Screenshot 2021-04-25 at 12.47.57

Why It’s Time for Universal Basic Income

Could UBI be the key to revitalising the economy and population post-pandemic? Andrew Roythorne discusses the expected benefits of UBI.

For years, the prospect of a Universal Basic Income (or negative income tax) has been left to the political fringes. Many say giving a tax-free cash payment to every adult, regardless of employment-status, background or income would be economically and politically unfeasible. But arguably brave and unique policies are required if we are to recover from the corona-induced economic crisis.

The key principle behind a basic income is providing everyone with a baseline level of security. With approximately 14.5m people in the UK living in poverty before the pandemic, inequality and wealth redistribution is an issue that needs to be addressed. If people received a regular payment every month, they would worry less about food and housing.

The most obvious opposition to UBI is the cost.

Citizens Advice say £960 per month is the sum necessary for avoiding personal debt. If the government was to give every adult £960 a month it would cost £580bn per year. Pre-pandemic, total government expenditure was £800bn.

However, UBI would wipe away the need for existing benefits such as universal credit and pension services. Streamlining the system by removing the need for means-testing would remove another substantial cost. The basic income network estimates that the gross cost of UBI would actually come to £63bn a year, which is far less than the £93bn currently spent on corporate subsidies and tax breaks. The basic income network also argue that the economic growth enabled by UBI would cause the scheme to become cheaper relative to GDP.

There could be some obstacles following implementation though.

Some claim by delinking work and income, we’ll be rewarding people for not working or participating in society. Given the ‘universal’ nature of the scheme, it also wouldn’t directly target poverty. Solving these possible downfalls requires finding the right amount to give people. We’d need to strike a balance that allows us to avoid absolute poverty, whilst still incentivising us to work. A higher rate of tax could stop the highest earners from further entrenching inequality.

The benefits aren’t limited to those living in poverty. It is generally accepted that “work” is something that you get paid to do although an estimated 26% of the UK population provides some form of unpaid care work for another adult. A disproportionate number of carers are women, and many are having to mix caring duties with a full-time job. A basic income would allow more time to be spent caring for family, which would in turn provide greater comfort for full-time carers and ease the burden on state social care.

UBI would also improve financial independence and foster innovation. Sufferers of domestic abuse, the vast majority of which are women, often cannot leave a potentially fatally dangerous situation because they are financially dependent on an abusive partner.  If they had their own financial independence, then a barrier for leaving may be removed.

Providing a financial safety net would encourage people to take entrepreneurial risks. When the cost of failure isn’t so high, people will no longer feel so tied down to low paying jobs. This could encourage people to set up their own business, pursue artistic passions or even spend more time volunteering in their community.

Many will claim that UBI is overly left-wing or ‘Socialist.’ However, that is not necessarily the case. Many of those on the right have also hailed the benefits of a basic income.

Milton Friedman, one of the key figures in neoliberal thought and someone who heavily influenced Thatcher and Reagan’s economic policies, was a keen supporter of a ‘negative income tax.’ He believed that it would reduce government bureaucracy by streamlining the welfare system and discourage the welfare trap by allowing everyone to earn more without losing their benefits.

He also believed it would improve market efficiency – if people had a baseline income, it would force businesses to compete for their money by offering a better-quality product, whether that be in the housing, food or any other market. It could also create greater competition in the jobs market – businesses would be forced to greater incentivise workers since they wouldn’t feel forced to settle for low-paid, unfulfilling jobs.

Many on the right today have echoed Friedman’s call for UBI. One of the key reasons for this is the threat of automation. Technological advances mean that many jobs are going to be lost to AI. If people were provided with a level of security, then the chances of a populist backlash, calling for short-term solutions to protect jobs at the expense of long-term economic growth, can be reduced. Figures ranging from the Adam Smith institute to Elon Musk have proposed monthly, indiscriminate cash grants to gain popular support for automation which would boost economic growth and improve living standards. 

The most extensive trial of a universal income in the developed world was in Finland – 2000 people were given €560 each month. The impact on employment was mild, but there were other reported benefits. The University of Helsinki said that freelance artists felt free to pursue their crafts and many others spent their newly-granted free time carrying out meaningful unpaid work. Almost all participants in the survey reported greater autonomy, hope for the future and overall improved mental health. 

The loosening of fiscal shackles that has already been done to counteract the effects of the pandemic, shows that when required, governments aren’t afraid to throw large sums at problems. Despite being one of the richest nations on Earth, the UK still has an unacceptable problem with poverty and inequality. Both cry out for a ‘helicopter money’ approach.

In the US Presidential Race, Andre Yang had UBI as one of his main campaign pledges. The Green party included a fully costed UBI policy as part of its manifesto for the 2019 UK election. The SNP has promised it will trial a basic income if it retains power at the upcoming Holyrood elections. Even the newly formed Northern Independence Party has promised UBI in an independent Northumbria.

A basic income has gradually wiggled into mainstream political debate. We may still be a way off from seeing it enshrined in policy, but it is slowly gaining traction.

Find out more: https://cbin.scot

Share this post

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email