Four ways Lib Dem MPs stood up for those with no income

MPs’ inboxes at the moment are flooded with the millions of people who are getting no support at all during the Coronavirus pandemic.

Imagine what that must feel like?

It’s people like self-employed hairdressers, physiotherapists, cleaners, decorators, people who own self-catering holiday homes who have been left with nothing.

Often their income from self employment was not that high anyway so they don’t have any sort of cushion.

After almost 4 months of this, many are at breaking point.

Liberal Democrat MPs have consistently called for more help for people who have been affected like this.

Here are four things that they have done this week:

Christine Jardine pressed the Prime Minister to introduce a Universal Basic Income

There are 3 million people in this country who get no support at the moment because they are self-employed or on contract. Our black, Asian and ethnic minority communities have an unemployment rate that is twice the national average and women are disproportionately affected by covid-19. The Prime Minister said a few minutes ago that he stands ready to help. Will he look at a universal basic income so that these people can get the help that they need now?

Typically the PM brushed off her suggestion, showing how little he cares or understands bout the predicament faced by too many.

Ed Davey called on the Government to scrap changes which would disadvantage contractors as reported by City AM:

Self-employed people face an unprecedented threat to their livelihoods due to the pandemic,” he said.

“The Conservative government’s insistence on their IR35 policy risks making the plight of many self-employed people even worse.

“Delaying the change to next April will do next to nothing to reduce the impact of Covid-19 which will be felt for months – if not years – to come. This is not the time to add to the burden of the self-employed.

And Jamie Stone is starting a new All Party Parliamentary Group which meets this coming Tuesday and aims to advocate for those who have been excluded:

Finally, Tim Farron highlighted the plight of people who were directors of limited companies – not huge corporations, just single person operations, sometimes.

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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61 Comments

  • Peter Martin 5th Jul '20 - 12:46pm

    “Will he look at a universal basic income so that these people can get the help that they need now?”

    Look, there are many people who have been hardly affected, in a financial way, by the lockdown at all. They are either receiving their full incomes as usual or they have had only a small decrease. I’m lucky enough to be one of the many.

    We don’t need any financial help.

    The Govt should concentrate on giving help to only those who need it. An ultra broad brush approach is an interesting macroeconomic concept but that’s about it. For example it could hand out £1 million or even £1 billion cheques to everyone. The bigger the cheque the more equal we’ll all be afterwards!

  • Peter Martin 5th Jul '20 - 2:52pm

    “The Torry plan…..for a permanent basic income would be revenue neutral i.e. there is no cost to the treasury.”

    The would mean we can change one thing in the economy, ie introduce a UBI, and everything else stays the same. ie Spending and Revenue or at least the difference between the two.

    That’s never a good assumption.

  • Peter Martin — can there BE a difference between the two, when totalled?

  • suzanne fletcher 6th Jul '20 - 10:53am

    Well done those MPs.
    Not forgetting those who have no income at all, and are not allowed to work, some destitute asylum seekers that Christine Jardine has stood up for ( as well as those asylum seekers who do get a small allowance who are not allowed to work. Many already qualified to work in health and care sectors).

  • suzanne fletcher 6th Jul '20 - 10:58am

    Re UBI. I am a long time supporter of this.
    I don’t expect to be “better off” as a pensioner. Given that I “share” my husbands work pension we are OK, but we would fully expect to have money deducted one way or another via taxation to ensure we did not benefit from UBI. we would benefit by knowing that others less fortunate were our of poverty though.
    I note, with gratitude, that 30 years on the council, and a lifetime of voluntary work as well as some low paid part time work would have left me in poverty if on my own.

  • Sue Sutherland 6th Jul '20 - 1:49pm

    It’s very encouraging to hear our MPs standing up for those in financial trouble and in poverty. Like Peter Martin I’ve never understood why a sophisticated tax benefits system seems to be impossible to implement and the means testing argument is about 100 years old referring to a time when inspectors were told to pry into people’s lives to find out if they were cohabiting. However, UBI definitely has its attractions and the system to which Joe Burke refers sounds promising, so I hope its time has come and that it will prevent at least some people from falling into the poverty that current benefit recipients experience.
    In the meantime would a loan system which begins as soon as soon as the Universal Credit application is made, to cover the weeks that applicants aren’t paid, at least help people to avoid debt sharks, hunger and homelessness? It wouldn’t need to be paid back until some time after the appeals process ended, if applicants were denied benefit. I’m thinking at least two years in which to pay, interest free.

  • Malcolm Torry’s “revenue neutral” UBI provides £30 a week extra for each pensioner, £60 a week for each person aged 25 to 65, £40 a week for those aged 20 to 24 and £30 for those aged 16 to 19 plus increasing child benefit by £10 a week. No one could live on these amounts. The cost of these meagre rates are a 5% increase to all three rates of income tax, increasing the 12% rate of National Insurance to incomes over £50,000 and reductions in the amounts before anyone pays income tax and national insurance.

    Each working adult earning £12,500 a year would lose £47 a week just from the changes to the allowances for Income Tax and National Insurance. If they earn £25,830 a year they would lose the other £13 a week. So a single adult earning more than £25,830 a year would be worse off.

    One of the problems of a UBI is that those people who can afford not to work because another family member can afford for them not to, benefit with no way to recover this increase to that household’s income without affecting those households where everyone works and the extra income has already been clawed back.

    I don’t think income tax rates should be increased at this time. Especially as some of the money people earning average earnings lose would be given to those with high incomes who are not likely to spend it.

    For such a large increase in taxation the poorest don’t even end up living at the poverty line. A single person living just on benefits is £25.71 a week short and a couple £39.11 short!

  • Peter Martin 6th Jul '20 - 7:23pm

    @ Roger Lake,

    “Peter Martin — can there BE a difference between the two, when totalled?”

    Yes. It’s easy enough for the Government to know how much extra will have to be spent on any new project but it’s always difficult to know how much revenue will be raised when taxes are increased – supposedly to “pay for” said project. If, for example, you look at John Redwood’s blog he’s fond of making the argument that the tax revenue from having the top rate of tax is maximised when it’s not too high. He cites the Laffer effect.

