Universal Basic Income (UBI) has many attractions as a policy. It is radical, an easy concept to explain and – depending how it is implemented – may be progressive.
Both our leadership candidates are backing it. Neither has been as specific as they could and should be about what they are proposing. There is enough economic analysis available for it to be perfectly feasible for them both to be more specific.
The fundamental question is whether we can afford a level of UBI which is worth having and does not create lots of losers, particularly at the bottom end of the income distribution if means tested benefits are withdrawn or modified.
On the economics, our candidates refer mainly to analysis completed by Compass, a think tank promoting UBI. This is the most detailed recent economic work that is publicly available on a UBI for the UK. The work has some gaps (which it acknowledges) but it does us a big service by showing the relationships between costs and benefits, and by considering properly how different income groups are affected.
It is not honest to say blandly that the Compass analysis shows that ‘UBI works’. But it does show what the constraints are, and means our candidates could say more precisely what they are proposing.
Compass model the following:
- A UBI of £3,120 a year for adults and £2,080 for each child – so £10,400 for a couple with two children.
- Most means tested benefits stay in place. 80% of people currently being means tested would still have a means tested benefit.
- It is not completely straightforward to summarise how much extra this UBI costs, but very roughly it requires annual tax or debt increases of £84bn – £56bn from higher rate tax payers and £28bn – equivalent to about 4% on income tax – from other unspecified sources.
- The largest contribution to funding comes from removing the cap on National Insurance (whereby any income over £50k is currently subject to 2% rather than 12% NI). There is a 3% increase in income tax – so together a 13% increase for higher rate tax payers.
- 24% of people are losers though only 7% lose more than 5% of their net income.
- Net income for the bottom 2 deciles increases significantly.
- Of the £84bn, roughly 2/3 is spent on helping lower income people and 1/3 is spent on protecting people in the middle of the income distribution from suffering ‘collateral damage’ from this substantial change in tax and benefit structures.
There are some other models, though none in quite the same level of detail. The New Economics Foundation has a model which does not require additional tax funding. A couple with two children receive £7,000 a year and there are more losers than the Compass model. Older (2017) OECD work also proposes a basic income of £10,000 for a couple with 2 children but this scheme increases levels of poverty because means tested benefits are not retained. The most recent Compass paper has a second model with a 30% increase in the UBI explained above requiring an additional £26bn a year of funding.
I am not sure that any of these models is attractive. A 13% increase in higher rate taxes (plus another £28bn) to deliver a £3,120 UBI with most means tested benefits staying in place? If we wanted to increase taxes in this way couldn’t we do something better with the money?
I think our candidates need to be clearer with us what they are advocating. The existing analysis is not perfect but is quite good enough to show the boundaries of what is possible.
Otherwise we may end up backing a generous and affordable UBI unicorn which a bit of analysis could have shown us did not exist.
* Kevin has been a party member since June 2017, from Kingston
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58 Comments
There is another problem, if I decide that UBI wont work then who do I vote for when both Candidates back it ?
What happens if Conference rejects UBI while the New Leader backs it ? That wont look good will it ?
Would UBI be subject to income tax?
If so what are the implications? Could people decline to accept the handout?
Kevin,
I agree that we need clarity around UBI. The best quality research is available through The Institute for Social and Economic Research (ISER) at the University of Essex who manage EUROMOD, of which the UK section is now called UKMOD. This is a microsimulation programme into which are coded all of the country’s tax and benefits regulations, and through which they pass data from the Family Resources Survey (FRS) in order to generate a variety of statistics about poverty, inequality, and so on, and from the output files of which they can calculate such information as household disposable incomes, the numbers of households on different benefits, and so on.
ISER has just published new microsimulation research on an illustrative Recovery Basic Income for the United Kingdom, and for a subsequent permanent revenue-neutral Basic Income scheme. https://www.iser.essex.ac.uk/research/publications/working-papers/euromod/em7-20
To calculate the permanent Basic Income, they first set feasibility criteria that included such features as revenue neutrality, minimal changes to the current tax and benefits system, and more. They then tested multiple illustrative Basic Income schemes until they found one that obeyed the criteria.
They found that an illustrative scheme that obeys the criteria has a working age Basic Income of £60 per week for working age adults, with lower amounts for younger adults, a £30 per week unconditional addition to the Basic State Pension, and an increase in Child Benefit of £10 per week. In this illustrative scheme, the Income Tax Personal Allowance is reduced to £4,000 per annum, and employee National Insurance Contributions are charged at 12% across all of the earnings range except for earned income below a smaller Primary Earnings Threshold. A household’s Basic Income is taken into account in the same way as other income when means-tested benefits are calculated. The net cost of the scheme is £26m per annum, and so effectively zero. This would remove one tenth of the households currently on means-tested benefits from means-testing, and the total cost of means-tested benefits would fall by 30%. The Gini coefficient would fall by one tenth, child poverty would fall by a quarter, and other poverty indices would fall by similar amounts. This relatively modest Basic Income scheme would provide a secure layer of income for every household and individual, and it would have useful social and economic effects.
