Can we afford a Universal Basic Income?

In the last few years there have been a number of reports which consider the introduction of a Citizens’ Income and how it can be funded. Towards the end of last year I came across the Compass report – “Universal Basic Income: An idea whose time has come?” written by Howard Reed and Stewart Lansley (and partly funded by the Joseph Rowntree Foundation).

Howard Reed and Stewart Lansley in the Compass report set out two schemes for a Citizens’ Income, both of which keep the existing means-tested benefits, the existing State Pension, replaces Child Benefit and increases the higher National Insurance rate to 12% and abolishes the Income Tax Personal Allowance. Their scheme 1 gives children a Citizens Income of £49 per week, adults under 25 £51, adults over 25 £61 and pensioners an extra £41. It also increases all Income Tax rates by 3%. Their scheme 2 increases the Citizens Income rates by £10 and all Income Tax rates by a further 2%.

The RSA report “Creative citizen, creative state: the principles and pragmatic case for a Universal Basic Income” written by Anthony Painter and Chris Thoungpointed out that there were big tax cuts in 2015-16 totally £19.5 billion (including £8 billion to increase the Income Tax Personal Allowance to £10,600) so we should not be too concerned about having a shortfall in funding as the Citizens Income Trust might have of over £10 billion. 

I have in the past suggested that the Basic Citizens’ Income should replace the Income Tax Personal Allowance at an equivalent level. In 2020 this should be £48.08 a week as it is planned to raise the Personal Allowance to £12,500 at least then and maybe a little earlier. The extra cost of providing this level of Citizens’ Income to all adults of working age is about £26.75 billion.

According to the IFS  increasing the National Insurance higher rate for those earning below £100,000 a year to 12% should raise £10.1 billion. Extending National Insurance to all forms of income should raise more than £6 billion (12 x £300 million plus 12 x £200 million based on ONS figures <>). Both the RSA and the IFS state that restricting tax relief on pension contributions to the basic rate will generate £10 billion. Just making these three changes should generate over £26.1 billion. It should be acceptable for the government to cope with any possible small shortfall.

Therefore introducing a very Basic Citizens Income for working age adults while keeping all the existing benefits is affordable. And at £48.08 does not increase any rates of Income Tax.

If the Citizens’ Income and Child Benefit were increased by £5 a week according to the Compass report this will cost £11 billion. They state that increasing all levels of Income Tax by 1 pence would generate £10.4 billion – again almost covering the full cost. It would mean that everyone earning less than £26,000 a year would be better off and those with two children would be better off if they earned less than £78,000.

Over a period of five years the Citizens Income for adults of working age could be £73.08 per week and Child Benefit could be £45.70 for the first child and £38.70 for the additional children. However, all the rates of Income Tax will have increased by 5% to 25%, 45% and 50%. This compares well to the Compass scheme 2 which has rates for children of £59 per week, for adults under 25 £61, for adults over 25 £71 and for pensioners an extra £41. However their scheme 2 has a shortfall in funding of £8.2 billion (while mine only of about £600 million) and treats the Citizens Income of adults and children as income and so reduces mean-tested benefits accordingly and there are losers among the bottom third poorest people.

With my second scheme for a Basic Citizens Income for adults of working age and increased child benefits coupled with retaining the existing benefit system (and not treating Citizens Income or Child Benefit as income) an unemployed couple with two children would receive £196.16 per week on top of their Universal Credit of £266.93 taking them to £463.09 well above the amount the Joseph Rowntree Foundation state in their report UK Poverty 2017  that a couple with two children aged 5 and 14 need each week – £401 (using 2015/16 figures).

* Michael Berwick-Gooding is a Liberal Democrat member in Basingstoke and has held various party positions at local, regional and English Party level. He posts comments as Michael BG.

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  • John Chandler 7th Feb '18 - 3:04pm

    Does the Lib Dems ALTER group have any information/studies on land value tax, and how it might relate to funding a Universal Basic Income?

  • Lorenzo Cherin 7th Feb '18 - 3:16pm


    You need to lead with your head and heart combined more, when you emphasise merely the head you do not reveal your very compassionate Liberal Democratic heart!

    You are not, though you give a good impression of it and say you are, didactic only or really.

    After on one post, my own article unfortunately, feeling you were a stickler , I increasingly think you are an asset !

    I would argue we have to see basic income as a holistic part of a holistic whole.

    Without curbs on immigration forget it.

    We need to think it through . Is it legal to only say it is for all permanent residents with five to ten, years standing here.

    If so, fine, one hundred a week, and abolish job centre plus, as it is, and many other organised nit picking top down related services and private contracts, massive savings there to answer yes we can afford this !

  • Nope, this one isn’t a flier. Next idea!

