There are reports that a universal basic income trial is being planned in Scotland. I wrote this for the iPaper last June. It seems worth sharing:
Why universal basic income is seizing the agenda
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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Would it not also be a better way of “shrinking the state”?
Interesting, but I doubt it
Weeell… something like a universal identity card/device, backed by blockchain (much as the Estonians already have), could make the administration a lot simpler event than you think – keep the functionality, but with far less paperwork. Recall that in Estonia the government created digital identity and the banks jumped on board with it because they say how much less work it would be.
That said you’d really need a proper constitution establishing citizen rights first, and I suspect that the twerps in power wouldn’t be interested in making things simple: the status quo offers more opportunity for the powerful to harass and bully the ordinary folk.
Yes, removing ‘condionality’ makes the state much, much less intrusive; and the whole system is cheapee to run.
The danger is that ‘small state’ fundamentalists will want to do two things: cut the benefit below survival levels; and impose a “that’s your lot” approach that caps the benefit, effectively withdrawing support from people with more complex needs – the disabled, especially.
This danger is the reason I would oppose a UBI today: I am certain that the current regime would administer it in a deliberately damaging way, and rapidly cut it down below starvation levels.
Also – and this is a longer argument that would hijack the blog – UBI can only work within the framework of a comprehensive welfare state. Think of the effect of for-profit monopolies (or distorted markets with natural or artificial shortages) on essential services, starting with housing and healthcare.
If wages are set to continue to decline (in terms of value and also as technology replaces human labour) then the UBI becomes increasingly important as a means to keep the economy ticking over nevermind giving people a decent level of subsistance. When you take money out of an economy we all should know what happens by now.
UBI makes perfect economic sense in my view.
A basic income must first of all cover the cost of keeping a roof over one’s head. Nothing that I have seen proposed will do anything to make this achievable. In fact it’s guaranteed to make the situation worse. All the problems which UBI is supposed to tackle have much better solutions.
I have proposed such a UBI
I recall you suggested an annual income of about £16,000 for adults, Richard and I agree that at this level the whole benefits and state pension systems could be totally simplified. Perhaps this is the way forward for us after Brexit.
In 1980 I worked in Dubai for a while and I believe the nationals received an income in Dirhams of about £20,000 pa but was not offered to non-nationals. In effect work was optional for them.
Can you post a link to your proposals (if they expand on those you have posted above)?
I am broadly in favour of UBI; but I do not see it operating as an income for basic living, rather than a universal top-up, unless it exists within a comprehensive Welfare State that can provide housing.
I’m agnostic on how the housing market can or should be run: but I know that it shouldn’t be run as an open-ended subsidy to landlords in a market with a structural shortage – otherwise, rents will always increase to a level that entirely consumes the income of the poor.
Also: Child Benefit worked very well as a universal income top-up. The cost of administering the conditional benefits that replace it (and of managing the consequences of withdrawing it) probably exceed the gross expenditure of this simple and cost-effective welfare payment.
A non-conditional or universal benefit of some kind can and should exist; it was and it would be a very cost-effective component of our Social Security.
But it’s not the whole story and, even though you’re not arguing that it should be, others will; and these others matter.
We are arguing the case in a hostile ideological environment, and there is a real risk that we will get what we asked for – but not what we need – in a “Take this fixed amount of money and that’s your lot” implementation that fails to fix the funding gap for housing. And, quite possibly, other essential services that are increasingly provided on a for-profit basis that makes no provision for the human costs of an affordability gap.
In haste http://classonline.org.uk/docs/2013_Policy_Paper_-_Richard_Murphy__Howard_Reed_(Social_State_-_Idleness.pdf
Why not eliminate the means testing and just tax the benefits?
????
I have not a clue what that suggestion is about
Richard, if this is a reference to my comment “Why not eliminate the means testing and just tax the benefits?”, then I am saying make benefits universal, as most are already or used to be, i.e. state pension, child benefit, unemployment benefit (or whatever it’s called now), etc, then add the benefit to income for tax purposes. This is how pensions work now and, I believe also, ‘unemployment benefit’. All other benefits should be tailored to need.
The big problem is housing benefit. The only solution to that is Council houses and LVT which would kick out most landlords and bring down house prices. Councils could buy up many of these previously private rented homes, let them at affordable rents and get a steady income. The rest might be affordable homes to buy to-live-in.