Universal Basic Income? Is this to be the Lib Dems’ latest Holy Grail? Basically, folks, it ain’t gonna happen. Wake me up when you get on to something that is easier to understand and isn’t an excuse for universally doing nothing.
According to the Compass article the Personal Income Tax Allowance is “abolished”.
So does this mean that any school student doing a paper round, or working in a similar low income job, has to pay tax at 25%?
The abolition of the personal tax allowance is a guaranteed way of increasing participation in the black economy.
“The fundamental question is whether we can afford a level of UBI which is worth having and does not create lots of losers, particularly at the bottom end of the income distribution if means tested benefits are withdrawn or modified.”
Yes. The same question was asked long ago, except that the phrase “UBI” was replaced by “Universal Credit”.
Ian Duncan Smith claimed to believe that there would be no downside and no losers, only winners. Then, the accountants worked out just how much all that would cost, and decided we couldn’t afford it. So they cut it back. There were lots of losers. IDS blamed veryone else. The blame belonged with IDS. The only thing which is not so clear is whether IDS was a fool (who genuinely believed he had found the magic money tree) or a knave (who knew perfectly well that he hadn’t).
Well, now we have another magic money tree, and we have another bunch of gullible people willing to persuade themselves that if you juggle figures hard enough, you can create many winners, and few losers, at no additional cost. What is dangerous is the risk that like UC, the nation signs on to the concept – and by the time they find that it causes a lot more harm than good, we are too far down the road administratively to drop the idea.
Bin it!
Labour need a scheme which repairs the electoral damage done by the 2019 general election. Does anyone know what they think? I do have a book called “The Future of Socialism” written by Antony Crosland, but have not yet read it. It cost me £1. Perhaps next Christmas?
Who is included in UBI? How is it affected by immigration? Is it dependent on accurate record keeping in government? Remember the Windrush?
@ John Marriott,
“….. it ain’t gonna happen. …..an excuse for universally doing nothing.”
For once we agree. I did raise the subject in my local once before the lockdown. There was a group of about half a dozen of us and no-one else had even heard of the idea. No-one thought it would ever happen either! It was all pie-in-the-sky stuff as far as they were concerned. Being naturally wary they were convinced that if Government was going to give them £1 with one hand they’d be taking away £1.20 with the other.
Now, I’m sure that proponents of a UBI can produce lots of figures to show that this won’t happen but will they be believed? Will the UBI concept lead to extra votes for Lib Dems?
Not if my small focus group is anything to go by!
Joseph – you may know better than me but I think for these purposes the ISER scheme is quite similar to the Compass one – just slightly less generous and creating very slightly more losers. It is also largely funded by an increase (in this case 15% – 5% additional tax, 10% additional NI), in the tax and NI for higher rate taxpayers. There are some other tweaks in the mechanics which get to a net cost neural position once the increases in taxation are taken into account but the basic principles are the same.
Peter – yes you are right – part of the way most of these schemes work is to get rid of all or part of the personal allowance. This means there is relatively little extra funding cost or change for people currently paying basic income tax. E.g – at a simplistic level under the New Economics Foundation scheme, a £2500 tax saving (20% of £12,500) under the personal allowance is withdrawn for these people and a £2500 basic income is paid instead. The Compass scheme summarised in my note above replaces the personal allowance with a 15% tax band, (though an earlier version abolished the allowance altogether). This mechanic has some benefits but does as you say bring more people into the tax net and also changes dynamics in relation to the poverty trap as the first income you earn is no longer tax free.
Depending on who your focus group are Peter I would think the responses to a scheme like that advocated by Compass would be
-For almost anyone in the bottom 20% of the distribution – yes this is a very significant increase to my net income and benefits
– For those in the top 10% – that is a very big increase in tax
– For the other 70% pretty much what you say – give £1 with one hand and take £1.20 with the other (given people always seem to perceive the worst where changes in the tax scheme are concerned)
25th Jun ’20 – 5:07pm
If UBI is a good idea would the Tories copy it?
They might have not conquered the virus by 2024, so there might not have been a crisis comparable to “Norway” or “Suez”.
Kevin,
you ask for clarity. The Torry paper provides it. The illustrative permanent scheme is funded by reducing the Income Tax Personal Allowance from £12,500 per annum to £4,000 per annum; by reducing the National Insurance Primary Earnings Threshold from £170 per week to £77 per week; by charging National Insurance Contributions at 12% on all earned income above the Primary Earnings Threshold; and by setting Income Tax rates at 25% basic rate, 45% higher rate and 50% top rate.
There is no overall increase in tax collections and no net cost to the exchequer. As mentioned above, this would remove one-tenth of the households currently on means-tested benefits from means-testing, and the total cost of means-tested benefits would fall by 30%. The Gini coefficient would fall by one-tenth, child poverty would fall by a quarter, and other poverty indices would fall by similar amounts.