  • @Barnaby

    “this daft idea”

    I think it is worth reading the first chapter on UBI in the Compass report. As it states “The principle of a universal basic income (UBI) has a long pedigree. It has been promoted over time by a diversity of British,American and European thinkers as diverse as Tom Paine, Bertrand Russell, Friedrich von Hayek, Martin Luther King Jr, Paul
    Samuelson, JK Galbraith and Milton Friedman. ”

    Among the reasons for UBI it gives are
    1. Reduce poverty.
    2. Put a floor under the benefits system.
    3. Stop the increasingly many who fall through the cracks in an increasingly complex benefit system.
    4. Help those who in a gig economy who face uncertain work.
    5. Value and support work still done more by women such as childcare, caring for relatives etc. and help the independence of women.
    6. Help prepare for work in the age of internet and AI where (routine) “work” may be done increasingly by robots and computers – freeing us up as humans but where some financial freedom may be needed to be creative. Intellectual property (IP) in the creative industries but elsewhere is going to be the life blood of developed economies in the future.
    7. Establish some democratic right that we all should a have a minimum share in the resources of a country – not just that might be “randomly” lucky through their ancestors.

    “free money to hand out to those who can’t work, won’t work, or choose to have children.”

    Well we give a lot of “free money” to those that chose to have children at the moment. This argument is also one against unemployment benefits and state pensions (those who are reckless enough not to provide for their old age).

  • Katharine Pindar 7th Feb '18 - 5:02pm

    It’s good to see such radical proposals so carefully worked out by Michael, and important questions already raised by John Chandler and Lorenzo Cherin. I hope the economic heads in the party will give this serious attention, and consider whether and how it might be integrated into our party’s economic and social programmes.

  • Robotics and A.I. entering the workplace will certainly cause employment problems, and I really want to ‘like’ UBI as a potential solution, but I just get the feeling that the promoters of the UBI idea, as well meaning as they might be, simply haven’t factored in ‘human nature’.
    The general sense I get, is that promoters of UBI think it will free us all up to become somehow ‘dilettante’. Freeing us up to find the ‘inner Artisan’, wood carver, or take up those guitar playing lessons we’ve always hoped we’d find the time for.

    Truth is, some in society will find any excuse not to work, or study for A levels, or career improvement, especially if ‘free money’ is perversely on offer for not working. Worse than that, if each additional child to the family garners another ‘wedge’ of UBI income, then we’re right back to large work-less households with 8, 9, 10 children, in order to get a large cost free council house and the proverbial £100,000 in UBI benefits?

    If I’m wrong, and crazy (lazy!), financial incentives are not unwittingly embedded within the UBI idea, surely the best way to sell UBI, is to show examples? Can someone who feels proficient in the intricacies of UBI give maybe four examples of likely income for.:

    1. Single person on minimum wage, working in a zero hours environment averaging 20 hours work per week.
    2. Couple in their 30’s, no children, and both earning £26,000 each per year.
    3. Non-working couple, with 8 children, 3 over age 16, and 5 under age 16.
    4. Lone widowed pensioner in her 70’s

    Whether good idea or bad, UBI will never be adopted if ‘joe public’ have no idea what affect it would have to the number of notes in their purse or wallet.

  • Peter Martin 7th Feb '18 - 6:23pm

    Why should we offer an extra £40 to £60 pw to those who don’t need it? This would include the non-working wealthy and their partners. It would include those who make a living from criminal enterprises or work the black economy.

    The removal of a tax allowance from legitimately working people will have to cost them more than its replacement by a UBI.

    What’s the problem with offering those who need work, but cannot find it on the open market, some paid work instead? It is better, from everyone’s standpoint, to not waste anyone’s potential to contribute to society. And of course, having made that contribution they should be entitled to wage which is adequate to cover basic living expenses.

  • @ Lorenzo Cherin

    I have posted about the issue of relative poverty and economic inequalities on LDV in some of my comment here, but you are correct I don’t wish to spend much time on trying to pull people’s heart strings about the human costs of these social evils. I assume we all already know these are bad things which hold people back and that we as liberals should be doing something about them. So I am more interested in putting forward solutions to the problems than discussing the problems.

    A Citizens Income is a very liberal solution as it gives more control to individuals to make decisions without the pressure of having no money at all.

    @ Barnaby

    I am not proposing to increase the 20% Income Tax rate to 40% starting at £26,000.

    I am saying for every pound a person earns over £26,000 they would be worse off by 5 pence if they didn’t have any children. So a single person with no children earning £30,000 a year would be £200 worse off, which is about £3.84 a week. I think it is right to expect such earners to pay this small amount (less than 1% of their gross salary) to ensure that less people live in relative poverty. I think it is a price worth paying.

    @ Rob Parker

    Please could you state which parts of my two schemes “will not fly”. I don’t see any reason why either could not be implemented.

    @ Michael 1 and Katharine Pindar

    Thank you for your positive comments.