    He does have a point but that’s not the correct explanation. The wealthy often do have ways of obtaining their income by more indirect means. So it’s probably just that they are shifting their income towards being a capital gain or a dividend payment when the rate of income tax is increased which makes it seem like its a disincentive to earn.

    It’s more likely to act that way at the other end of the pay scale in this case. The introduction of a UBI will also have the significant macroeconomic effect. The first £12.5k or so of earned income will no longer be tax free. That’s an obvious disincentive, for some, to not bother to earn it in the first place. It’s difficult to know in advance just what effect that will have. The higher the UBI the greater will be the effect. So in the worst case that could result in lots of lower paid workers dropping out of the labour market. It may seem that because they aren’t paying much if any tax anyway that it won’t matter.

    But anything that significant will have an effect on the economy and that effect will be seen in the government’s revenue stream.

  • Peter Martin 6th Jul '20 - 8:57pm

    @ Joe B,

    “Given that low-income households have a higher propensity to consume than higher-income households, the additional income that lower-income households would receive would increase demand in the economy. The scheme would also benefit the disposable incomes of mid-range income households.”

    But how does this work according to your view of the economics? You’re always telling me that a fiscal stimulus can only be regarded as a temporary measure!

    In actual fact, it’s no more temporary than injecting more fuel into your car engine as and when it is is needed. But that’s to digress slightly. It could work this way if the UBI is minimalist in scale just as child benefit would still work if that were still universal.

    But no one should consider only the demand side of the equation. The mainstream are fond of laying emphasis on the supply side. Maybe too much at times but it can’t be ignored. So I’m not sure why they are keen to ignore it when it comes to a UBI. But I smell a rat! There is something they aren’t telling us! The the downward pull on the supply side has to be factored into the calculations and I can’t see that Torry has actually done that.

    The bigger the UBI the higher the adverse affect will be on supply. If it were much bigger than proposed by Torry, if the UBI were large enough to take everyone out of poverty, which would be the point of it all for many like Michael BG, it would have a very large adverse effect.

  • Peter Martin,

    Torry is precise in his wording. He says “the additional income that lower-income households would receive would increase demand in the economy. This is a permanent increase, not a temporary stimulus.
    Torry is precise in what he advocates and has noted “The scheme could provide additional employment market and business-creating incentives for the large number of households no longer on means-tested benefits: an important factor in relation to the rebuilding of the economy following the coronavirus outbreak.”
    What Torry’s simulation shows is how it would be possible to implement a Citizen’s Basic Income scheme, with Citizen’s Basic Income levels of useful amounts, that would be revenue-neutral. The increase in Income Tax rates required would be feasible while both poverty and inequality could be substantially reduced.
    There are significant advantages to making benefits Univeral, as Beveridge understood, and numerous disadvantages to social security systems that are over-reliant on means-testing and sanctions.

  • The Times carried an article recently headlined ‘Coronavirus has united left and right on universal basic income.’
    “It’s a rare day that the far left and the libertarian right can find something on which to agree, but crises have a way of making the unthinkable happen. In this case, both wings of the political spectrum have been united not by some trivial idea but by welfare reform of the most radical kind: the introduction of a universal basic income.”
    Stephen Davies, head of education at the Institute of Economic Affairs, the free-market think tank, said that the time had come for an open debate on the subject. Free marketeers had forgotten the “long tradition of classical liberal thinking on the welfare function of society”. A focus on means-testing, rather than a guaranteed income floor, had been “a blind alley” https://iea.org.uk/wp-content/uploads/2020/05/Redefining-the-state-of-welfare_AW-1.pdf
    ● Major crises such as wars and pandemics (such as the 1918-19 Spanish Flu) have often been the occasion for radical reconstruction of the welfare system. It is very likely that the Covid-19 pandemic will also do this.
    ● This is because it will bring discontent with the existing system to a head and will lay bare its weaknesses, particularly as regards its central element, Universal Credit.
    ● There will be a major public debate or conversation. Indeed it has already begun.
    ● In that conversation one idea that is bound to have a lot of support and has a ‘head start’ is that of a Guaranteed Minimum Income and in particular one version of that, a Universal Basic Income.
    ● There are however strong doubts or objections to that idea, from all parts of the spectrum, and there are several rival ideas.
    ● The debate cannot be a purely technical one because it touches upon fundamental questions, which have also been raised by the impact of the virus: the place of the home and household; the importance and nature of work; and the role of civil society and voluntary action.

    The Chancellor will make a statement on the economy on Wednesday. Perhaps the conversation will continue from there.

  • Peter Martin 7th Jul '20 - 2:01am

    @ JoeB,

    You shouldn’t believe everything you read in the Murdoch press! The UBI has not “united left and right”. It is important to appreciate that what might be an agreed useful temporary measure in a time of crisis can’t be regarded as more than that. The left isn’t asking that all workers be given the longer term option of staying at home on 80% of pay, for example.

    The recent push for a permanent UBI has more to do with present day Milton Friedman supporters than anyone on the left. Google {Right Wing Case for Basic Income}. The left has always campaigned for jobs for all at a fair and living wage which is not at all the same thing.

    I’ve asked you for an assessment on how any UBI, large enough to take everyone out of poverty, would affect the supply side of the economy and zilch! How odd is that? Here we have a supply side economist with nothing to say about the supply side!