The point of UBI is it is not taxed
That increases its effectiveness and prevents the poverty trap which is a major goal for it
Benefits should only incur tax over a threshold. This would have been a far better thing to do rather than removing child benefit from individual high earners. I would raise the threshold for paying income tax anyway so that only unearned income/economic rent is taxed. This would be possible with LVT. (But I do not agree with abolishing NICS!)
Personally I have long believed that a UBI would be not only beneficial but in fact essential for social stability – and set high enough for recipients to feel an inclusive part of the community and not social pariahs as they do under the prevailing welfare arrangements.
However, as you know, MMT is firmly opposed to the idea and strongly argues for a government work guarantee scheme. Bill Mitchell has written extensively on it – http://bilbo.economicoutlook.net/blog/?p=34479.
I can see there are different arguments (and benefits) for both approaches and each recognises the necessity to change the way society deals with the impact of growing unemployment. Why do you think MMT is so opposed to UBI and are they mutually exclusive? I can deal with the general principles but once it gets into the economic ‘fine print’ I’m lost!
Remember money is a fiction and the injection of money should reflect the increase in activity in the real economy or else the unit of exchange is devalued.
A strict MMT might argue that UBI is money injection without a link to real activity so it misses the opportunity to use the power of money creation to promote growth. In contrast a job guarantee pushes the economy in the direction of full capacity which should increase productivity.
Of course the world looks very different whether you look at it from a micro or a macro perspective. A micro example would be to look at where the UBI goes on an individual basis. If it mostly goes into the hands of the landlord or rentier all you do is push up the price of existing assets such that at the aggregate level only the rentier class are better off.
Richard knows that you have to get tax policy right in order to make UBI functional. Personally, I prefer a social housing safety net plus job guarantee or additional support in the case of special need.
I dislike direction
And I think that to compel work denies the value that can be created in so many other ways
It says all that is of concern is material
That’s my big problem with a JG – job guarantee
Don’t you just love the Internet! I found an answer to my question, which might save you some time and be of interest to others – http://www.coppolacomment.com/2013/07/economic-equivalence-job-guarantee-and.html. I’ll go along with Frances Coppola’s conclusion. What do you think?
My objection to a JG is the same as Frances’ – I am a liberal and so prefer the choice in UBI
And I trust people
Trusted people do the right thing, by and large
I have never really thought of the JG as illiberal. No one would be forced to do a particular job. There would just be more job opportunities wherever there is need. In many cases paid training would be offered first but again it would be a matter of choice for the individual what sector they would like to work in.
I am not against a UBI but only if you implement the right tax policy first to counter the inflationary effect and the rising inequality associated with a rentier economy, otherwise it will not achieve the desired effect.
I accept your last point
How would a JG impact those who cannot work? I know how a UBI would
Good point – a just society should not be making people complete an assault course to decide if they deserve an income or a job.
Also better for some to take the UBI and write another Harry Potter, rather than be distracted with sweeping up leaves. A real plus of UBI is it how it does provide a platform for creativity and innovation.
Which we need
Richard, interesting though the first line of your article surprised me. The only way this would become policy is by winning the political argument. As previously discussed bad economics (austerity) wins politically because it can be presented as common sense, we can’t spend money we do not have. It is complicated to explain and convince the mass population why what seems common sense and obviously true is actually very wrong.
If you present UBI as getting paid to do nothing then you are playing into the hands of those who will oppose it. How can anybody get paid to do nothing? This is a fantasy make believe world.
What UBI actually offers is a sensible solution to a host of issues. But it will only be implemented if it is politically successful and that means its proponents have to be smart about how they argue for it and not play into the hands of those who will deliberately kill it before it has got of the ground.
Are you arguing for a jobs guarantee then?
But what jobs?
Richard, I don’t think I am arguing for a jobs guarantee. Though I haven’t thought it through enough.
My general point is that the political argument must be won and the political argument requires different tactics than the economic argument. I cannot see the political argument being won soon by proponents of UBI if they begin the argument along the lines of ‘’we can pay you for doing nothing’’. Just like the people’s QE /Green QE argument will not be won merely by saying that we will just print the money. The reality may well be that people are paid to enjoy leisure time and we do just fund huge investment by printing cash (you have shown this to be true) but that doesn’t mean that you should package it in that way. Package UBI along the lines of a mass simplification of the tax and benefit system and it would probably carry more political traction where it matters most i.e. the minds of middle England.