  • @Sheila Gee

    Alaska has a basic income has had a basic income since the 1980s. Interestingly the experience from Alaska is that if anything a basic income means people working more rather than less – And people prefer to keep the basic income rather than cuts in tax

    On robotics, computers, AI – I am optimistic. Mechanisation and automation has been a tremendous boon for humans – from farm mechanisation, the industrial revolution through to computerisation. We have chosen to give some of this wealth to non-workers – pensions, unemployment benefits and the raising of the school leaving age. Of course people spend their benefits in the economy creating jobs.

    But as an example suppose an economy moves from 10 people working on a farm to a point due to mechanisation only 1 person is needed. The farmer could then keep all the money from the farm in which no-one can buy the food produced. Or the farmer could give out benefits and people can now afford the food and many things can happen within the economy. To a degree this has been happening through benefits and pensions and I think increasingly will happen – some redistribution from those that are lucky enough to be “farmers”.

    Obviously Alaska has had a windfall with its oil. We have had our oil but also other resources that are somewhat randomly allocated to individuals such as land that at one level belongs to everyone and they should have a democratic right to at least a small share in these resources as of right regardless of work status.

  • Michael BG,

    an good article referencing the Compass report. There was an interesting report from Centre Forum a few years back debating the relative merits of tax credits versus personal allowances

    This report set out the arguments for and against an increase in personal tax allowances or an increase in tax credits. The analysis shows that: At a household level based on a static analysis, increases in tax credits result in a more progressive outcome than an increase in the personal tax allowance The incentive effects on entering the labour market and working more hours are in the short term stronger for primary earners from increases in tax credits than from personal tax allowances for single earners and first earners in couples. In contrast, the incentive effects are stronger from increases in the personal tax allowance for second earners in households. Beyond that, the conclusions on which is the preferable approach depend on both a political view of the role of the state and also on a view of the dynamic impact of the tax credits versus personal tax allowances on overall incentives within the economy, and hence growth and income levels. This is a question of balance and tradeoffs.

    Interestingly, the report found that the most equitable distribution of the tax burden proportionate to income was achieved by effectively doubling the then personal allowance to 20,000 and the basic rate of tax to 40% on earnings above this level.

    While ALTER supports low levels of taxation on earned income it does not favour high marginal rates of tax on higher earnings and would advocate for replacing higher rates with a Land Value Tax. This might be achieved by combining a flat rate income tax with a Land Value Tax.

    I endorse point 7 in the comment from Michael 1 above “Establish some democratic right that we all should a have a minimum share in the resources of a country – not just that might be “randomly” lucky through their ancestors.”

  • Michael 1

    “Alaska has a basic income has had a basic income since the 1980s.”

    I’m not sure if that $2000 per year can be considered as an example of UBI.?

    Given their bounty of oil from tar sands, it seems less like UBI, and much closer to some kind of annual ‘carbon bonus’ per citizen. Similarly, Norway prudently saved some of their North Sea oil revenue into a public fund, whereas we in the UK could be said to have ‘splurged’ our North Sea carbon bonus, with no regard for the future.
    Similarly, Saudi Arabia, pretty much have everyone on the ‘carbon welfare’, with little need for work, but given it is linked intrinsically to their oil revenue, it hardly qualifies as UBI, but more as a carbon bonus payment.

    When it comes to robotics and A.I., I feel it is more about public ownership of the robotics that will make the real difference to society. I know that mentioning the Pirate Party UK, will receive guffaws, because they are perceived to advocate downloading copyrighted material for free, but their policies are much more nuanced [and liberal!], than that. They know that Corporates can ‘stitch up’ technology advancement using copyright law for their own profit, and they [PPUK], want to free up more publicly accessible ‘open source’ economics.

  • @ Michael 1 “We have chosen to give some of this wealth to non-workers – pensions, unemployment benefits and the raising of the school leaving age”.

    Careful with your terminology on the doorstep. Pensioners have worked (some of us exceedingly hard), not everyone chooses to be unemployed and are you going to lower the school leaving age ? Hope not.

    “Alaska has a basic income has had a basic income since the 1980s. Interestingly the experience from Alaska is that if anything a basic income means people working more rather than less”

    Alaska isn’t an ideal examplar. Not only did it give us Sarah Palin, but average life expectancy is over ten years lower than ours and suicide is the second highest cause of death. Not my idea of a liberal society. Not surprised there are more working – all the others are dead !!

  • @David Raw

    For clarity I was and in favour of keeping benefits for these people – while others seemed to be (logically) in favour of taking them away.

    “Alaska isn’t an ideal examplar. Not only did it give us Sarah Palin, but average life expectancy is over ten years lower than ours….”

    Lol! I am not sure that this is serious contribution to the debate. Of course may be our life expectancy is higher because we make available universal health coverage and spend less on it than America….