  • Peter Martin,

    this is Rebecca-Long Baliey advocating a UBI as part of her leadership candidacy:
    The shadow business secretary said the policy would take the form of a “fixed payment made to all, providing everyone with a basic minimum income of at least the real living wage, for the duration of the coronavirus pandemic”. The Pandemic is expected to continue into 2021 or later until a vaccine is developed that can be produced and administered to the UK population. That is a temporary recovery UBI and stimulus (as illustrated in the Torry paoer) that would need to replaced with a more sustainable and affordable permanent UBI as the decline in economic activity is reversed.
    Had Labour been elected last year, then UBI trials would have been undertaken across the UK https://basicincome.org/news/2019/11/united-kingdom-shadow-chancellor-john-mcdonnell-affirms-basic-income-will-be-piloted-in-the-uk-if-jeremy-corby-gets-elected-in-december/ So it would appear the journalists at the Times do indeed have a good handle on the thinking of the left.
    Absolute poverty is defined by the UN as living on $1.90 per day. There is no one in this country that has had to live at that level of subsistence since the welfare state was introduced by the Liberal party over a century ago. Relative poverty is a measure of inequality. There were 20m people claiming DWP benefits in 2019 (13m claiming state pension). As Torry notes, the proposed UBI payments would substantially reduce both poverty and inequality (increasing the income of the lowest decile by a quarter); large numbers of households could be removed from means-testing and the problem of wait times for Universal Credit significantly ameliorated. The scheme could also provide additional employment market and business-creating incentives for a large number of households no longer on means-tested benefits aiding in rebuilding the supply capacity of the economy in the wake of the pandemic.

  • Peter Martin 7th Jul '20 - 11:12am

    @ JoeB,

    It’s true that many on the left have been taken in by superficial arguments about a UBI. I don’t know if RLB is aware that Milton Friedman was in favour of one and was also openly in favour of using it as a cover to dismantle the welfare state. His words were:

    “We should replace the ragbag of specific welfare programs with a single comprehensive program of income supplements in cash — a negative income tax. It would provide an assured minimum to all persons in need, regardless of the reasons for their need…A negative income tax provides comprehensive reform which would do more efficiently and humanely what our present welfare system does so inefficiently and inhumanely.”

    So his thinking is quite clear. Everyone gets the UBI and they have to manage on it. There’d be nothing extra. No NHS. No unemployment benefit etc.

    The origins of the UBI aren’t from the left. It’s been promoted by the Libertarian right as a cover to dismantle the welfare state. Note that people like yourself have suddenly started putting the adjective “means tested” in front of the word “benefits”. They haven’t been “means tested” in that sense since before WW2.

    https://www.basicincomeaction.org/what_is_origin_of_this_idea_the_history_of_basic_income

    You’re still not addressing the supply issue. All you can come up with is that extra demand will create extra supply. That’s not an argument the right have been particularly amenable to previously. But then UBI is somehow a special case!

    The inconsistency of it all can be seen on LDV. We have articles on how we won’t be able to manage without overseas workers to pick our strawberries etc then we have other articles on how the robots will take our jobs so we’ll all need a UBI to live on! Go figure that!

  • This thread is a good example of why you need informed MPs to be engaged in leading policy development.
    Peter Martin writes that tax may not be collected from higher earners because they might shift their income towards being a capital gain or a dividend payment when the rate of income tax is increased which makes it seem like its a disincentive to earn. This ignores the fact that the system is deliberately set up to make sure that corporation tax plus dividend tax is about the same as what you’d pay in income tax. So shifting it around between dividends and income doesn’t make much difference. Capital gains could also be taxed at equivalent rates of tax and NI subject to allowances for inflation.
    The same issue of understanding the details applies to austerity, It means different things to different people. It can be where we raise taxation so as to kill inflation (as advocated by Modern Monetary Theory)? For some, it means reducing the budget deficit or having a budget surplus. For others, it is the Keynesian one, where we let the deficit blow out in a recession (as we should). But we rein it in afterward by reducing that increase in expenditure caused by the recession as happened from 2008-2014. Government spending in 2008 was circa 40% of GDP, pretty much the same level it was 11 years later in 2019. There is also expansionary austerity. As the UK did in the 1930s. Where we have contractionary fiscal policy and very expansive monetary policy thereby having an overall expansionary policy while the govt spend and the deficit both fall, taxes rise? That’s the version of austerity that got the UK out of the great depression after18 months while the US carried in for near a decade. There is also the post-war austerity of the Attlee government when budget surpluses were run most years as military spending was dramatically cut. It meant holding back the growth of private consumption, so that resources could be transferred from the war effort to civilian uses, with most of those resources flowing into exports and investment in an era of cheap money. In economic terms this policy was very successful; between 1946 and 1952 consumer spending rose by 5.9 percent, but fixed investment by 57.9 percent and exports by 77 percent.
    It is this latter Attlee type austerity that we will likely need in the wake of the pandemic to rebuild and rebalance towards a higher wage more resilient economy. Less concern with boosting unsustainable House price inflation, consumption spending and GDP and more focus on Investment in skills, International trade, Infrastructure, public housing and inequality.

  • Peter Martin 7th Jul '20 - 12:16pm

    @ JoeB,

    “This ignores the fact that the system is deliberately set up to make sure that corporation tax plus dividend tax is about the same as what you’d pay in income tax.”

    Don’t forget that if you take your income as a dividend you don’t have to pay National Insurance. This is from an accountancy website and there is lots like this:

    “Most contractors find that paying themselves through a combination of salary, directors’ loans and dividends is the most tax-efficient way of drawing money from their limited company.”

    There’s lots of other wheezes the wealthy can employ to be “tax-efficient”. Some are probably downright illegal but they still happen. Remember the “Panama Papers” scandal?

    https://www.icij.org/investigations/panama-papers/what-happened-after-the-panama-papers/

  • Peter Martin 7th Jul '20 - 12:34pm

    “There is also the post-war austerity of the Attlee government when budget surpluses were run most years as military spending was dramatically cut. It meant holding back the growth of private consumption, so that resources could be transferred from the war effort to civilian uses”

    Resources are always transferred after a major conflict. The tricky bit is to do it without inflation getting out of hand. Nearly all the hyperinflations have occurred in the aftermath of serious destructive hostilities. The Attlee government behaved very much like MMT advocates would have recommended. During the war years many domestically based workers did well financially. But there was rationing and not much to spend it on. At the end of the war there was pent-up demand which would have created a serious inflationary problem if it had been released too early. Therefore war time rationing coupled with a tight fiscal policy was necessary for several more years as a counter inflation measure.

