frightened by it, and why. Take care of where you use it: powerful men do not sit in silence with their fears.
“Fourth, because it is universal it should enjoy widespread support.”
I fear that’s optimistic both from the point of view of those who would ask why lower income tax payers should pay increased tax rates to fund a payment to Mike Ashley, and those (perhaps more easily dismissed) who like to talk about the “undeserving poor”.
The idea that those on low incomes could not see the benefit in this is patronising
Usual flawed poppycock.
A SINGLE/WIDOWED pensioner now earns £11000 tax free plus further £ 1000 interest without tax. Thus possible £12000 tax free.
Your predication envisages this amount PLUS £2132 equals £14232 . But now thus us a GROSS figure subject to 23 percent tax equal £10958 nett .
How is that pensioner better off. Go figure!!
Yes. But in practice there is no way on earth that savings should be tax free anyway
I am in principle in favour of a UBI, if and only if it was set at a level that would allow all the basic human needs to be provided to each individual, which presents a major problem in itself within a capitalist system where market forces affect the cost of everything on everyone. And therefore you could only set the UBI at a level to provide the least variable essential costs (e.g most basic costs of survival such as food, water, clothing and little else). The major variable costs (e.g. housing, healthcare, transport, energy, insurance, etc) would still need to be subject to some sort of regional/personal variation depending on actual needs/costs.
But the bigger question in my mind is that if a nation state was to fundamentally alter the mechanics of private financial capitalism by removing the “need to work” to survive, why bother with retaining private financial capitalism as the dominant economic model?
As I cannot see the bankers and their political stooges liking any such move away from the “free market” for labour, there will no doubt be the usual level of collusion in the corridors of power to ensure this idea never sees the light of day.
I would like to be more optimistic about UBI, but actually feel a more fundamental systemic reform is the only solution.
However, it would not surprise me if the establishment gurus come up with a way to create something called UBI, which is nothing more than todays Universal Credit. In the same way that the new Living Wage is nothing like a real living wage for the vast majority of people in this country.
I will repeat this as my two-penny worth: UBI is a solution looking for a problem, and add that, if it isn’t funded from LVT, it will just increase land values.
Carol
Usually we agree but that is just untrue
The poverty trap is real, and pernicious and the need for redistribution is urgent
Richard
Redistribution is better done through improving workers’ bargaining positions, against those of the owners of capital and land, and taxes on economic rents and wealth.
Bur that does not solve the poverty trap
Richard-isn’t there some truth in what Carol is saying. As I posted above, the land/housing issue is a real ‘wrecker’ of good intentions and is the source of the ‘pollution’ further down stream.
UBI will help a lot, I agree but it’s benefits are massively reduced by it being ‘devalued’ by the Land/Housing issue.
However we probably have less ‘flying pigs’ with UBI than LVT given the economic ideology-though I’d only put the ‘flying pig reduction’ at about 10% (according to my ‘flying pig formula’ which is too mathematically complex to reproduce here!).
I want an LVT
But I do not think Carol’s generalisationwas fair re a solution seeking a problem
The problem is very real
I agree with that, the problem IS real!
The solution to the ‘poverty trap’ – or rather poverty itself in one of the wealthiest countries in the world – requires addressing primary distribution from production. It’s the power of the owners of capital and land which is the root cause of poverty. UBI does not solve this – it will just produce further distortions, especially in the land market.
But you are still ignoring the fact that the benefits system – and we will still need one – demands a change in tax as well
These are not either / or but both
In my view UBI is something that has to happen in some form or other.
The consequences of not doing so just means more misery.
The current Welfare ‘Deforms’ from the Tory party IMHO are aimed at nudging people into the direction of having less children or making it clear that there is an intolerance of those who are unable to work for some reason (long term illness, disability).
Prima facie – nudging people into producing less children because there will less or nothing for them to do seems sensible.
But when you consider how much money is swilling around the world and how badly it is distributed you begin to think differently.
The price of progress means that there will be less work for people to do and more leisure time. Previous generations used to fete this fact when selling us the future.