There are big % gains for the lowest income deciles and every income decile from 1 to 7 gains. At income decile 8 there is a small net loss of income 0.55%, at the 9th decile 2.81% and for the top 10th decile it is an affordable 7.16%.
This is exactly the kind of redistribution that will be needed as the economy recovers from this pandemic, which I expect is the reason both leadership candidates are advocating such a policy.
You can argue against the scheme on whatever grounds you choose, but clarity of costs and benefits is not one of those grounds.
@Joseph Bourke
Sorry, old chap. You lost me after the first sentence. I hope your election literature is easier to understand, especially if you have pretensions of actually winning something.
I believe that a UBI ‘experiment happened in Finland. You might also like to turn your retentive mind to what happened with Social Credit in 1930s Alberta, Canada and, I believe, BC as well. They used to call it ‘funny money’ back then. By the time I arrived in Alberta in 1970, the Social Credit Party, which had run the province for donkeys’ years, was about to be replaced by the Progressive Conservatives. What did Lady T famously say? “You can’t buck the market”. I reckon the same applies to income, whether earned or not.
Thank you for a great piece, Kevin, but with one caveat.
You say “it is not completely straightforward to summarise how much extra this UBI costs”. I thought it was very clear. This was one of the things I most liked about the paper.
There’s a table showing the two schemes they are recommending. In the table, they give the total costs to implement, how much would be covered by benefits cuts, how much by tax increases (ie increased income tax and NIC receipts), and how much from from other sources (presumably further tax increases).
The proposed tax increases for the two schemes are: £140.2bn/yr and £160.6bn/yr, and the uncosted amounts are: £0.7bn and £8.2bn.
So, presumanbly, the total tax increases for the two schemes would be: £140.9bn/yr and £168.8bn/yr.
See page 15 of https://www.compassonline.org.uk/publications/universal-basic-income-an-idea-whose-time-has-come/
If a Lib Dem government were to implement it, presumably we’d also want better funding for the NHS, local government, etc, so the total tax increases we’d have to propose in a general election would be greater than this.
These increases are enormous, up to twice what Corbyn proposed last December (he proposed £80bn/yr). Perhaps this is what party members will want. But, like you, it worries me that we are being sold a policy, without a discussion about the costs, and what we might have to choose not to fund, in order to be able to afford this.
Admittedly, I haven’t really been following the internal Lib Dem debate surrounding UBI too closely and share some of the natural scepticism expressed by others – but perhaps its advocates could explain, in clear and simple terms, how they would actually summarise the merits of their version of UBI on a Focus leaflet or in a TV interview?
A proposal such as this generates a number of questions. Let us assume that the existing benefits system is working as intended. If it is not working as intended then the simplest and lowest cost solution is to put the existing system right.
What is the benefit of UBI and why do we need it? What is the extra cost? What is the justification for giving an income to the wealthy? Who will pay for it?
It looks like a loony, ideological, daft, extra cost on hard pressed taxpayers in order to make the party look progressive, virtue waving and woke. If it is not that, then what is its primary purpose and why is it superior to a properly managed targeted benefits system?
The UK already has (or until recently had) forms of Universal benefits for pensioners and parents of minors. The state pension (plus other pension benefits like winter fuel allowances) are paid to all based on age and Child benefit was universal (until tapered away for higher earners under the coalition). Personally, I would advocate a Minimum Income Guarantee rather than UBI.
The focus leaflet would simply say – Liberal Democrats would introduce a Minimum Income Guarantee providing every UK citizen with a basic subsistence income of £100 a week. It is not a replacement for benefits. It is the amount that every adult taxpayer or benefit claimant is guaranteed in either cash or tax relief. We will also increase the Universal Credit work allowance to bring it to the equivalent of a full-time minimum wage after-tax.
Liberal Democrats working to ensure that work really does pay. .
@ Joe Bourke,
“……. and for the top 10th decile it is an affordable 7.16%”
I like the accuracy of this statement! I’d have probably said just over 7% Possibly 7.2% but you’ve insisted we know that the true figure is 7.16%. Or is it?
How about this for a prediction? The top decile won’t be much, if any, worse off than they are now. Instead of paying income tax they’ll switch their earnings to be via dividends or capital gains tax or whatever tax dodging, sorry tax avoiding scheme, their accountants will recommend. You simply cannot assume that if the top decile are paying in £N billion with a tax rate of M% that they be paying in £1.05N billion if the tax rate is increased to (M+5)%.
@ Joe B,
“The state pension (plus other pension benefits like winter fuel allowances) are paid to all based on age…”
No it isn’t. The State pension is calculated on the basis of contributions made. You’ll need 10 qualifying years on your National Insurance record to get any State Pension. You’ll need 35 qualifying years to get the full amount. It’s not at all like a UBI which is, by definition, a no-questions-asked cash handout.
The only way to ensure that work really does pay is to provide a generous Personal Income Tax allowance and combine that with minimum pay laws and/or guaranteed jobs for those who need work but cannot find them in the open market.