    Germany had the same problem which it solved by scrapping its old currency, the Reichsmark, and introducing a new one. The Deutschmark.

    It’s all standard stuff. No mystery about it at all.

  • Peter Martin,

    most higher earners are not wealthy enough or in a position to employ “tax-efficient” devices. As the Torry analysis shows the top income decile has a mean disposable household income of £1564 pw or £81k per year. That is doctors, headteachers, University Professors, MPs, lawyers, city accountants, directors of SME’s, lower league football players etc.
    There are a small number of super-wealthy non-domiciled individuals that can benefit from complex tax avoidance schemes and a large body of tax avoidance law. The big tax leakages are from multi-national companies and simply non-payment of assessed liabilities as a consequence of insolvency or otherwise. This is why you need informed MPs with access to reliable research and data to be engaged in leading policy development.

  • The Church Times has published a call for Universal Basic Income The time for a Universal Basic Income is ripe
    ” Modelling by the RSA in Scotland found that, in Fife, a basic income of £2400 a year would reduce relative household poverty by 8.5 per cent and halve destitution. A basic in­­­come of £4800 a year would reduce relative household poverty by 33 per cent and end destitution completely. Foodbanks would become a thing of the past.”

    “Dr Malcolm Torry argues that UBI could be permanently funded by a five-per-cent rise in in­­come tax, while the New Economics Founda­tion proposes scrapping the tax-free personal allowance to fi­­n­ance it. Others have argued that it could largely be financed by the re­inven­tion of the current benefits system.”

    “My more modest proposal is to introduce UBI for one year only, as part of the Covid-19 recovery plan, both for its short-term effects and to test it rigorously as an option for the future. It might also be used to model a separate “gap-year” product in the tradition of National Service, giving everyone the right to a year off, to use for volunteering and cit­izen­ship, or to retrain or reskill for the future.”

    “OPPOSITION to UBI tends to focus on two main issues. One is moral hazard, the other its political irre­versibility. The latter argues for a very clear Covid-related one-year pro­­­­­gramme to permit a political U-turn should the experiment not work. The former is harder to dis­lodge. It argues that citizens would abuse the system and that it would drive dependency and idleness.”

    “As a Christian, I shiver at this allusion to the “undeserving poor” of the 1834 Poor Law. Getting rid of this law was one of the reasons that Archbishop William Temple fought so hard for the Welfare State, greet­ing Beveridge’s report as “the first time anyone had set out to embody the whole spirit of the Christian ethic in an Act of Parliament”. This movement also created our beloved NHS. If the C of E champions the launch of a ther­apeutic year of UBI, perhaps this could be its own William Temple moment.”

  • Joe Bourke,

    According to the Social Metrics Commission “4.5 million people (7% of the population) in the UK now live in the deepest form of poverty (more than 50% below the poverty line), compared to 2.8 million people (5% of the population) in 2000/01” and “7.1 million people (11% of the population) in the UK live in persistent poverty, meaning that they are in poverty today and were also in poverty for at least two of the last three years”. There is real poverty in the UK. The preamble to our constitution states one of our primary purposes is to ensure no-one is enslaved by poverty. Poverty not absolute poverty. In the UK 14.4 million people to live in relative poverty, are held back by relative poverty and are disadvantaged by relative poverty.

    You note that low-income households have a higher propensity to consume than higher income households and you say that Torry’s income re-distribution would increase demand in the economy. But you refused to accept the same would apply to an increase in benefits. I hope that in any future discussion you will accept that increasing benefits even if just an income re-distribution would permanently increase demand in the economy.

    I don’t do much betting but I would bet you £10 that Rishi Sunak does not announce he is going to introduce a Universal Basic Income.

    You have a different view from me on what a successful economy looks like. Unemployment in the UK was 15.5% in 1935, 13.1% in 1936, 10.8% in 1937, 12.9% in 1938 (up from previous year!), 9.3% in 1939 (even in December 1939 it was 8.2%), 6% in 1940 and it was not until 1941 that unemployment was at the acceptable level 2.2% and by 1942 it fell to 0.8%. I don’t consider an unemployment rate of 12.9% a success. (The peak in the USA was later than in the UK.)

  • Peter Martin,

    Malcolm Torry is aware of the issue of changing behaviour. On page 13 he wrote, “Microsimulation research of this nature always has its limitations. … It tells us nothing about how individuals’ and households’ employment market and other behaviours might change, nor about how the benefit changes and net earned income changes that those behaviour changes would bring about would affect financial circumstances, poverty and inequality levels, and so on.”

    The change in behaviour by the introduction of Torry’s permanent Citizen’s Basic Income is likely to be small. If a Basic Income was introduced at Torry’s Recovery Basic Income level of £196.59 a week the effects would be large. You see these effects as negative and all bad. Liberals do not. It allows each individual to be financially free during periods of their life to not work and so do other things such as education and training. In trials parents often reduce the number of hours they work to spend more time with their children and/or to do part-time training or education.

    If benefit levels were increased to £160.30 a week for a single person (£36.29 less than Torry’s Recovery BI) and £276.20 a week for a couple (£116.98 less than Torry’s Recovery BI) the change on behaviour will be less. (Doing this would cost about half of doing Torry’s permanent Citizen’s Basic Income being praised by Joe.) Especially if only people still had to meet similar conditions as today – not working and looking for work or not well enough to work. However, benefits at these levels (coupled with the scrapping of the benefit cap) would ensure that no-one of working-age should live below the poverty line and when linked to small increases in the benefit levels for children, would ensure no children lived below the poverty line.

  • richard underhill 8th Jul '20 - 7:51am

    Joe Bourke 7th Jul ’20 – 11:30pm
    A “modest proposal” resonates historically. Do you want to eat babies?

  • Peter Martin 8th Jul '20 - 8:20am

    @ Michael BG,

    Yes, you and Prof Torry are right about tax and benefit changes also changing behaviour. At present someone can choose to not work and receive nothing, except JS allowance if they are looking for work, or say receive £12.5k tax free if they want to work enough to earn up to the tax allowance. With a UBI based on your figures they would receive £8.4k tax free for doing what they please. If they wanted to work to earn more they would be taxed considerably more than they are now which is an obvious disincentive.

