Coranavirus and the Minimum Income Guarantee

As the economic impact of the Covid-19 lockdown becomes clearer day by day the necessity of ensuring that millions are not left destitute by gaps in support systems becomes ever stronger.
The UK was already teetering on the edge of recession, as business confidence dried up in the face of a potentially hard Brexit.
Now, with a global recession underway, economists are predicting a slump in GDP of between 7.5% and 24% this quarter and we have already seen over 1m new claimants for registering for Universal Credit.
The New Economics Foundation (NEF) has published a policy document for a new proposal to build a Minimum Income Guarantee (MIG), to sit alongside the government’s current job retention and self-employed income support schemes
BUILDING A MINIMUM INCOME GUARANTEE FOR THE UK
This article provides further detail on costs A safety Net for All writing:
“The government’s job retention and self-employed income protection schemes ensure 80% of incomes for many people, but still exclude large numbers of workers. These include employees who are losing their jobs, employees who have taken on a new job after 28 February 2020, and self-employed people who have been operating for less than a year, amongst others.”
The NEF proposal is for a short-term MIG of three months, possibly extended to six months, set at a rate of £221 per person per week, equal to the 2019 minimum income standard, established by the Joseph Rowntree Foundation and the Centre for Research in Social Policy, excluding rent, mortgage, and childcare costs.
“Those already on benefits would get an automatic top-up to bring the main element in the relevant benefit up to the level of £221 per person. For new applicants to UC, payments will be non-conditional and non-means tested at the point of access, by using the universal credit advanced payment system — crucially this means no five-week wait for payments.”
“Anyone can apply for the MIG. But where the MIG takes an individual’s disposable income above £2,500 per month, the difference above £2,500 would need to be paid back — either through any backdated payments made through other government schemes or through higher taxes in the 2021/22 tax year. Universally raising the level of the safety net will ensure that those losing all or part of their income will not be expected to fall so far, and will also raise income for current claimants, who may face further hardship as a result of the crisis.”
“It is clear that the MIG, or something like it, is vital to ensure that no one is left without enough to cover their basic needs. By the time the coronavirus crisis is easing, there will be many more than one million who fall outside the schemes for salaried and self-employed workers. It is vital that they find something capable of supporting them until work is available again.”
Clearly, this level of support cannot be maintained in the long-term. But as a crisis support mechanism, it deserves consideration and could form the basis for a lower permanent MIG and job guarantee scheme to aid in getting people back to work.

* Joe is a member of Hounslow Liberal Democrats and Chair of ALTER.

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14 Comments

  • I have always been a supporter of Minimum Income, guarenteed to all adult citizens. I had believed that the polarising trends within the labour market (a few well paid job, more people on low wages) would bring such a policy to pass, but it seems that this pandemic may well be the catalyst. Evenets, dear boy, events.

  • Katharine Pindar 10th Apr '20 - 10:45am

    This seems like a very good idea, Joe. How would it fit in with your ideas for a citizen’s basic income? What would you like to see happen after three months, if the government accepts this?
    Meantime should we be tweeting Dick Newby and Ed Davey to recommend our backing the scheme? Thank you for telling us about it.

  • Peter Martin 10th Apr '20 - 10:51am

    “The government’s job……. schemes still exclude large numbers of workers.”

    They do. So how about offering cheap unsecured loans to this group of workers? This could be a simple solution for many who have good earning potential in normal times. If necessary repayments could be managed through the taxation system.

    This way it won’t cost the government much at all. Govts can borrow for next to nothing. On their balance sheets they’ll have the value of the loan to offset against the cost of issuing the loan.

  • Richard Underhill 10th Apr '20 - 11:33am

    I am catching up on books I have bought, but have not yet read. Recommended to us all by Shirley Williams is “Small is beautiful, a study of economics as if people matter”
    by E.F. Schumacher 1973. Penguin £3.99 (except in America). He rubbishes a lot of conventional economics and widespread assumptions in our intellectual culture.
    Chapter 4 is on Buddhist economics, which we might follow, despite our current government. Chapter 5 is “A Question of Size” which is relevant now as we devolved governments throughout the UK and are starting on regional governments in Manchester and Birmingham despite the defeat of the referendum in the northeast of England. Tony Blair was PM then and Charles Kennedy went to help, as he told us during a small fringe meeting at a federal conference in Glasgow.
    One might also wonder about the NAFTA agreement, which appears in the index of “My Life by Bill Clinton” as Bush-Perot conflict, pages 413, 415, 431.
    We were told about an earlier stage by a Canadian senator at a Liberal International meeting in Italy. She had been appointed as the equivalent of a life peer by the current PM’s father. She disapproved of US access to Canadian forestry and timber.

  • Katharine Pindar 10th Apr '20 - 11:42am

    Joe, great explanations, but why don’t you commit yourself and say, Yes, this is a good idea our party should support? If so we should be tweeting our support to our leaders.