As a comedian might say, it’s the way you tell them
For those discussing the Jobs Guarantee this is just out on Naked Capitalism http://www.nakedcapitalism.com/2017/01/fck-work.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29
Thanks for that link 🙂
A common argument you against is that money for nothing would turn people into lazy shirkers. On the contrary I heartily agree with Richard about trusting people to spend their time usefully. I read an interesting analogy by Matt Bruenig recently: under the current system we effectively already have an universal basic income. It’s just that, it’s only for the rich – namely capital income.
https://medium.com/@MattBruenig/the-ubi-already-exists-for-the-1-d3a49fad0580#.2xvh31mt8
I think it’s quite salutary to look at our current system from the point of view that almost its entire purpose is to guarantee the 1% an unearned basic income!
I think this is not quite right. Capital income is paid for by the debtors, the workers, who have to work to pay off their debts, it is trickle up economics.
All money has to be paid for by labour + resources eventually because all money is created as debt. Overt money finance or money for only nothing devalues money relative to real assets (labour, land, resources etc) which can still be a good idea if you are stuck in a balance sheet recession as we are.
I should have added that I agree with you that we should be doing something about capital income. If we impose the right level of tax on capital income as Michal Kalechi suggested then fiscal spend is neutral.
The problem of an economy cannot be solved by injecting money without also paying attention to how that money redistributes.
The problem I see with UBI is that it will benefit the rich and leave those who the pressright wing public deem feckless.
Why?
There are too many people out there who will use UBI as an excuse not to work, as “money for nothing”
This will give the press a field day to go full on “scrounger” mode. Visit any back street boozer and meet the kind of people I mean, also many workplaces.
Those who are well off will manipulate UBI, just like they do with tax now, as you have commented on several times on this blog.
The comment from Carol Wilcox below is a better idea, increase wages so it really does pay to work, and eliminate the need for tax credits and housing benefit.
That is your prejudice, not fact or argument
No predjudice involved, just years of being out and about, listening to actual persons statements.
I have worked in many places where some others simply do not want to be there, and have said so in no uncertain terms. They have openly said that if they could, they would take money for nothing.
I have also frequented several said drinking establishments and listened to people say those things, I’m sure you have experience of both too.
There is a prime example in The S*n
https://www.thesun.co.uk/news/2539942/tesco-shopper-mocked-women-groceries-pyjamas-slammed/
If you can stomach it, read the article, then the comments, then weep.
People say lots of things they don’t mean
There is very compelling evidence most people want to work
But maybe not in their current job
I fundamentaly disagree with UBI. Wages are the best method of distribution of wealth, backed up by taxing economic rent. Paid employment is the basis of our economy and there is no sign of the demand for labour diminishing for the foreseeable future. Full employment, statutory lower working hours, much higher minimum wage: these are better solutions to the perceived problems.
Your analysis may be right
It does not accord with the evidence I see coming from the economy though
Carol, you are right for those people with so-called ‘proper’ full-time jobs. All your recommendations have been applicable during the past 35 years. And had they been implemented many of the current socio-economic problems would have been mitigated.
However, UBI looks to the future state of the global economy. I’ve just heard on Max Keiser’s programme that during the entire Obama administration 95% of all jobs created were in the zero-hour contract, gig economy. This is the macro-direction we’re all heading in. A general slowing down of world demand, decreasing profitability of capital investment in traditional industries, environmental issues, AI, robotics, 3-D prining and other advanced technologies all contribute to a lessening of future demand for full-time labour in the classic sense. And this must be a very good trend.
Additionally there is the inestimable contribution made to the quality of community and national life by creative people, charity workers, stay-at-home mothers/fathers, grand-parents, carers et al. who have not been able to achieve their full potential for lack of funds.
As a millennial I was told that we’re all heading for the ‘leisure society’. What a joke. Most people work harder and longer now than they probably did 40 years ago. But, at last, ordinary people can genuinely look forward to less work-place enslavement and a better quality of life – providing the political process allows it. In the end, to avoid social rebellion, it may have no other choice. So while there is a lot to be gloomy about in the medium-term, long-term prospects are encouraging. Progressive, liberal governments can make the transition quicker and less painful; Neo-liberals will fight every battle along the way but they will lose the war.
I said above I was a ‘millennial’. Haha! If only. Wishful thinking. I meant ‘baby boomer’. New Year resolution – double check before hitting ‘enter’.
“Most people work harder and longer now than they probably did 40 years ago.” So there is no decreasing demand for labour. UBI would only be necesary if there were. When all the manufacturing (and design?) is done by robots there will still be service jobs, unless of course we are made to take the pills which make us happy with arts and entertainment created and performed by robots. We just need a better system of reward for work – and fewer hours so we can enjoy more leisure time.