    In economists jargon this represents a constraint on supply. Joe knows this which is why he is reluctant to discuss the supply implications of a UBI.

    You are right that it could have some positives. Some working parents may cease to be working parents and spend more time looking after their children. On the other hand some will take the UBI and make up the rest of their income in the black economy which may well extend into the criminal black economy. But, whether they are positive or negative the implications can’t be ignored.

    PS The concept of ‘the couple’ is probably on the way out due to social changes. It was traditionally based on the notion of one male plus one female plus some form of sexual activity! Now it can be anything. The tax and benefit system cannot possibly keep up with this. How do we know if two individuals, of whatever sex, are just sharing a flat or are in some kind of relationship? The only long term solution is to ignore it. So your figures may need some adjustment.

  • Peter Martin 8th Jul '20 - 8:54am

    @ JoeB,

    ‘most higher earners are not wealthy enough or in a position to employ “tax-efficient” devices. ‘

    How much income do you need to have to “employ” your wife and children in the business – even though they don’t actually do anything? Or put your mobile phone on the business, or use a company vehicle instead of your own or visit a client in Paris, supposedly as a business expense, but really you just want a weekend break away with your wife.

    Come on Joe. Get real.

  • Peter Martin 8th Jul '20 - 10:50am

    @ Joe,

    You asked me about the left’s opinion of a UBI and this is what I’d say it will be when everyone has had more of a chance to discuss it. There is another article in the Morningstar called “UBI: The Fad is Over”. That may be a touch optimistic but you’ll get the idea.

    At the moment RLB and others are probably thinking “Don’t look a gift horse in the mouth”. When really it should be “Beware of Greeks bearing gifts!”

    No disrespect to modern day Greeks BTW!

    https://morningstaronline.co.uk/article/universal-basic-income-and-end-%E2%80%98democratic-capitalism%E2%80%99

  • Joe Bourke,

    In response to me you make a comment about the poverty trap and the people of Fife being in favour of a UBI. I think Torry’s idea of a Basic Income of £196.59 a week is great. I might, as the people of Fife seem to, support it replacing most of the working-age benefit system. However, the costs are huge – increasing two income tax rates by 5% and the top one by 10% and extending the 12% employee rate of National Insurance to incomes over £50,000 PLUS £236.63 billion per year.

    You quoted, “A basic income of £4800 a year would reduce relative household poverty by 33 per cent and end destitution completely”. That is £92.31 a week. If a single person’s benefits were increased by that amount they would receive £166.90 a week and a couple’s by twice that amount they would receive £301.71. And the benefits of these increased benefits would be the same as a basic income of £4800 a year if the benefit cap is abolished as our party wants. Also this would cost much less than a UBI at these rates. Remember just increasing the benefit rates to the poverty level will cost half of what Torry’s ‘permanent Citizen’s Basic Income’ will cost.

    With reference to the poverty trap, if no-one of working-age is living below the poverty there is no poverty trap.

  • Peter Martin 9th Jul '20 - 6:43am

    @ JoeB @ Michael BG

    Joes’s simple example shows how we take $$ from the rich and give it to the poor. If Milton Friedman was in favour of doing something like this, as are his modern day followers too, you can bet your life there’ll be catch! And there is. But that’s not the only problem.

    This is not to say we shouldn’t tax away money from the rich if we think they have too much but we don’t need it ourselves. Taking from the rich and giving to the poor isn’t going to provide what we need anyway. This is the kind of “Robin Hood” type thinking which has always bedevilled the left.

    In the example above 2/3 of the population lose out so that 1/3 of the population gain. That’s never going to work electorally. The claim in Torry’s plan, as Joe says, is for only the top 10% to lose out. They’ll be funding mainly the bottom 10%. So we’re taking away money from those who don’t need it and so will be very unlikely to spend it and give it to those who do need it and definitely will spend it. How much tax would a very rich person have to pay to not be able to buy that Bentley or not employ a Butler? How much tax would they have to pay to affect their spending patterns which is, after all, the purpose of tax?

    A great deal more than anyone is seriously suggesting.

    So what’s the difference between taking an inconsequential amount from the rich and just creating the money we need to give to the poor?

    http://bilbo.economicoutlook.net/blog/?p=38440

  • Peter Watson 9th Jul '20 - 8:12am

    Ed Davey in the article: “The Conservative government’s insistence on their IR35 policy risks making the plight of many self-employed people even worse.”

    Surely the intention of IR35 is that the self-employed will not be affected at all; it is intended to catch those who are in “disguised employment” while operating as a limited company.

    All that this Government’s policy does is to make private sector companies responsible for determining if their contractors are covered by IR35, something that is already the case in the public sector. IR35 itself has been around for 20 years so in theory this (and the earlier public sector implementation) doesn’t change anything, but previously it was the responsibility of the contractor to decide if they ought to pay more tax (which always seemed like expecting turkeys to vote for Christmas!).

  • Innocent Bystander 9th Jul '20 - 8:12am

    I think it was Thatcher who said that socialists eventually run out of other peoples’ money, and all the discussions here focus on taking someone else’s property.
    Firstly, $1 sounds benign but in that example 2/3 rds of the population face increased taxes of half the UBI. Talk of Bentlys and butlers is just sniping. A large number of voters will be asked to put an ‘X’ next to the “Couch potatoes charter”. As they, themselves, are working (to pay the tax in the first place) they may feel that the sofa surfers try ” work” as well.
    Secondly, I have said many times paying tax is voluntary and neglect of this obvious truth has led socialism in general and trade unionism in particular to inevitable failure. The latter assumed that UK businesses would always be there and always propelled by greed for profits which they could milk. No they didn’t. The factory closed, the site became derelict and the products it used to make became imports.
    Socialists plan to tax the rich but refuse to understand that you can not force anyone to make themselves rich. They can keep their entrepreneurial spirit to themselves, or they can take it to more welcoming jurisdictions. We have a country already, where energy and ambition are flat. Increased taxes will only flatten that more.
    The UK is on a heading straight for the eye of the Maelstrom. It does not need UBI it needs a whole new cadre of wealth generators (like what China and India have now got).
    But no. Our plans are for universal prosperity based on some arty-farty, airy- fairy, government run, conscience friendly “Green Revolution” where the planet is saved by the British who play golf all day while robots do all the drudgery.