Peter Martin,
the top income decile has a mean disposable income of £1,564 per week. This reduces by £112 per week to £1452 i.e. 7.16%,
Dividends in these income bands are already effectively taxed at the higher rates and under LibDem tax policy, the separate capital gains tax-free allowance of £12,000 would be abolished, and gains would be taxed at income tax rates.
On state pensions, if you do not have a full contribution record (including NI credits while on benefits) you still receive a basic state pension if your husband, wife or civil partner paid enough contributions. This can be further topped up with means-tested pension credit.
Lots of good discussion here but my main point is that while Joe Bourke (and Compass and others) have been clear about costs and benefits, the leadership candidates haven’t yet to the best of my knowledge.
I don’t yet know whether they are proposing a £3000 UBI or something cheaper or more generous. And I don’t yet know if they are proposing to ask the party to support the level of tax increases that are necessary to finance them. I think we need to be clear about this.
@ Joe Bourke,
I agree that we should attempt to extract more tax from the wealthy. Including wealthy companies. I agree it should be possible. But the record of successive governments isn’t one to inspire confidence. So if we couldn’t get hold of the money to help close the deficit during the coalition years, why would Lib Dems do any better when the motivation was to fund a UBI?
Yes, you can get a full State pension subject to the rules you mention. But the point is those rules do exist. If the pension were a UBI there wouldn’t be any need for them.
Peter Martin,
the record since the 2008 financial crash has been to extract more tax from high earners and relieve those at the lower end of the income scale. The IFS https://www.theguardian.com/business/2019/nov/13/richest-britain-income-tax-revenues-institute-fiscal-studies notes:
“the share of income tax paid by the top 1% of taxpayers has risen from 24% of the total in 2007-08 on the eve of the financial crisis to 30% currently.”
“Unlike the increases in previous decades, this has not been driven by a rising income share at the top,” the thinktank said in a briefing paper. “Rather, it reflects policy reforms: there have been income tax rises for high-income individuals (the additional rate of income tax above £150,000, the withdrawal of the personal allowance above £100,000, substantial cuts in income tax relief for pension contributions, and a net real reduction in the higher-rate threshold), even while increases in the personal allowance have reduced or eliminated income tax for those with lower incomes.”
“After the inclusion of cash benefits and the deduction of the main personal taxes – income tax, employee and employer NICs and council tax – the ratio [of the highest 20% of earners {after tax} incomes to the poorest fifth of the population] came down to five.”
“Britain’s overall tax take – revenues as a share of annual national income – stood at 34.4%, its highest sustained level since it was on its way down from the high levels seen during the second world war.”
Sorry, but you can’t have means tested benefits and UBI, absolutely ridiculous idea with the ruination of GDP by the virus and Brexit but UBI replacing benefits systems is a good idea. I understand why the LibDems might want to do it but electorally you would end up a laughing stock.
“Universal Basic Income (UBI) h…. an easy concept to explain” Is it? The endless debate about what it should look like suggests not. I can see us having to spend an entire election campaign trying to explain how it all adds up. I am far from unconvinced. We need to channel more of the nation’s resources to the people at the bottom. Rather than getting into a muddle about UBI – lets lead the argument for more help for those at the bottom and against the fallacy of the undeserving poor.
I think I’m with Chris P on this one. I instinctively like the notion of UBI but I think its just to difficult to explain or deliver. But that doesn’t take away one very serious problem, which is that labour markets of the future are likely to polarise rewards in favour of those with specific high tech skills, leaving the mass of workers in unstable, low skill work. We have seen the start of that in the growth of the gig economy.
Part of the answer may lie in supply side reform, in particular a focus on STEM education, but that will only ever be a partial answer. So how else, if we reject UBI, do we spread future prosperity ? The notion that every adult is entitled to a basic sum of money, to keep a roof over their head and food in their belly, seems reasonable in a civilised society, but how do others suggest we achieve that ? Clearly the present welfare state, with it’s endless complexity and ever shifting notions of what constitutes “entitlement” is failing.
@ Chris Cory,
” So how else, if we reject UBI, do we spread future prosperity ? ”
How about guaranteeing everyone a job at a basic living wage? There’s lots more by Stephanie Kelton for anyone who want to Google the topic:
UBI is such a good idea that we should rethink from a blank page, almost. It is neither unaffordable nor very complicated. It should be founded on a concern for the National Income, not the National Product, since the NI looks at people not businesses (I simplify a bit!).
The name UBI is unhelpful. It should be thought of as an entitlement to a share in the material life of the kingdom, and conceived and operated as a National Income Dividend.