  • @Sheila Gee

    We have had our own “bounties”. Oil and gas, land, mobile phone airwaves that have been sold off… the list goes on and on. Much of this though goes to individuals – I am not a communist but I do believe in some redistribution of this.

    Copyright is of course a complicated subject. If anything UBI allows people to work on open source collaborative efforts. Many are giving away their creative work for free but supported by crowdfunding sources. People contribute to a country in many different ways – voluntary work, political activism, debating and refining political policies….

  • Michael 1
    “I am not a communist but I do believe in some redistribution of this [oil bounty]”

    Like I said, Norway might be able to convert their ‘carbon savings’ into some kind of UBI carbon bonus package for its citizens, but given that our UK North Sea carbon bonus was spent by governments throughout the 80’s and 90’s, we can hardly re-spend it on UBI again?

    Given that corporate wealth, versus, government funding for public services are becoming an ever vicious, ‘Corporate-tax-tug-o-war’, I think the Pirate Party are instead thinking laterally, and looking for the ‘soft underbelly’ of the corporations. What the PPUK have concluded, is that Corporate wealth is very easy to hide behind a brass plaque on the Cayman Islands, but valuable corporate ‘know-how’, especially when that know-how is digitised into 1’s and zero’s, is almost impossible for corporations to hide?

    I guess ‘the Pirates’ figure that if you can liberate digitized corporate ‘value’ into an ‘open source society’, it’s as good as liberating their hidden corporate ‘wealth’?

  • @ Shelia Gee

    If you are a liberal, please can you explain why a person’s economic situation should restrict their freedom to have children?

    1 A single person working on average 20 hours a week on £7.50 an hour would earn in an average week £150. With my second scheme they would receive an extra £73.08 a week in Basic Citizens Income;

    2 A couple earning £26,000 each and no children – with both of my schemes there are no changes in net incomes;

    3 An unemployed couple with 8 children if claiming after 6 April 2017 receive £232.53 Universal Credit plus £116.60 Child Benefit making £349.13 a week. This is £510.87 a week less than the Joseph Roundtree Foundation state was needed for such a family in 2015/16 not to live in poverty. Under my scheme 2 this family would receive a further £346.16 a week and the family would still not have enough to take them out of poverty, being £164.71 short. However if the Liberal Democrat policy of restoring University Credit for every child is factored in as well then this family would receive an additional £320.77 (without my scheme they would still be £190.10 short of the 2015/16 poverty line). Of course they would need to meet the conditions for Universal Credit (note I haven’t included any effects of the benefit cap and housing benefit which would mean they would be even harder up);

    4 Single pensioner – with both of my schemes no change.

    A fifth example might be useful – a couple with one earning £40,000 and the other £30,000 with two children. Currently they would end up with combined net earnings of £1073.99 per week plus 34.40 Child Benefit making £1108.39 a week. Under my scheme 2 they would have combined net earnings of £916.72 per week plus £230.56 Citizens Income and Child Benefit making £1147.28 a week making them £38.89 better off.

  • I am really struggling to follow all this, it all seems rather complicated.

    I really love the idea of a UBI, I think the way automation is going, it is something that is going to have to be seriously looked at within the next decade.

    Considering the amount of time it takes governments to roll out these programs ( Juts look at the mess with PIP and Universal Credit) It is something that should be triled tested and ready to be put into action on a major scale for when the inevitable time comes.

    But what confuses me in your piece Michael is that you seem to keep other welfare Benefits on top of UBI. This seems kind of strange to me because its another layer of expensive bureaucracy and I thought the idea of a Universal Basic Income was, everybody gets the same amount regardless of whether employed or not and that did away with the stigma of the deserving and undeserving poor
    Of course there would have to be extra provisions for Disabled people who have added costs and of course housing costs,
    So why would you not just devise a universal Basic Income that does away with Income Support, Job Seekers Allowance and Employment & Support Allowance and Child Allowance. Then have Top up in the form of Personal Independence Payment as we do now for disabled people

    What (*) of Universal Income equates to though would be what though ?

  • @ Michael 1 You can LOL as much as you like, Michael, but the only inaccurate or non-serious thing in my Alaska comment was the incredible Ms Palin – who can see Russia from her house.. An exemplary exemplar it was.

    Remember the complicated perils of Universal Credit- which Lib Dems in Government voted for. We can do without a second Faustian compact – if we ever get the chance.

  • “If you are a liberal, please can you explain why a person’s economic situation should restrict their freedom to have children?”

    I think it is important that society financially supports the right to have children. However I think it is a supreme folly, to design a system of benefits, which go beyond support, and indeed incentivise already poor, large families into a self-imposed state of increasing poverty with each additional child they have.

    Curiously, your examples show that working childless couples and pensioners are excluded from any financial gain under your UBI, and yet by my calculation, Jacob Rees-Mogg and his 6 children would have a UBI gain of £259.62 per week.?
    It’s now very clear that your version of UBI, is a very perverse form of benefits redistribution, but not actually UBI as the general public would understand it.