This generation – or certain members of it – believe otherwise and the motivation just seems to be greed.
Never mind being on benefits as a lifestyle choice; choosing to work could very well be one of the choices in the future – and be seen as the exception instead.
But some are also cutting their own throats because if there is less money to spend, then there is less of an economy too. An economy based on yacht sales? Ferraris?
The current direction of capitalism does not make sense at all.
Where do Housing, Council Tax and Disabilty Benefits fit into the UBI regime?
£61pw is actually less than JSA, so wouldn’t the unemployed and disabled be far worse off, unless top-up benefits were available?
(But with those, you are back to means testing and disincentives to return to work.)
If UBI is around the same level as existing Income Tax Relief, but a rise to 23% would be a further tax burden on workers, why would they support it?
What is to stop a future (Tory?) Government whittling down or freezing the UBI rates – which in the absence of the previous benefits system would increase poverty and destitution?
As Unemployment Benefit is an automatic stabiliser, what would be the macroeconomic effect of removing it?
These are genuine questions, to which the answers would be helpful.
In this version such benefits still have to be means rested
There may be no way round that on disability and maybe housing
We do not live on an optimal world
Thank you Richard.
I had thought that one of the planks of the UBI argument was that it would do away with most, if not all, means tested benefits, and that it would be broadly ‘funded’ by the resulting savings in bureaucracy (although one person’s bureaucracy is of, course, another person’s job.) If most of that bureaucracy were to remain, then that dilutes the argument somewhat.
But anything that rids us of the appalling sanctions regime, and it’s dreadful consequences would be good – UBI is a step towards that I suppose, although if HB, Disability, etc could still be withheld then the advantage would be lessened.
Channelling Colombo for a moment, I do have another question… I’m assuming not, but would the UBI be counted as taxable income?
The version I refer to in the Joy of Tax is much more radical
I think Compass have opted for a first stage much lower rate
Oh, and the carbon fee and dividend tax. Can be implemented locally but if done on a global basis would address global inequality and AGW, which are far more serious problems.
Isn’t £61 a bit too low? Wouldn’t it make sense to set the UBI at the level of JSA at least and eliminate that benefit entirely? Otherwise, I’m all on favour of this and pleased to see the Labour Party looking at the idea.
I would go higher
See the version Howard Reed and I did for CLASS think tank
Just googled our names and CLASS
I agree with the morality of a basic income and I know that as a sovereign issuer of currency the government can always afford whatever it wants to afford.
My only concern is that the money might help to suck in more imports, because it helps the poor in the way which does not help them in the long term.
I thought Clement Attlee and subsequent social democratic governments had it right when they inadvertently gave a citizens income “in kind.” The NHS, Council Services, free higher education etc, etc. This kept the spending domestic, and gave people what they needed but found more expensive or unaffordable on a private basis. It created lots of public sector jobs. It avoided also what Attlee called “interest, profit and rent,” so was very frugal.
I think that people would be much better off with more private and public sector jobs that are well paid, and the citizens income to be paid in kind, and cash only given to those in need.
There are plenty of things the UK could do to provide jobs, we could do what Norway are planning and put government money into green cars and public transport which would create lots of scientific, and manufactucturing jobs. Reflating the public sector would help too.
This would help to cure our terrible trade deficit.
UBI is not a solution in isolation: far from it
All those other issues are relevant and I support them, very clearly
But we cannot run an affective and integrated benefits system without UBI in my opinion
But it is never an alternative to pre-distribution and better work
I am a great supporter of the principle of UBI and I think that it is inevitable that it will be introduced one day. However, I am a little puzzled by the figures you have suggested above. A single person working a 40 hr week on minimum wage would earn approx £15k pa. The model outlined would result in a tax liability of £2720 as opposed to £800 currently, thus making them considerably poorer.
Is that really what is intended by this model, or have I misunderstood? It certainly doesn’t seem to benefit single low earners.
You are ignoring they will get UBI?