The Chancellor of the Exchequer should begin his or her Budget Speech by announcing that the ONS has reported that the previous Year’s National Income was £X billion; and that HMG intends that Y% of that amount is to be distributed equally in monthly instalments for the year now beginning, to every and each resident adult, as an inalienable entitlement. What would remain– or in the event emerge as the remainder — of the NI would be distributed in ways more traditional, perhaps, but ways that saw to it that Household Disposable Incomes varied over a much smaller range than they do now, while still allowing the nation’s Joneses to rule their particular roosts (though with less ostentation, the margins being smaller). Most of that shaping would be done by Income Taxes, I suppose, and by major changes (reductions or abolitions) in ‘Benefits’. The N.I.D. payment would be part of each individual’s total Taxable Income; and everybody getting N.I.D. would pay some tax on it, so that every adult resident could look every other in the eye, as a proud fellow Taxpayer in a commonwealth, and no longer a mere hapless supplicant before a grudging State or nation.
This NID would have to start small, of course, since the realignment of Disposable Incomes would realign Demands and consequently Employment. The nations would adjust their perspectives fairly quickly, I believe.
One of the benefits would be the saving in costs and in souls, by relieving front-line public servants of the odious task of attempting to say No to the needy, by exposing them to humiliating scrutiny.
@Peter Martin.
Ok, so I watched the video and the problems with UBI that Ms Kelton discusses are all fair points, which is why, as I say, I’m still unsure as to whether UBI can be made to work in practice. But she says nothing that convinces me that a job guarantee is the answer. How does it help the low paid worker ? They already have a job but are pretty much stuck on the margins of poverty. UBI at least holds out the promise of raising them up. What about the white collar worker made redundant at 50 ? Can you promise them a job that fits their talents/ experience/ interests or do they have to break rocks (metaphorically speaking) or do any old job the government says they have to do ? There’s an implied compulsion in that which I, as a liberal, find unacceptable.
So I’m afraid I’m sorry, but I remain unconvinced.
P.S. I did like the reference to the “dividend” paid to all Alaskans each year. I know that’s a slightly different idea and in no way a replacement for UBI, but it has all sorts of merits, IMO.
If we put UI in our next manifesto we will be reapeating the mistake of 2005 with Local Income Tax. Layla take note!
UBI is such a good idea that we should rethink from a blank page, almost. It is neither unaffordable nor very complicated. It should be founded on a concern for the National Income, not the National Product, since the NI looks at people not businesses (I simplify a bit!).
The name UBI is unhelpful. It should be thought of as an entitlement to a share in the material life of the kingdom, and conceived and operated as a National Income Dividend.
The Chancellor of the Exchequer should begin his or her Budget Speech by announcing that the ONS has reported that the previous Year’s National Income was £X billion; and that HMG intends that Y% of that amount is to be distributed equally in monthly instalments for the year now beginning, to every and each resident adult, as an inalienable entitlement. What would remain– or in the event emerge as the remainder — of the NI would be distributed in ways more traditional, perhaps, but ways that saw to it that Household Disposable Incomes varied over a much smaller range than they do now, while still allowing the nation’s Joneses to rule their particular roosts (though with less ostentation, the margins being smaller). Most of that shaping would be done by Income Taxes, I suppose, and by major changes (reductions or abolitions) in ‘Benefits’. The N.I.D. payment would be part of each individual’s total Taxable Income; and everybody getting N.I.D. would pay some tax on it, so that every adult resident could look every other in the eye, as a proud fellow Taxpayer in a commonwealth, and no longer a mere hapless supplicant before a grudging State or nation.
This NID would have to start small, of course, since the realignment of Disposable Incomes would realign Demands and consequently Employment. The nations would adjust their perspectives fairly quickly, I believe.
James Young – what is the problem with a Local Income Tax? And why was it a particular mistake in 2005, when I believe we LD’s achieved our best ever general election result?
@ Chris Cory,
The JG helps low paid workers by effectively setting a floor on wage levels. Just what that floor is will be a matter of political choice. A JG can still mean, for example, that those with families can receive help just as they do at present.
If a worker is made redundant later in life, there is going to be a problem just as there is now. A UBI isn’t going to pay a living wage in the same way a JG can do. There’s no reason why anyone with useful skills can’t be given a JG which utilises them. Maybe you can think of examples to show the contrary. Possibly if they are very sick and cannot work at all there’ll be a difficulty. I’d say this can be solved by giving them a JG but putting the person on indefinite sick leave.
No-one is saying a JG will solve all problems but it will solve many problems especially if we engage in creative lateral thinking.
@ Roger Lake,
I think I’ve explained this before but the National Income is only very slightly different from GDP.
As this link says:
“Gross Domestic Product (GDP) is the most important aggregate of national income for accounting purposes, and for economic analysis.”
So I really wonder if you really mean National Income or if you have a made up idea of National Income is based on some misguided notion that there is such a company as UK Ltd which makes a profit and somehow we’re all entitled to a dividend.
Well there isn’t and we aren’t.
https://www.economicsonline.co.uk/Managing_the_economy/National_income.html#:
Personally, I think swingeing tax increases and UBI (or the “Couch Potatoes Charter” as it will become known) will be a productive angle for the LibDems to take. With the de- fenestration of Rebecca Wrong-Daily over a trumped up charge, Sir Keir is signalling the movement of his party back to the centre. The LibDems could prosper as they did in the halcyon Blair/Kennedy years when erstwhile, left-leaning Labour voters found a home away from the hated Tony. Of course, they all went back when first Miliband then Corbyn took the party to the left again.