  • @ Peter Martin
    “The removal of a tax allowance from legitimately working people will have to cost them more than its replacement by a UBI”.

    Are you disputing that an UBI of £48.08 a week equals an Income Tax personal allowance of £12,500? The removal of the Income Tax personal allowance of £12,500 and replacing it with a UBI of £48.08 a week will not result in anyone being worse off. It is only the changes in the higher National Insurance and the tax relief changes on pension contributions which would adversely affect some people (those earning above £45,000 a year).

    £73.08 a week in UBI with a basic Income Tax rate of 25% equals a personal allowance of £15,200.

    The reason for having an universal basic income is to increase a person’s choices no matter what their circumstances.

    I also support the idea that everyone who wants a job should have one and to achieve this the government needs to guarantee either a job or training for everyone who does not have one of them. Having a Citizens Basic Income does not stop their being full employment or a job guarantee or both.

  • @ Matt

    You are correct many people who support an Universal Income wish to replace many means tested benefits (and I did until quite recently) A major problem with replacing benefits with an Universal Income is the number of losers amongst the poorest in society. The Compass schemes while keeping means tested benefits still have losers among the poorest third in society. The reason is because they count their Citizens Income as income for assessing means tested benefits. Our working group into working age benefits rejected a Citizens Income in 2016 because of the number of losers amongst the poorest in society. This is why my schemes keep all means tested benefits and do no treat the Basic Citizens Income or Child Benefit as income so there are no losers amongst the poorest in society.

    While I like the idea of having a Citizens Income of £144 per week increased by inflation since 2015/16 I don’t think we could introduce it within a five year period. I do think it would be possible to get to a Basic Citizens Income of £73.08 within a five year period and so I am advocating it. If by 2027 we had a Basic Citizens Income of £73.08 or above this figure linked to inflation since 2022. I would want to set out how this Basic Citizens Income could become a Citizens Income that would allow someone to live on it not in poverty. This second phase would look at reducing the means tested benefits as the Citizens Income is increased but may well take over ten years to achieve this.

    @ Sheila Gee

    It is possible to have a system of benefits which ensures that no child has to live in poverty. As a Liberal I want the UK to get there. As I pointed out with both the current Liberal Democrat policy of restoring Universal Credit to all children and my scheme we would get there. The Liberal Democrats are also committed to abolishing the Benefit Cap and so this family with their 8 children would not be living in poverty, which I think is what you say you want.

    Please can you let me know what Jacob Rees-Mogg and his wife Helena de Chair’s incomes are and how much they contribute to their pensions and I will check your figures. I don’t think you have considered the extra 10% he and she would have to pay on incomes above £45,000. Have you taken into account the Child Benefit charge on incomes over £50,000?

  • Peter Martin 8th Feb '18 - 8:20am

    @ Michael BG,

    You can juggle the figures to make it look like a working person is going to be slight better off with a UBI than with a tax allowance but what about changes in other taxes that might be required to compensate. The removal of a tax allowance is the removal of an incentive to get out of bed in the morning and go to work. How do you factor in the cost of that? The economy does run on the work that everyone does rather than the ££ that circulate in the system.

    You’ve still not answered the question of why we need to pay out money as UBI to those who neither need it nor deserve it. It’s not going to be just me asking that question. You need to come up with some kind of answer.

  • Michael BG

    “It is possible to have a system of benefits which ensures that no child has to live in poverty.”

    I’m sure such a system is possible. What bothers me, is that you have written an article describing your convoluted ‘pet’ version of such a system, but disingenuously wrapped it up as a ‘UBI’, when it is clearly nothing resembling UBI as generally understood?

  • William Fowler 8th Feb '18 - 9:33am

    I do agree that UBI has to be linked to income tax to stop political parties coming along and offering to raise it with no economic consequences. It would also be interesting to link it to the overall health of the economy and initially introduce it as a bonus to the populace (subject to a minimum residence requirement), only payable when the government was running a surplus, which would focus minds and show the benefits of good government to everyone. As it would be a fixed sum rather than percentage of salary it would have the greatest effect on the poor. However, the idea of keeping the benefits/pension system and adding UBI to it is absurd as we already have one of the most complex and expensive welfare systems in the world. UBI should be survival money not lifestyle money.

  • Has Lib Dem Voice just become a site for weekly discussions on a Universal Basic Income? It seems to come round more than any other policy area and with the same arguments and counter arguments each time. Is there a way we can move this discussion on? When is the next welfare policy paper planned? – I know there was one not long ago.

  • Peter Martin 8th Feb '18 - 11:37am

    “It is possible to have a system of benefits which ensures that no child has to live in poverty.”