  • Richard Underhill. 10th Apr '20 - 11:47am

    Richard Underhill 10th Apr ’20 – 11:33am
    A nephew of my wife has admitted voting for Perot, who was a businessman who bored everybody with his lectures on how to run a large company, having made a fortune on US federal contracts. He managed to create a political party and get it registered for a general election in all fifty US states. https://en.wikipedia.org/wiki/Ross_Perot
    The US does not often have three parties ISBN 0-19-913130-9, although both current parties celebrate Abraham Lincoln, for different reasons.

  • Katharine,

    this is a great idea and our party should support it. Ed Davey has been active on this front https://www.theneweuropean.co.uk/top-stories/rishi-sunak-package-of-help-for-tackling-coronavirus-1-6572151 calling for the Chancellor to:
    “…raise the level of statutory sick pay and extend it to the two million people earning less than £118 a week that are currently excluded. It is also vital that the charities and not for profit organisations who do so much to care for so many are not forgotten during this crisis.
    “By guaranteeing 80% of income not just for workers but also the self-employed, boosting sick pay to £220 a week for everyone, and increasing out of work benefits, the government would in effect create a temporary Citizen’s Income. This would send a strong signal that we care for everyone in our society.”
    He has also been pushing for the set-up of bank accounts for the estimated 1.2 million people who do not have one during the coronavirus outbreak https://www.mirror.co.uk/news/politics/open-bank-accounts-shoppers-can-21788415
    In a long article in his local paper https://thegoodlifesurbiton.co.uk/2020/03/20/how-to-survive-crisis-ed-davey/ he writes:
    “Kindness and volunteering will help Surbiton survive the current pandemic as the community rallies to support its most vulnerable residents.” This is what I will be focusing on with our local foodbank and resident association. On the economic side of things he comments:
    “Judging the right economic package [to safeguard beleaguered businesses] is quite tough; in the first place [the government] may have to go overboard, and then row back,” he said, adding that the first phase of response was to shore up confidence.
    “If you remember what happened in 2008 [the banking crisis], which is seared on most people’s memory, all the screens were going red and the banks were going down… Gordon Brown, whatever one thinks of him, acted very, very fast in a coordinated way and basically said: ‘The system will not close’.
    “Monetary policy by itself will not sort this out. It can be powerful at certain times, but this is about paying people’s wages. This is about the cashflow of small companies. If people aren’t coming in and buying a meal, or buying a pint, or doing their normal shopping, there’s no money, and you get a classic downward spiral where demand completely collapses.”

  • Richard Underhill. 10th Apr '20 - 3:06pm

    Katharine Pindar 10th Apr ’20 – 11:42am
    MIG makes me think of the Lutwaffe.
    https://www.bing.com/videos/search?q=Guernica+Spain&qpvt=Guernica+Spain&FORM=VDRE

  • Who can disagree with the NEF when it states, “The problems is the UK has entered recession with one of the weakest employment safety nets, either among advanced economies globally, or in the UK’s own post-war history. Total out-of-work payments received by UK employees are on average around 34% of their previous in-work income – the third lowest among 35 OECD advanced economies. And at less than 15% of average earnings, the main adult unemployment payment is worth less than at any time since the 1948 creation of the welfare state” (page 1)? And “Strengthening the social security system so it can do its job as a sufficient and comprehensive safety net should have been the first economic priority of government. It is true that UC and working tax credits have been temporarily strengthened, with an increase in the main adult payment by around £20 per week. But this £7 billion injection of cash amounts to just one fifth of the cuts to welfare seen since 2010.” (The Resolution Foundation have stated elsewhere that for 2023-24 the value of the cuts are “around £34 billion a year lower on current plans than had the 2010 benefit system remained in place” ((https://www.resolutionfoundation.org/press-releases/conservative-manifesto-risks-child-poverty-reaching-record-highs-while-no-manifesto-will-reduce-it/) “Even after these changes, the UK still has one of the weakest safety nets in its post war history, and far weaker than the majority of advanced economies” (page 2).

    £221 a week for a single person and £442 for a couple are much higher than what I have been calling for benefits to be increased to (£160.30 a week for a single person and £276.20 for a couple). What is there to dislike? It being temporary. It would be unfair to increase a person’s benefit by £141.91 a week and a couple’s by £347.41 a week (based on the new increased rates for Universal Credit) and then cut them by these amounts in three or six month time.

    I wonder how these new rates would not interact with the benefit cap? Would the benefit cap be increased by £3891.68 for a one adult household and £18,065.32 for a two adult household (based on the new increased rates for Universal Credit)? The best solution would be for the government just to abolish the benefit cap.

  • I also think the NEF have underestimated the cost of this for the 8 million claimants who are on benefits. I think the cost for a month is in the region of £9.6 billion not £3 billion. We can see why their figures are too low by looking at their figures for 500,000 new claimants which is only £1000 extra for each claimant, while the real costs are £614.95 for a single person and £1505.44 for a couple. I think the £1000 figure should £1204.88 per claimant.

    Katharine,

    Joe Bourke in his reply to you of 10th April, 1.40pm could have mentioned Ed Davey’s letter of 20th March to Rishi Sunak, the Chancellor of the Exchequer, where he called for some of the things Joe lists and he also calls for a targeted minimum guaranteed income of £150 a week for a single person and £260 for a couple (https://twitter.com/EdwardJDavey/status/1241016452800491522).

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