So moving hard left while Sir Keir moves centre will, in my prediction, bring another dozen or so seats. Even further away from government of course, but still a little something.
@ Innocent Bystander,
“With the de- fenestration of Rebecca Wrong-Daily over a trumped up charge…..”
Despite being guilty of schoolboy type name calling, you do get one thing right.
It is a” trumped-up charge”. If Keir Starmer thinks he’s going to get away with this lightly he’s got another think coming!
A recent yougov poll found strong public support for three key policies https://www.independent.co.uk/news/uk/politics/coronavirus-poll-universal-basic-income-rent-control-job-safety-a9486806.html
– paying people a universal basic income to ensure their financial security, introducing a jobs guarantee to keep employment stable, and bringing in rent controls to limit housing costs.
“The poll is the latest evidence that the crisis has opened up Britain’s political terrain to new ideas – with a Tory chancellor unveiling an unprecedented package of state support for families and businesses that would have been unthinkable just months ago.”
As a party, it is not a question of if we address these issues – it is when and how. The when is this autumn. My view of how (as set out earlier https://www.libdemvoice.org/minimum-income-job-guarantees-and-basic-rental-income-64378.html) is:
1. A minimum income guarantee of £100 per week and a UC work allowance equivalent to a full-time minimum wage after tax.
2. A job guarantee program that enshrines the basic right to work
3. A basic rental income that distributes the unearned increment from land as a UBI.
There are many people here far more knowledgeable about UBI than me, but as far as I can tell, there are two aspects to convincing people of the merits of UBI.
The first is whether or not it’s a good idea in theory. The concern is that it’s free money for shirkers, and will discourage people from working hard to earn a decent living. The many benefits include reducing poverty and allowing people to make bolder life choices, such as women leaving abusive partners, or switching jobs.
The second is that the numbers won’t add up, it will have a negative impact on tax take, and people who can’t afford to be worse off will end up worse off and so on.
IMO, the first is nonsense, and is fairly easy to dismiss to a willing audience. Unfortunately, the right wing press will love nothing more than to scare its readership into thinking along those lines. Meanwhile, they scare those same readers that their children will be cruelly denied a small portion of a massive unearned inheritance. I think it’s Roger who is pushing, rightly, the idea that UBI is a form of shared national wealth which we’re all entitled to. Some of you will have already listened to it, but this point is well made in the recent Compass podcast with Guy Standing. I suggest people give it a listen if they want a better explanation than I can provide.
To most Brits, the concept of the NHS isn’t radical or an extreme left-wing loony notion. We’re used to the idea of people getting health care as required without fear of becoming bankrupt. Meanwhile, in the US, people are stuck in toxic relationships or tied to bad jobs with bad bosses because they can’t risk losing the medical insurance. UBI is similar, in that it means people can pick better jobs with better conditions, or it’s easier to move on from bad relationships and so on.
The second point is where I think a lot of LibDems are, and I suggest we should keep a reduced tax threshold. It is essential we discuss this second point, but it’s inevitable that a lot of the wider public will get stuck on the first one, so it’s a very fair point that we need to invest time and effort in convincing those outside our bubble of the benefits.
@ JoeB,
You’re being rather disingenous with your claim of public support for a UBI. The survey is particular about the Govt’s response to the currency Covid19 shutdown. It isn’t about what should happen generally.
@ Fiona,
It’s not just the right wing press. Paying someone £100 pw might be a nice amount of pocket money for someone who doesn’t need it but it isn’t going to take anyone out of poverty. If we increase the money to an amount that will then you will be removing the incentive to work. Why go out to work when you don’t have to?
Besides that once we start talking about £15k pa. or whatever the figure might be to take someone out of poverty then the numbers get difficult to justify. They don’t stack up.
If there is a problem with poverty then ensure everyone who is able to work has a job at a living wage. It’s fine to argue that the proceeds of our efforts should be divided equitably. But without our efforts there are no proceeds to argue about in the first place.
@ Joe B,
“A basic rental income that distributes the unearned increment from land as a UBI.”
You’re previous explanations as to how this might work haven’t made any sense to me and I doubt anyone else understood any better.
So how could it possibly work? We could nationalise all land without compensation, and then charge everyone who wants to use the land a tax, sorry a rent, based on its usage. So land under a skyscraper would be taxed much more highly than a land on the Northern moors which was used to graze sheep.
So we’d collect all the taxes, sorry rents, and do what all govts do with taxes. I mean rents. That doesn’t have to be a connected with a UBI.
That would work. I’m sure everyone understands the idea too! But it doesn’t sound very Lib Demmish!
Peter Martin,
up until 1963 imputed rents on residences were taxed under what was then called Schedule A and today is called income from land and property.