  • re Thatcher. She never quite ran out of Denis’s money when he was a director of BP did she ?

  • Innocent Bystander 9th Jul '20 - 10:00am

    I don’t know if Mrs T ever did a speaking tour of the US but, if she did, she would have earned more than Dennis ever did.
    Although I recognise her immense strength I regard her as deeply flawed. Kamikaze unions were destroying huge tracts of industry in the 70’s and she defeated that movement but she should then have extended the hand of reconciliation. Instead she left a country split in two (and it still is). But she had a vindictive streak that, on balance, did more damage than good.

  • Joe Bourke,

    I don’t understand why you are targeting your comments about Torry’s ‘permanent Citizen’s Basic Income’ being re-distributive at me, when I wrote stating that both that scheme and paying for increases in benefits from increasing income tax are re-distributive! I don’t understand why you target your comments about the difference between gross and net costs of UBI schemes at me, when I have always been clear about both!

    To be clear Torry states that his ‘permanent Citizen’s Basic Income’ will have a NET cost of £26 million (which he defines as ‘revenue neutrality (Hirsch, 2015), which is taken to be a net cost or saving of no more than £2bn per annum; [page 9]) and that his ‘Recovery Basic Income’ scheme will have a NET cost of £236.63 billion (page 6).

  • Peter Martin 9th Jul '20 - 8:22pm

    @ Joe B,

    “Univeral basic income was always an alternative to the Beveridge system.”

    And not a good alternative! That’s what I’m worried about. The problem is that many on the left haven’t grasped this. They think it’s in addition!

    https://www.theguardian.com/commentisfree/2019/may/06/universal-basic-income-public-realm-poverty-inequality

  • Innocent Bystander 9th Jul '20 - 9:09pm

    As usual, Joe, a thorough reply but I fear you avoid the point. #CouchPotatoesCharter is up there with #Bollocksto Brexiteers and #Defund the Police as sure fire electoral suicide.
    I am sure Dame Juliet was as keen as many are today on wealth redistribution. Fine. But better take those whose wealth you want with you or they will thwart your plans.
    As I keep repeating, you can not force the entrepreneurial category to risk their money and health to exploit market changing ideas just to pay the results to the taxman.
    We don’t have an inequality problem, we have a flat, low energy and lifeless economy with an absence of that spirit which is fuelling China and India. We are running out of wealth to redistribute in the first place and running out of time.

  • @ Joe Bourke. Lady Juliet got about a bit…. from National Liberal to Liberal and then to Conservative. Why did she join the Tories, Joe, and why did she want kids to get the basic income as well as the adults ?

  • Innocent bystander,

    I am a little more optimistic for the future. When I lived in the States in the 1980s there was great concern that the US was being outcompeted by Japan. When I moved to Japan, I soon found that Japanese companies were, on the whole, as chaotic as the rest of us in America and the UK and Japanese management dealt with the same kind of tensions and conflicts that we all do.
    I have been to China and India and teach Chinese and Indian students on MBA courses. They are good students but no better than British students. What China and India both have is very large populations, large numbers of graduates in STEM subjects, and a strong desire to haul themselves out of poverty. In China’s case, they have embraced their form of state capitalism and made remarkable progress since the poverty destitution of Mao’s rule, just as Japan and other Asian tigers did after the war.
    Innovation and technology remain the key to improved standards of the living. Often that comes from engineers as much as it does from research scientists. I think that is the area where we need to keep our focus. Artificial Intelligence, the internet of things, robotics and green technology are all promising areas for the UK both domestically and Internationally. It does, of course, go without saying that to sustain a resilient system of social security needs a stable and growing healthy economy operating at full potential.

  • Peter Martin 10th Jul '20 - 7:25am

    @ Innocent Bystander

    “We don’t have an inequality problem” ???

    I could give you references with facts and figures, such as Gini coeficients etc, but I don’t know if it would do any good.

    You really need to get out and about a bit more and open your eyes! Or even just rewatch the 7 up Granada TV series.

    https://en.wikipedia.org/wiki/Up_(film_series)

  • Peter Martin 10th Jul '20 - 7:47am

    @ Joe B,

    “We will need a clear vision of how to refashion an economy that is being battered by a global recession, Brexit, negative real returns on savings, a weakening currency, multiple failing businesses and heavily increased unemployment. ”

    Well that’s never going to happen, is it?

    We can all agree on how computers, cars etc function, or even, mostly, on the natural laws that govern the universe, but the introduction of politics into the mix puts an end to all that when it comes to the workings of the economy.

    Most people would include the Covid 19 pandemic in any list of economic problems but you seem to have forgotten about that. You haven’t forgotten about Brexit or the negative return on your savings though!

    I’m not sure how long you’ve been stuck with your mix of 19th century Georgism and 20th century neoliberalism but that’s probably not going to change anytime soon.

  • Innocent Bystander 10th Jul '20 - 8:12am

    Notions of equality are just good old fashioned jealousy. Eradicating poverty and want are the targets and it shouldn’t matter to anyone who has all they need that someone else is a billionaire (other than the the green eyed monster that infects us all).
    Poverty won’t be fixed through some air-headed dreams like “tax the super rich” (not a chance – that makes them laugh) and “close offshore tax havens” (after decades of such calls they are stronger than ever with just a bit of cosmetic juggling to appease the critics).
    It will be eradicated when the great mass of the ordinarily resident population (that’s us, not the billionaires who have just left to one of their other many houses from Farnborough or Blackbushe) now have high paying productive, foreign currency earning work and pay the tax needed to support the poor.
    The developing countries spotted that long ago but not us. We are too clever. We may not have bustling businesses but we have lots of economic theories. God help us.
    So fighting inequality is just a socialist dream but, as history shows, it’s just a question of time until the socialists come grovelling back to capitalism.
    Joe, I am touched by your optimism but unfortunately it butters no parsnips and your options for progress are correct but stand no chance at all within the culture we have created and continue to reinforce. As I have said, we have cultural, attitudinal inhibitors that have to be tackled first in order for those, essentially tactical, measures you mention to succeed.