Silly me. Apologies!
UBI is an unobtainable dream.
The “White heat of the technology” was going to liberate the work force so that could enjoy three day working weeks. What would we do with our leisure time?
Should AI survive the next world war then this will be desperately needed together with the shattered remains of humanity to rebuild civilization – it will be hands, human as well as robot, to the pump…..
The future is very bleak if we continue on the current path….
Of course it is not unobtainable
But thinking it is ensures it will not happen
I kind of agree with Sandra that the government is a better arbiter of money and could provide us individually and collectively. I’d worry business will exploit ubi. I think we ought to find solutions to poverty in better fair paid work
But that does not solve the poverty trap
Are you deliberately missing the point?
Of course we need better paid work too
We need both
“people earning no more than £15,000 a year can pay tax at up to 80 per cent on each additional pound they earn in this country”
We can go higher than that number. Given employer’s NI is paid for by the worker, then once above the tax free allowance the worker could notionally earn an additional £113.80. The worker would lose £13.80 and £12.00 for the two types of NI, £20.00 for Income Tax, £41.00 for the Tax Credits Taper, and then 65% of net income remaining if claiming Housing Benefit, leaving £17.55 of the original £113.80.
It could be even worse taking into account NEST, CTR and time away from home. It’s no wonder low earners are switching from cars to e-bikes, and fags to e-cigs.
Most MMT economists I know are opposed to it.
That is because they believe in the jobs guarantee
But you cannot guarantee jobs
I’m a big UBI supporter but it needs to be liveable and to remove all benefits except for disability not covered by a UBI. In todays terms I worked out it would need to be £12k tax free per annum. Key for me would be:-
Funded via truly progressive taxation and LVT
UBI cannot be used in lending decisions and cannot be touched for debt repayment
Removes all benefits and tax allowances, including housing – provision for additional disability support not covered by the £12k
All other forms of income taxed
Cradle to grave but starts at lower amount and reaches max at 25
Citizens only
You might to look at the version in The Joy of Tax
£61 a week for adults seems such a piddling amount it would have no effect on sweeping aside the vast bureaucracy of the existing benefit system,
may I propose, with the aid of the back of this fag packet and pencil, a more robust approach?
if UBI for adults was set around the level of the current basic personal tax allowance, say £12k/annum,
NI was dropped, in my opinion a stealth 12% income tax in reality, and any income earned was taxed at 50% across the board,
someone earning £24k/annum would still receive 24k, they would just receive 12k upfront and repay 12k out of their 24k earnings,
you would be able to dispense with virtually every benefit and tax credit possible, unemployment, disability, pensions, tax credits and also housing benefit for all but London and parts of the south east,
how much is the total benefit bill for the country plus the administrative costs?
I would suggest that sufficient of the then redundant DWP HR and facilities were redeployed to work with the grossly underfunded, understaffed and demoralised HMRC to ensure every penny of possible revenue was actually collected,
I also wonder if there is any point to VAT, after administrative costs does it actually make anything?
am I being ludicrous or is there some sense in aiming high enough to make a fairly large chunk of the state administrative apparatus unnecessary?
I admit I much prefer th version I note in The Joy of Tax
That would meet your spec
Richard, when I read the Compass report, I for some reason, assumed that the £61 is in addition to the ‘applicable amount’ (the amount the Government ‘thinks’ you can live of, making it £134.10. Is this right? £61 doesn’t make any sense as a figure on its own. But I might be quite wrong here.
I will have to check
VAT at minimum 15% is a requirement of membership of the EU.
I have been recommended this by a CD/LVT supporter, for whom I have a lot of respect. I haven’t read it because I have neither the inclination nor the time at the moment. http://www.citizensincome.org/wp-content/uploads/2016/03/Booklet2015.pdf
Some good arguments ‘against’ here, as well as some ‘for’;o)
http://www.theguardian.com/politics/2016/jun/10/potential-benefits-and-pitfalls-of-a-universal-basic-income?CMP=share_btn_fb