    Why all the concentration on benefits? Yes there should be benefits for children and their parents. Child benefit. No VAT on children’s clothing etc. Tax allowances even.

    But benefits alone aren’t going to cut it. Children are always much more likely to in poverty if their parents are out of work or in low paid insecure employment. Parents and Guardians need full time jobs on living wages. There’s plenty of work that needs doing that simply doesn’t get done at the moment because, supposedly, there is “no money” available to pay for it. Just ask any local council.

    Many municipal parks are in a very run down state. The ‘robots are all going to take our jobs’ argument is much exaggerated. I don’t see many robots tending the flower beds or mowing the lawns in those parks! Jobs that used to be done by council employees either now aren’t done at all, or they are done very much less well than they used to be by outside contractors.

  • Peter Martin 8th Feb '18 - 11:53am

    @William Fowler,

    “only payable when the government was running a surplus”

    The UK government cannot run a surplus. Its a neoliberal lie to suggest it either can or it should. Money is the creation of government which spends it into the economy. Then it get some of it back in tax. But it can’t get back more in tax than it has created to start with. It’s just not arithmetically possible.

  • Mick Taylor 8th Feb '18 - 12:28pm

    Peter Martin. But National Income is not the same as income creation via government spending. Government spending is just one facet of national income. So it is possible for taxation receipts to exceed government spending to create a budget surplus. How else would a government reduce its borrowing in the long run? Of course, Keynes argued that government SHOULD run surpluses during the good times and deficits in the bad times to keep national income on an even keel.
    You are also confusing money creation with government spending. They are not the same thing. Money is, in any event, largely created by banks, who have known for a long time that keeping around 10% of deposits was sufficient to satisfy withdrawal demands and that they could lend out the rest, thus creating money. Now some argue – and some governments insist – that banks should retain more (around 12%) due to the profligate behaviour of some banks during the recent mortgage crisis in 2008, but the principle remains the same.
    In fact to the extent that taxation covers government spending no money is created at all. Of course modern governments, especially Tory and Labour ones, run deficits all the time, because the political flak to do otherwise is seen as too much.
    It’s just basic economic theory.

  • Sue Sutherland 8th Feb '18 - 12:34pm

    Like Matt I find this all confusing but would agree that UBI should be tested in various areas but one of the major attractions for me would be the increased simplicity of the benefits and taxation systems which Michael BGs suggestion doesn’t offer. If rich people also get UBI isn’t it possible to claw that back by increasing taxes at the higher end?

  • Peter Martin 8th Feb '18 - 1:35pm

    @ Mick Taylor,

    Money is largely a creation of government. If we look around the world the Australians have A$, the Americans have US$, the Japanese have the Yen. These are no longer backed up by any precious metal. They are Govt IOUs. Tax vouchers if you like. They are created when Governments spend. The commercial banks of these countries can create their own IOUs denominated in these currencies but they can’t create them intrinsically. So the US government, by creating US dollars, is also creating a unit of measure which others can use too.

    Another way of looking at it is to appreciate that a Bank IOU is an asset/liability pair. The two always cancel. We can also consider Govt issued money as an asset/liability pair. In other words everything has to sum to zero. If we want positive numbers in our accounts then Govt has to hold the negative numbers.

    The Keynes argument you are referring to should only be applied to a country with balanced trade. If there are pounds constantly leaving the economy to pay our net import bill, Govt needs to continually replenish the lost money by deficit spending to prevent the economy falling into recession. If you don’t like that idea you need to argue for a much lower pound to make our trade balance.

  • @ Peter Martin
    “You’ve still not answered the question of why we need to pay out money as UBI to those who neither need it nor deserve it.”

    The cost of giving a Citizens Income to everyone is less than a means tested benefit. Being universal makes it more likely people will receive it. Giving it to everyone gives everyone “a stake” in society and this is particularly needed for the richest in society who seem nowadays to be very disconnected from the majority of society. Also I suggest you read Michael 1’s post of yesterday 5.00pm.

    For someone on Universal Credit the incentive “to get out of bed” in monetary terms (I would hope that people get more than a monetary benefit from going to work) is 37 pence for each pound earned. I am not a supporter of economic need being the main motivator of people and look forward to a time when it motivates people less and I think that would be a better society. People should be motivated by getting a happier life; having more “well-being”.

    I thought your economic position was the government created money and then spent it and so created demand. I think the logical corollary from your position is that people have to have money to spend before anything is created. Therefore money comes first and production comes second. If the government gives people money to spend then they will create demand for goods and services and these will be provided; the provider of theses goods and services may employ people to assist with the provision (and pay them) but it is necessary.

  • @ Sheila Gee
    “you have written an article describing your (Basic Citizens Income), but disingenuously wrapped it up as a ‘UBI’, when it is clearly nothing resembling UBI as generally understood”.