If 1.5 million of us want work yet remain unemployed and countless others would like more work than they have in order to earn more, UBI is a simple method of more fairly distributing wealth.
Added to which we should not be so hooked on the work ethic which really came in only with the arrival of protestant capitalism and its need for maleable and reliable labour. We need to be thinking more and working less!
http://evonomics.com/capitalism-medieval-peasants-got-vacation-time-heres/
and
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/12/against-busyness.html
It has nothing to do with the ‘work ethic’. You work, you get paid, you demand goods and services, labour produces them – that’s how the economy works.
Additionally:
UBI is a blow for freedom
“…everyone but an idiot knows that the lower classes must be kept poor, or they will never be industrious.”
Arthur Young, Agriculturalist 1771
These are exactly Osborne’s sentiments of 2016.
The upper classes are of course not at all industrious but that doesn’t seem to matter…
http://www.filmsforaction.org/news/recovered-economic-history-everyone-but-an-idiot-knows-that-the-lower-classes-must-be-kept-poor-or-they-will-never-be-industrious/
And also pretty much all the French Socialist primary candidates are promotimg UBI to a greater or lesser extent (though how they’ll mananage it in the Euro I really wonder).
http://www.francetvinfo.fr/politique/ps/primaire-a-gauche/revenu-minimum-universel-une-utopie_2003087.html
Sorry I cannot find any English language version.
I tend to be in broad agreement with Richard on UBI and in particular setting at a high enough level to allow people to live with no further recourse. But I am fascinated by the kneejerk reactions I see on here around the positives of work. This seems to be mainly informed by a lifetime of absorbing aspects of the ‘protestant work ethic’ or similar. Especially when we consider other popular attitudes:-
Work hard, be successful and retire early = good and to be envied
Inherit money and not need to work = lucky and to be envied
Win lottery and not need to work = lucky and to be envied
So not having to work can be a positive and enviable position but only if achieved in ‘approved’ ways. But this sort of contradicts the idea of work being a good in and of itself.
Then there’s the assumption that lots of people would give up work or give up looking. For £16k a year I wouldn’t stop working but I could afford to be choosier or take some chances.
Be interesting to see some evidence for UBI, surely anything that impacts poverty, particularly child poverty, is to be welcomed. Finland is trialling a system of UBI support to a randomised group of benefit claimants. We should keep an eye on the outcome
http://www.demoshelsinki.fi/en/2016/08/30/thousands-to-receive-basic-income-in-finland-a-trial-that-could-lead-to-the-greatest-societal-transformation-of-our-time/
What nobody posting here has noticed is that we already do have a universal basic income in the UK – the state pension, which you receive regardless of past, present, or future circumstances, as long as you meet the qualifying age. State pensioners _are_ “paid to lounge around”.
Anticipating the rebuttal, no, you do _not_ get a state pension because “you’ve paid into the system”. You get a state pension regardless of how much tax or national insurance payments you have made. You qualify solely on age. If you have paid 30 years of National Insurance contributions you get a full state pension. If you have paid less than 30 years of NI contributions you get a smaller state pension topped up to the the full state pension amount. If you have never worked, never paid any tax, never paid any NI, you still do get a state pension. You qualify solely by being alive and over the qualifying age.
So, to argue against a universal basic income must for consistancy argue for abolishing the state pension.
Agreed
Pensions should be considered as deferred wages. You work, when you no longer can you get a pension. This is nothing like UBI.
Carol, if you don’t work you can get a pension. Is that a deferred benefit?
Pensions are for people who can no longer work. Are you proposing the same level of benefit (UBI) for those who can?
Yes
And the state pension is not enough to live on, so there are extra benefits on top. So presumably you want a UBI at a level higher than the state pension.
Of course
Actually a UBI is exactly like a pension just paid earlier and, if to be liveable, a higher amount. The best options I have seen are:-
High enough to allow living with no work if desired
Paid to every citizen tax free from birth to death
Sliding scale so gradually increases from birth to say 25
Cannot be counted in debt/credit calculations
Removes all other benefits apart from those related to special needs
As your UBI is not impacted by work you are free to take as much or as little work as you want and for whatever rate you want – no more minimum wage
All income is taxable and there are no tax free allowances or tax breaks, the UBI replaces these.
I have seen the numbers crunched in a variety of ways but believe that the above is very affordable at the nominal £16k Richard suggests. Apart from attitudes the only real stumbling block is housing and again there is a variety of potential solutions.
I think there is a case for both Job Guarantee, and UBI.
There is literally too much work to be done, now, to just start giving away UBI. Reopening all the libraries that have been closed due to government cuts is a start, which can be run by people on JG money.