This article discusses imputed rent http://civitas.org.uk/2018/11/23/imputed-rents-forgotten-but-not-gone/
“Owner-occupiers benefit from two major tax incentives, which arise because the returns on investing in a property are taxed differently according to whether the owner lives in that property or not. One is an exemption from capital gains tax on owner-occupiers’ main homes. Landlords are taxed on the profit they make from house price appreciation; owner-occupiers are not. Wilcox and Williams estimate the cost of this relief to have been £18.7bn in 2016/17. The other tax advantage enjoyed by owner-occupiers is an exemption from income tax on the imputed rent. A landlord pays income tax at their marginal rate on the rental income, net of the cost of mortgage interest on that property, which is an allowable expense; an owner-occupier does not. Wilcox and Williams put the cost of this at £21.3bn in 2016/17.”
Professor Muellbeaur in his recent paper for the NIESR on the UK housing market writes:
“To tackle the supply side of the housing market, four fundamental changes are required. The first is to enable a public sector land bank or banks to acquire land at existing planning consents. Second, the government should revise its fiscal rules so that its measure of the ratio of gross debt to GDP is replaced by a net debt measure, which nets off the marketable land assets owned by the government. Third, as far as local government is concerned, financial incentives are needed to encourage planning consents. Fourthly, along with many other housing experts, I believe that a far greater public or social sector housebuilding programme is needed to provide affordable homes.
Such a radical reform package would clearly reduce expected rates of return in land holding, which is at the base of investing for capital gains on housing. In the long run,
this should result in a more prosperous economy. Wealth inequality would be reduced as holdings of land are highly concentrated. Inequality of opportunity would be reduced as housing became generally more affordable: property prices reflect access to publicly-provided goods such as good transport and schools, clean air, public parks and other facilities.
@ JoeB,
Yes I understand the idea of Schedule A tax. There’s a lot to be said for it.
The idea is that ownership of a house is saving the owner the cost of the rent they would otherwise have to pay to live in it. So if this is, say, £1000 per month their annual income goes up by £12,000 and they’d have to pay extra income tax accordingly. Or we can call it Schedule A, if we want to, but it’s essentially an inputed income tax.
We can do the same thing with land of course.
That’s not hard to explain! If that’s what you want then go for it! I can’t see it going down too well with your voting base in Twickenham and Kingston though.
Peter Martin, it is very good of you to keep trying to put me right, but I’m afraid you are mistaken about what I say; and also, I consider , in your belief that nothing is gained by treating them as much the same thing and interchangeable, the NI and the NP.
If we bring it down to the PI and the PP (first P = personal), most people know the difference: your PP is the sweat of your brow, (and perhaps your employer’s income in a way); your PI is what he pays you for your sweat, and what you’ve gained to pay for another barrel of beer or biscuits with. Still true, if you’re self-employed. So in one way you are right. But you are missing my point that most of us are more keenly interested in what’s pouring into our wallets than in what’s in it for the boss. I think.
It’s fair enough that you might think the 5% or so difference between GDP and NI might have some significance but you need to explain exactly why.
Waffling about PI and PP isn’t going to do it. Just as on a National Level our total income (NI) is largely dependent on what we produce (GDP) so it is on a personal level too. There are some technical differences which mean they aren’t exactly equal but can you explain them? Can you explain why they important?
Perhaps more importantly, can you explain how my fortnightly payment to my window cleaner which contributes to both GDP and NI is going to help fund your UBI? Sure, you can apply a tax to the transaction. And that’s all you can do. But that’s hardly an original observation.
The trouble with all the carefully calculated figures from Compass et al is that you can’t mandate a future government to stick to the figures. Certainly not, if you don’t think you will be in that government: probably not, even if you will be the next Government!
Universal Credit, UBI, magic money tree. You want to maximise the benefits to winners, you want to minimise the pain for losers, but there’s only so much tax revenue to go around. You can start with plans which look good. But then the education, health, defence etc lobbies start screaming about all the things you desperately ouught to be spending more tax money on. And then Amazon and the like get better and better at not paying you any tax. So you have to tear up your generous UBI plan and replace it with something practicable. That’s when the shine comes off, and you start getting mentioned in the same breath as IDS with his very wonderful Universal Credit wheeze.
Starting with the obvious, ambitious people are motivated to achieve. They then attract criticism from rival ambitious people and from rival self-interested people. So the above discussion focusses on calculations and estimates of winners and losers. Those who can prove that they are unmotivated should win their arguments, but they only do if others understand them, thereby creating a need for spin doctors as an alternative to force.
On Channel 4on 25/6/2020 at 21.00 there was a programme called “The School that tried to end racism” which sounds idealistic, but it is worth a look on Catch-Up. Start by accepting that schoolkids aged 11 are the right people to try, boys and girls from a mixed school in London and accept that Martin Luther Kng was wrong to say “I have a dream”. That is too difficult.