    I have explained (briefly in the article and longer in my reply to Matt above) why keeping means tested benefits are necessary for the five years I am discussing, but could be phased out after this at the Citizens Income is increased. The Compass schemes also keep means tested benefits.

    Malcolm Torry is a well know advocate for a Citizens’ Income and his definition of a Citizens’ Income is “an unconditional and nonwithdrawable income for every individual. That definition never alters, and if an income does not fit that definition then it is not a Citizen’s Income.” (101 Reasons for a Citizen’s Income: Arguments for Giving Everyone Some Money). The title I gave to this article was “How can a Basic Citizens’ Income be afforded”. You need to ask Caron why she changed the title. The only times I use the word “universal” in the article are because it is used in the title of other works on Citizens Incomes that I mention.

  • Peter Martin 8th Feb '18 - 6:15pm

    @ Michael BG,

    ” …..the government created money and then spent it and so created demand”

    Initially, they spend it so that people will work for them and provide necessary services. They simultaneously impose taxes payable in the currency of account to create a demand for that currency and so give it a value. Once the currency has a value it become a means of exchange generally in the economy

    “If the government gives people money to spend ”

    Possibly, if there is an emergency need to rapidly increase spending power then this could be considered. The Australian Federal Govt handed out A$1000 cheques to most taxpayers after the GFC. But it should be very much a last resort and should be avoided if at all possible. It’s better for Govt to spend money and get something for it in return.

    This is basically how it all works.

  • Peter Martin 8th Feb '18 - 6:29pm

    @Michael BG,

    “The cost of giving a Citizens Income to everyone is less than a means tested benefit. ”

    If the income is very small this is likely to be true. But if we are going to make a significant difference then we have to talking about significant amounts of money. Then some form of means testing will make sense.

    If we offer guaranteed work at a living wage there isn’t any means testing involved. If people need the money they’ll turn up and do the jobs on offer. If they don’t need it, or are busy doing something else, they won’t bother. So the system will be self selecting. Society will receive a benefit in that jobs will be done that wouldn’t otherwise have been.

  • @ William Fowler

    I would not judge a government as good because it had a government surplus. I would judge a government good if it managed to keep unemployment below 2.5% of the working age population.

    According to in the twentieth century there were only 29 years when there was a government surplus with the national debt increasing from £568.7 million in 1900 to 349,300 million in 2000. In 1800 it was £441.35 billion, so it even increased during the nineteenth century.

    @ CQ

    We don’t have as many articles on Universal Income as we do on Brexit. I think we need to continue to discuss why a Citizens Income is a liberal idea and should be party policy for as long as it takes for a majority in the party to agree and make it party policy again.

  • Michael BG
    “I am not a supporter of economic need being the main motivator of people and look forward to a time when it motivates people less and I think that would be a better society.”

    Laudable idea, but again this simplicity, just doesn’t account for innate human nature.

    How does your proposed benefits distribution system which is actively directed towards producing large workless families, speak to a 16 year old, and encourage them to take their maths and science ‘A’ levels seriously, when the retort is that education is pointless because I’ll get £73.08 a week for free for not working anyway, and the more children I have, the more money I will get?

  • @ Peter Martin

    I am sorry if I was not clear. The cost of administrating (giving) a Citizens Income to everyone is less than the cost of administrating mean tested benefits. Some schemes for a Citizens Income discuss the savings from replacing means tested benefits. Malcolm Torry and the Citizen’s Income Trust includes this feature. Malcolm Torry has estimated the savings from abolishing means tested benefits (that is the costs of administering the benefits) and moving to a Citizens Income at £4 billion.

    I don’t know where you get your obsession with work. Perhaps it is a Labour thing, and having to be the party of the “working class”. Work is not a “good” in itself. Lots of people only see it as a means to an end – getting the money they need to live on. Remove the need to work for the money to live on, then work can become something else. Something much more positive and rewarding.

    You want a society based on work, but we have a society based on money. I would like to change society so people can get as much satisfaction and happiness from their lives and not be forced for economic reasons to have always to work.

    If you pay someone to be a gardener or if you give that person the money they would have earned the net result for the economy is the same. Basic Keynesianism!

  • @ Sue Sunderland
    “If rich people also get UBI isn’t it possible to claw that back by increasing taxes at the higher end?”

    It is indeed. To fund the £48.08 for those not earning £12,500 a year my scheme increases the tax collected from those earning more than £45,000 by increasing the higher rate National Insurance and those paying Income Tax at 40% and 45% by reducing their tax relief on their pension contributions to 20%. Also no one earning more than £125,000 assuming the current system continues would benefit from the Citizens Income in the same way as they don’t benefit from an Income Tax personal allowance.