  • Peter Martin 10th Jul '20 - 8:26am

    @ Innocent Bystander,

    “So fighting inequality is just a socialist dream but, as history shows, it’s just a question of time until the socialists come grovelling back to capitalism.” ??

    Just as a matter of interest, can I ask where you’d place yourself on the political spectrum? Are you now, or have you ever been, a member or voted for the Liberal Democratic Party?

    PS In case anyone asks, yes I have voted Lib Dem when the Lib Dems were further to the left than the Blairite Labour party!

  • Innocent Bystander 10th Jul '20 - 8:50am

    Peter,
    I joined the LibDems in 2015 when I foresaw spending the rest of my life under a Tory government and thought that, surely, this party would fill the yawning gap in the centre.
    But not to be. I gave up after two years when I realised it is actually a politically themed social club without any trace of serious ambition and is only centre ground in that it tries to juggle both ends of the spectrum , simultaneously, in the hope they cancel out.
    I voted Tory once, (for Thatcher) as I was a young engineer in heavy engineering on ‘Red Tyneside’ watching Kamikaze TU destroy my employer and most companies around us.
    I realise I have no political home but am a pragmatist who lives for real world solutions to pressing problems without being constrained by “isms” ( socialism, capitalism, etc).
    So the LibDems are attractive but we need more than ‘values’, ‘preamble to the constitution’ and ‘social contracts’ to bequeath our children the means of earning a living in the competitive world of today and tomorrow.
    Our national problems are deep rooted but we will not face them, rather we resort to gimmickry, quackery and completely daft economic miracle solutions.

  • Peter Martin 10th Jul '20 - 9:31am

    @ Innocent Bystander,

    You say you aren’t by “isms” but you want to see “the socialists come grovelling back to capitalism.” Spot the contradiction?

    All societies are a mixture of both. Even the USA. So it’s not a question of either/or but how we strike a balance. There’s always going to be disagreements on that. That’s only natural and to be welcomed.

    The UK, for all its faults, can’t be too bad. So let’s get it into perspective. Why would there be such a desire to move from the EU countries if we had such “deep rooted… national problems” as we do? Why such a big urge to make the crossing from the Calais camps to Dover? Why would anyone want to move to Manchester from Malaga or Marseilles? They’ve got great weather and the Med. We’ve got cr*p weather and the Manchester Ship Canal!

  • Peter Martin 10th Jul '20 - 9:33am

    First sentence should start: “You say you aren’t governed by “isms”….”

  • Innocent Bystander 10th Jul '20 - 10:38am

    No contradiction Peter, buy you were just teasing. Socialism’s fight is against capitalism and they always eventually surrender. I am on neither side.
    And that issue of balance of course, is the point I make over and over. The obsession with inequality and soaking the super rich is a self deluding diversion. They won’t allow it. We are 1% of the world’s population and occupy an even smaller percentage of territory. Go to Blackbushe, Farnborough, Luton and see the line up of executive jets. Do you think the billionaires are going to pay for UBI? They think the idea is funny.
    Poverty and want are the issues, not inequality. And that will be solved, when the mass of us, not the super rich, are generally richer and paying more tax.
    The obstacle we have is the national paradigm epitomised by your eager immigrants, Joe,’s misplaced optimism and any number who claim we are the fifth richest country in the world when we are the second most bankrupt.!We are in a ‘Phoney War’ cosy unreality and another May 10th 1940 will come and shake us out of our sleep. I hope we have not left it too late to cope.

  • Peter Martin 10th Jul '20 - 11:07am

    @ Innocent Bystander,

    “when we are the second most bankrupt.”

    And you think the first is America? Maybe Japan? National Debt =240% odf GDP

    Nope. You’re wrong. The UK had a similar level of debt in the 19th century.

    “Poverty and want are the issues, not inequality. And that will be solved, when the mass of us, not the super rich, are generally richer and paying more tax….”

    We are around 4 times wealthier than when the Beveridge proposals were implemented. It would have been inconceivable, at the time, that we in 2020 should be so wealthy and yet still be fretting about poverty levels.

    The capitalist system, as it functions at present, and no matter how much wealth is generated, always requires a level of poverty. It’s the fear of that that does make most of us get up in the morning and go to work. There was only one time in my career that I had a significant worry about losing my job and it wasn’t pleasant!

    This seems to be well understood by those on both the left and the right. But those in the so-called progressive centre are totally oblivious. Was it you described a UBI as an “arty farty” or “airy fairy” utopian idea recently? I wouldn’t put it in those terms but I wouldn’t disagree. From a left perspective, we do have to know what we are up against and what is, and isn’t, realistic.

  • Peter Martin 10th Jul '20 - 4:32pm

    @ JoeB,

    “…….not least a highly dysfunctional housing market”

    It’s a bit rich for someone who supports monetarist control of the economy and the maintenance of a tight fiscal policy to complain about the housing market.

    The government doesn’t like to do what it calls ‘borrowing’. Or at least it didn’t used to before Rishi read that book on MMT that I posted him 🙂 But as a matter of accountancy, someone has to do the borrowing to support the external deficit in trade. If Govt doesn’t do it then it has to be the Private sector. The other option would be to hold down the value of the £ on the forex markets to eliminate the external deficit. But, going by the howls of protest about any fall in the £’s value that would be a popular move.

    More borrowing by the private sector needs high house prices as collateral. And high house prices are what you get when there is too much private borrowing. As house prices rise more buyers are encouraged to get in on the act too. So we have a bubble.

    The good news, or maybe not so good (depending on your POV), the Covid 19 virus has acted as pin to burst that bubble!