However, people on JG also need holidays….and they should have holiday pay the same as any other worker.
Anyone can nominate jobs to do, in the public interest, that can be added to the JG big list of stuff to do. And, anyone in the job guarantee scheme can be paid to do these jobs. However, should the list start running short, then the government just increases paid holidays. This paid holiday, is in effect, UBI…. money paid for no requirement for work.
The list gets too long?….reduce holidays, so there are more man hours available to get the stuff done.
AND, should the apocalyptic robots arrive, leaving no work to be done, then the things on the list would dry up, and UBI funded holidays would have to take the place.
Its wrong to choose either UBI, or JG. Instead, a combination of the two would be best.
I rather like that….
I despair; tinkering at the margins dressed up as economic radicalism
That the political classes have finally cottoned on to the fact that the terminal decline in the need for human labour in the economy is going to require a response is to be welcomed, but typically it’s all too little, all too late. For the millions whose labour is going to become surplus to the needs of the economy a universal income has to be more than a bit of pocket money, it has to be an income on which they can live comfortably.
Technology has already done away with much human toil, and now it is closing in on human cognition. In private A.I conferences the message is very clear; within 5 years technological unemployment will hit crisis point, and within 10 years it will be a full blown disaster. I say disaster because the political class have no appetite for the kind of radical action which will be required to guide us into the post-work world. Indeed, most are so wed to their neoliberal marketism that they argue that as was true in the past, new technology will actually result in even more demand for human labour. The reality of their folly is going to hit them hard, very very hard.
And a little something to illustrate how behind the curve most people are on this issue…
A few years ago the game of ‘Go’ was considered to be too complex for computers to beat even average human players because it can’t be brute forced, that is to say as can be done with chess a computer can’t just use computational power to reveal the best strategic moves. To be a great Go player the computer would have to learn the game and the underlying strategy. At the times estimates from people knowledgeable about computer technology, but not well informed on the pace of deep learning research, guessed it would be anywhere from 30 years to 100 years before a computer would be a master Go player.
Last year AlphaGo trashed not just a Master player, but the Go world champion. A few days ago it was also revealed that AlphaGo has utterly destroyed a clutch of the world’s best Go players having been deployed secretly to play online.
In South Korea, the home of Lee Sedol, and where Go is a national obsession, his defeat by AlphaGo caused something of a national crisis. Something very dear to the nation’s psyche had succumbed to the rise of A.I.
Our politicians are advised by the same underinformed talking heads who were so spectacularly wrong about the game of Go. They won’t listen to people who are actually at the cutting edge of research in the field because they don’t like the answers they get. They don’t like being told this is an exigent issue, and not something they can gleefully ignore and leave for another administration to deal with.
“… the fact that the terminal decline in the need for human labour in the economy “. It is not a fact. They’ve been saying that for a century. As I said above:
When all the manufacturing (and design?) is done by robots there will still be service jobs, unless of course we are made to take the pills which make us happy with arts and entertainment created and performed by robots.
My patience with such ill-informed replies has worn decidedly thin
Nobody is saying there won’t be jobs for people, just that there won’t be enough to support an economic system in which having a job is the norm. The transition is already well underway; today’s massive companies like Google and Facebook employ only a tiny fraction of the workers the giants of the past did. Why is it so difficult for you people to understand that there simply won’t be enough labour from which one can earn a living to go around?
A century ago machines replaced human muscles, but a human mind still operated the machines. Now the human mind is being replaced, and if you can’t see that this is a distinctly different situation you are a fool.
Ross
Carol is no fool
But you are intemperate and rude
Get some manners or don’t come back
Richard
Ross, that’s a little harsh but the essence does need saying. There is a lot of quality input on this blog but many of us do seem to get carried away into areas we maybe lack the depth of knowledge to comment knowledgeably. I know I’ve done it here and elsewhere and been suitably slapped down.
Carol – I have been very impressed with, and have followed links to, your work on LVT. But you may be guilty of shooting from the hip on AI/technology here, it’s not an area I’m qualified in. However I can say that your comments on UBI reveal a lack of understanding on that subject. I found this particularly surprising as I see the same sort of comments aimed at you when you join in on a LVT discussion.
I hope I’m not being sanctimonious and I’m probably impacted by having skimmed through Guardian comments on their latest UBI article(depressing). But every time this subject comes up the same objections/points are made as if answers, or links to the answers, haven’t been supplied many times over. I’m sure you get the same feeling when you meet LVT challenges.