GDP share; a more timely and effective alternative to Universal Basic Income

That’s your bloody GDP. It is not ours’. Thus a Brexit supporter expressed their detachment from the national economy in 2016.

This proposal addresses both the perception and reality behind this comment. It provides poorer households with a bigger share of GDP, achieving a more deliverable redistribution of income than a Universal Basic Income. It makes more people feel that this is ‘our GDP’. It also steers the national conversation about growth towards ‘net zero’.

UBI and its problems

A conference motion calls for the party to campaign for UBI.

But the practicalities mean we are doomed to deliver a very small and disappointing version of a very big and (somewhat) controversial idea. The UBI promise of a reasonable income for everyone is not achievable. Recent work by sympathetic academics has shown how far we can (and can’t) get. Even if we raise higher rate taxes a lot and get rid of personal allowances (so that for most people there is no net benefit) to fund a UBI, we cannot sustainably pay a UBI of much more than £3000. At this level, many poor people would lose out unless all or most current means-tested benefits stay in place – thus forgoing one of the significant supposed advantages of UBI. And even to get to £3000, we would likely have deployed the money from all of our tax-raising ideas on this one concept cutting out anything else we might want to do.

Of course, we could make something work at a very low level – but in advocating UBI as a concept, we will have used all our capital creating a vision which we cannot sensibly deliver. If we want an original idea on redistribution, we are better starting with something which could be done within the country’s means.

An alternative proposal for redistribution

We start with GDP.

We take out the ‘value add’ from the big CO2 generating industries such as oil & airlines– let us call this Net-Zero-Compatible-GDP.

Some fixed percentage of this becomes the ‘citizens’ share’ of Net-Zero-Compatible-GDP. The state shares this between all adult citizens through a monthly payment the following year. If the Citizens’ share is 2.5%, this would be roughly £1000 each year.

To make this neutral for the public finances, we also reduce the income tax personal allowance by £4000 and increase the rate of national insurance on incomes over £50,000 from the current 2% to 6%. Taken together, these measures transfer income from the top 10% of individuals by income to the bottom 20%, with no net effect on those in between. With some care in implementation, there should be no losers outside the top 10%.

Its benefits

The ‘GDP share’ delivers three benefits.

First, it is a proposal for redistribution which is not hampered by the grander pretensions of a UBI.

Second, it promises a more positive national conversation linking individual income to the national economy. The extra (say) £30 I get from the economy’s 3% growth is easy to understand individually relevant headline from every chancellor’s budget speech.

Thirdly, it links this conversation about growth to net-zero and reinforces net-zero thinking within the government. People measure politicians on what they see tangibly in their pockets. Politicians manage what people measure.

We should consider a GDP share as an alternative option when we debate UBI at the party conference.

* Kevin has been a party member since June 2017, from Kingston

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8 Comments

  • James Belchamber 9th Sep '20 - 3:37pm

    For an article that proposes an alternative to UBI.. isn’t this just a UBI? What is meaningfully different, other than the framing?

  • Peter Martin 9th Sep '20 - 4:03pm

    @ Kevin,

    I’m not sure you understand what GDP is. Anyone who is working for , say, £30k per year is contributing £30k to GDP. They be paying tax and NI so their net pay will about £24k. Their employer will sell the products of their labour and there will be VAT and other taxes on that too.

    So say you want to levy 2%, as your GDP tax, of that £30k or £600. Who is going to pay it?

    GDP isn’t some source of funding that Govts have hitherto carelessly overlooked! They are pretty good at devising new ways to obtain taxation revenue. They don’t miss much!

  • Kevin Langford 9th Sep '20 - 5:11pm

    James – yes this is similar in some respects. But it isnt promising people that the state owes them a reasonable income. When I talk to people about their expectations of a UBI is, it is something around £10-20k – which just doesnt work.

    Peter – I dont think you have understood the proposal fully – sorry if it was not clearly enough explained. Essentially GDP is used here as a measure of how much people get. The funding is from increased taxes through reducing personal allowances and from changing national insurance over the upper limit, Indeed there isn’t a magic ‘GDP’ we can tax and havent thought of.

  • Innocent Bystander 9th Sep '20 - 5:23pm

    So the proposal is to dishearten and demoralise the nation’s entrepreneurs until the last sparks of enterprise and personal ambition are extinguished?
    Why will the energetic risk-takers bother to create the new economic base we desperately need when the fruits of their labours will be confiscated by the state?

  • Kevin Langford 9th Sep '20 - 8:10pm

    Well that is a rather big question about how much redistribution is (a) right and (b) possible. That needs a response which is a bit longer than can be done in a comment on a comment on a blog.

  • David Garlick 10th Sep '20 - 4:33pm

    Nice to welcome back the Innocent Bystander. I have missed these comments.

  • Innocent Bystander 10th Sep '20 - 9:45pm

    David,
    Many thanks (unless I am too vain to spot satire!). I post less out of despair. I, like millions, pray for the arrival of a new political force but the landscape is unchanged with the tired old political machines tediously churning out promises we know will be broken, presenting miracle cures that have been tried before, multiple times, yet have always failed and who, when in power, display incompetence, corruption and cronyism unsurpassed since the reign of Emperor Commodus.
    I have a soft spot for the LibDems as our son and daughter in law are members but the party seems intent on being Santa Claus to not only our own citizens but the entire world.
    It sniffily refuses to sully its hands with ‘trade’ or ‘commerce,’ except of course, for the conscience friendly Green Revolution, which has the same prospects as I have of being the next Pope.
    BTW I miss ‘frankie’. I hope he (or she) has not been taken by the plague.

  • john oundle 11th Sep '20 - 8:58pm

    Innocent Bystander

    Exactly, why bother?

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