    Of course countries like Germany don’t do it like this. They have lots of export money coming in so they can keep domestic borrowing under better control. We should all be like Germany and run export surpluses!

  • Peter Martin 11th Jul '20 - 6:21am

    @ JoeB,

    “The government cannot control both the interest rate and the exchange rate.”

    This isn’t true.

    I think you are referring to what is known as “the impossible trinity” which, as the name suggests, has three aspects to it. You’ve overlooked the movement of capital. If this is regulated then we can have control of both. Whether this might be necessary at some time in the future remains to be seen.

    https://en.wikipedia.org/wiki/Impossible_trinity

    “In the UK, with its persistent trade deficit, a devalued currency is necessary to maintain financial flows into UK property and portfolio investments.”

    The govt doesn’t ‘devalue’ the currency. That is a term which is only applicable to a fixed currency regime. Once the currency is allowed to float its value is established by the inflows and outflows of money. These are normally expressed as capital and current, but the division is somewhat arbitrary. The currency will naturally move to equalise the flows so no direct adjustment is required – except that possibly the central bank will intervene in the markets from time to time to smooth out any abrupt changes.

    So it may well be that the pound will fall in the longer term. In which case that will mean a reduced ability to purchase imports. No-one knows which way currencies will move. If I’m wrong about that, and anyone actually did know, they could become very rich, very quickly.

    “Countries like Germany and South Korea will be able to bounce back…”

    You’re thinking that because they are net exporters? They rely on there being net importers! So if we and the USA can’t fulfill that role any longer they will suffer equally.

  • Peter Martin 11th Jul '20 - 6:29am

    “The housing market is a good example of structural problems.”

    Many don’t see it as a problem at all. High house prices are necessary to act as collateral for the private debt that the government relies on to keep the wheels of the economy turning. Motor vehicles aren’t anywhere near so useful in this respect. They wear out. They depreciate. Anyone needing to borrow, for any reason, can often get a much better deal if they use their home as collateral. I’ve never borrowed for a car myself but I did once raise a business loan. The bank quite openly suggested that I should apply for a home improvement loan and then I could do what I liked with it. There were no checks.

    You might want to consider the possibility that the present situation has come about by design, though not necessarily a good one, and not by accident.

  • Peter Martin 11th Jul '20 - 2:03pm

    @ JoeB,

    I’m always interested in any economist’s POV and reasoning. If you consider that Martin Wolf, Pau Johnson or anyone else, has a strong argument to refute what I’m saying then please point me to it.

    Yes, I said you’d overlooked the possibility of capital controls. You’ve then assumed that I’m in favour of them. You might want to reconsider that. I wouldn’t rule them out entirely, but I don’t see any need for them at the moment. Countries which do want to run a surplus in their current account, or an export surplus, do have to find a way of running a deficit in their capital account. One way is to set up a Sovereign Wealth Fund. This is a form of capital control. It’s the deliberate exporting of capital to keep the exchange rate down, but there won’t be any need for the UK to have one any time soon!

    It remains to be seen how South Korea and Germany will be affected in the longer term. I agree that they have had a better strategy than we have in controlling the spread of the virus. That will certainly help them. But the health of the world economy will ultimately be decided by what happens in America. If it all goes wrong there it will go wrong everywhere. There’s no reason why that has to happen but I can’t see the Germans changing their ordoliberal ‘faith’ any time soon. They are hooked on the idea of the need to export and if the US market goes **** up then they’ll be stuck wondering how to cope. If they could see that they only need US dollars to buy US goods and they already have plenty, they’d be perfectly OK. But that’s too simple! Italy has a slightly different problem which can only be fixed if gets out out of the eurozone. The sooner the better.

    Yes, you’re right that it’s the land. A house in London or the SE would be worth much less than the same house in the North. So, it has to be the land value which makes the difference. But that doesn’t change anything. Property and the land it sits on is expensive by design and not by accident. Politicians should be saying something like they want affordable but expensive housing. There is a strong lobby, or body of opinion, in the Tory Party, and I would expect the Lib Dems too, that we shouldn’t have too much development. This is a useful political cover for those who want to see things continue as they are.

  • Peter Martin 11th Jul '20 - 2:13pm

    @ JoeB,

    I’m always interested in any economist’s POV and reasoning. If you consider that Martin Wolf, Pau Johnson or anyone else, has a strong argument to refute what I’m saying then please point me to it.

    Yes, I said you’d overlooked the possibility of capital controls. You’ve then assumed that I’m in favour of them. You might want to reconsider that. I wouldn’t rule them out entirely, but I don’t see any need for them at the moment. Countries which do want to run a surplus in their current account, or an export surplus, do have to find a way of running a deficit in their capital account. One way is to set up a Sovereign Wealth Fund. This is a form of capital control. It’s the deliberate exporting of capital to keep the exchange rate down, but there won’t be any need for the UK to have one any time soon!

    It remains to be seen how South Korea and Germany will be affected in the longer term. I agree that they have had a better strategy than we have in controlling the spread of the virus. That will certainly help them. But the health of the world economy will ultimately be decided by what happens in America. If it all goes wrong there it will go wrong everywhere. There’s no reason why that has to happen but I can’t see the Germans changing their ordoliberal ‘faith’ any time soon. They are hooked on the idea of the need to export and if the US market goes belly up then they’ll be stuck wondering how to cope. If they could see that they only need US dollars to buy US goods and they already have plenty, they’d be perfectly OK. But that’s too simple! Italy has a slightly different problem which can only be fixed if gets out out of the eurozone. The sooner the better.

    Yes, you’re right that it’s the land. A house in London or the SE would be worth much more than the same house in the North. So, it has to be the land value which makes the difference. But that doesn’t change anything. Property and the land it sits on is expensive by design and not by accident. Politicians should be saying something like they want affordable but expensive housing. There is a strong lobby, or body of opinion, in the Tory Party, and I would expect the Lib Dems too, that we shouldn’t have too much development. This is a useful political cover for those who want to see things continue as they are.

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