    To fund the extra £25 a week for those of working age and for children everyone pays an extra 5% Income Tax on whatever rate they were paying. Therefore for a single person they are better off until then earn more than £26,000. For couples when their joint income is £52,000. Assuming the “High Income Child Benefit Charge” is kept at the existing rate a person earning more than £60,000 a year will have to pay back their child benefit via the tax system. Therefore no one earning more than £60,000 would be better off because of the increases in child benefit.

  • @ Sheila Gee

    Not everyone should have to take “A” levels. And certainly not everyone should have to take a science subject and Maths at “A” level. Schools would need to teach that education is not just for work. It can be for enjoyment and to give a person more choices in life. Schools would need to teach that work is not just for money but can be for enjoyment, job satisfaction, social intercourse and “doing something useful”. A Citizens’ Income is liberal because it gives people choice. A Citizens’ Income will not abolish work, but it would make society more liberal.

    You are correct as a liberal I believe in the goodness of human nature. And would expect people to act rationally and act to increase their happiness and well-being and this is likely to mean they would choose to do some sort of “work” even if unpaid. The children of the rich seem to be able to motivate themselves to work when their economic situation does not mean they have to work.

  • Peter Martin 9th Feb '18 - 8:34am

    Michael BG,

    It’s not basic Keynesianism to just hand out money for nothing. If we pay someone who needs an income to work in the local park, we, as a society, have the benefit of the products of that labour. We will be able to take our children and grandchildren to play in it. It will be an enjoyable experience. That’s what the economy is about. Our society isn’t really based on money. That is just a means to an end. If we were marooned on a desert island a bag full of money would be useless to us. But if we had a canoe which somone had spent time building then it would be useful.

    So the net result on the economy of paying someone to do something useful and just handing out the same amount of money isn’t at all equivalent. Fine tuning the economy means not wasting anyone’s talents.

    This is not to say we all need to work 60 hours a week for 50 weeks a year. The working week fell in the early part of the last century as technology progressed but that reduction stopped in the 70s just when neoliberalism began to take hold and we could have a more useful discussion on just why that was.

  • @ Peter Martin

    Keynesianism is about the government stimulating the economy and this was often done by cutting taxes (the USA is a modern example), i.e. giving people money to spend. There is the famous quote from Keynes which implies it doesn’t matter what you pay people to do it is the money which is important – often quoted wrongly as “the government should pay people to dig holes in the ground and then fill them up”.

    If a job such as keeping the park looking nice is needed to be done then it should be done because there is an economic need for it.

    If we were marooned on a deserted island we would be outside of our society and money would be useless. Money only works when there is a society that accepts it. Hence my “we have a society based on money”. There are adults who do not work and they can survive because they have money. If society was based on work then they would only to be able to survive if they could do work either to produce what they need or to exchange their labour for the things they need.

    Having a Basic Citizens’ Income can increase the incentive to work because a person does not lose any money when they earn any more. It can encourage people to take part time jobs and can increase their choices in life. It is a liberal measure. Do you understand that increasing choice is one of the benefits of everyone having a Basic Citizens’ Income?

    Was it a good thing that a person had to work 60 hours a week in the nineteenth century to meet their basic economic needs? If it wasn’t then why is working 40 hours a week a good thing?

  • Stephen Milton 11th Feb '18 - 6:02am

    Can we rebrand this idea as a ‘Universal Dividend’.
    It is the ‘dividend’ that we as members of society are getting by virtue of the collective endeavour of our forefathers. It is not an income that has to be earned with all the baggage of proof that it is deserved.

  • Peter Martin 12th Feb '18 - 12:50pm

    @ Michael BG,

    This is the exact Keynes quotation in question:

    “If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”

    So it’s better than nothing but it isn’t ideal. Keynes was trying to show how we could do the same with buried banknotes as we used to do with buried gold. ie We could mine it.

  • Peter Martin 13th Feb '18 - 11:05am

    @Michael BG,

    “The children of the rich seem to be able to motivate themselves to work when their economic situation does not mean they have to work.”

    Like being found an “executive” position in the family firm? I don’t see them working in the same way as the rest of us had to. Or maybe you know differently?

  • Roger,

    My approach is based on looking at the work of others on the issue, making a calculation of what the cost of a UBI at a particular level would be, and looking at what has been published on how much revenue would be raised from particular tax rises. To convince people that a UBI is affordable both the real costs and the amount of revenue it is expected from particular tax rises is the only way.

    Even if you didn’t accept my calculations for the cost of a UBI of £48.08 a week you could comment on the Compass report which states that increasing a Citizens’ Income and Child Benefit by £5 a week would cost £11 billion and that if Income Tax rates were increased by 1 penny £10.4 billion would be generated. This would mean if you funded a UBI of £50 a week and increased child benefit by £50 a week the Income Tax rates would need to be increased by 10 pence to 30%, 50% and 55% and when the current National Insurance rates are added the marginal “tax” rates are 42%, 52% and 57%. Refusing to engage with the figures does not make them go away.

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