Suppose you want to end the rioting and looting in the USA. The Peston programme on ITV showed that the next election is crucial, by forecasting what a second term for Donald Trump might be like for the USA and the world. He would not be affected by a fear of future elections. The USA already has the highest rates of coronavirus in the world and statistics which are untrustworthy and misrepresented by the President and his small band of loyalists. Is there a realistic hope that the rioting and looting which happened after a black man was killed by a white policeman can be ended?
What will Hollywood produce?
Distopia!!!
A trade deal with the USA after the UK leaves the EU seems unlikely. Can we trust Boris to do the right thing without effective scrutiny?
@Peter, do you know anyone below retirement age who has received an inheritance of a size equivalent to, or more than five years worth of UBI? If so, did they all give up work immediately?
If not, why not?
If so, how do you propose we change inheritance laws to stop people being so lazy? IMO, if you are against UBI on the grounds of unearned income, then surely you should be against inheritance for the same reasons?
Isn’t it more likely that people will still want to earn more to have a higher standard of living? Won’t it be the case that the balance of power between employers and employees will be tipped, slightly, further in favour of the employee, requiring employers to put more effort into retaining staff?
Some jobs are dull, but most people like to work because it gives them a sense of achievement. And I don’t think UBI will solve poverty in its own right, but rather it is more about creating more of an even playing field, and I don’t apologise for pointing out that the right wing press are against even playing fields.
This is one of those policies where, IMO, it’s very definitely the right thing to do, but a hard thing to sell, and that’s in part because people get stuck on the notion that too many people will abuse it. But even if some people do abuse it, will that be worse than those same people abusing the current benefits system?
Spain has introduced a minimum income guarantee https://www.fastcompany.com/90511093/spain-creates-a-universal-minimum-income-targeted-at-2-3-million-people
that targets lower-income households.
“Though the minimum amount the government is guaranteeing is €462 a month, that amount will increase with the number of family members, up to a total of €1,105 a month. A family is defined as “vulnerable” and eligible for the plan if its monthly income is €10 or more below the minimum income. At the point, the government will give them enough cash to meet the thresholds (but won’t exceed them).”
“The idea of giving everyone money through a universal basic income has been gaining traction in recent years, and the coronavirus crisis added fuel to that fight.”
Last year a Gallup poll found 77% of UK adults in favour with 53% willing to pay higher taxes to fund a universal basic income program https://news.gallup.com/poll/267143/universal-basic-income-favored-canada-not.aspx.
A Populus poll in 2018 found that 41% of those surveyed supported the idea with only 17% opposed. The rest were either neutral or didn’t know. This polling also helped illuminate what the public feel would be the costs and benefits, with 49% agreeing it would reduce the stigma of claiming welfare but 45% being concerned about it being unaffordable.
A 2017 poll by the University of Bath’s IPR found 79% thought that introducing a UBI as a reward for those doing unpaid work is fairly or very convincing as well as finding 63% of Labour-leaning adults supported the principles of a UBI compared to 40% of Conservative-leaning adults. This suggests that while a UBI is traditionally seen as a more left-wing idea, there is a significant level of support across the political spectrum for introducing a Universal Basic Income.
@ Fiona,
I’m not sure how many people would give up work completely if they could afford not to work. My guess would be about 20% -30%. I think it might also depend on age. I’ve seen several of my friends take early retirement when they’ve had the chance. Possibly they were just in need of a change. I haven’t, though, seen any of them start a new and different job just to give themselves something to do.
Also I would say younger people would be more inclined to not work. Anyone who has had to cope with lethargic late-teen-agers will know what I mean by this. I’m glad I was able to say to my kids that they’d better get themselves moving because no-one was going to just hand them money for lying in bed all morning. They’d have all been keen LibDems for sure on that basis!
But 20-30% of the workforce would be significant. And enough to bring any UBI scheme into disrepute and so bring about its demise.
Someone mentioned ‘Land Reform’ (probably Messrs Bourke or Martin). Didn’t the great Lloyd George come unstuck over that in the 1920’s?
Peter Martin, yesterday at 12.09pm
“I think I’ve explained this before but the National Income is only very slightly different from GDP.
As this link says:
“Gross Domestic Product (GDP) is the most important aggregate of national income for accounting purposes, and for economic analysis.”
So I really wonder if you really mean National Income or if you have a made up idea of National Income is based on some misguided notion that there is such a company as UK Ltd which makes a profit and somehow we’re all entitled to a dividend.
Well there isn’t and we aren’t.”
Well said, Peter, but wrong in two ways at least. You don’t actually explain much, you assert, without listening to what I try to say. When you say GDP and NI are only very slightly different you are only taking about their magnitude in monetary terms: you must look at HOW they are calculated: that is quite different.
As for your second salvo, it’s not far from the truth that indeed there IS a going concern, but we don’t call it UK Ltd, but ‘The UK Economy’. We all live in it, and consequently we all have a right to some of what it collectively produces. So there is and we are.
Why be so bitter about the idea of UBI? No-one, I think, is suggesting that to survive on that alone would be what pigs call clover. On UBI alone, you’ld soon decide to try to earn something — well, quite a lot — if you could.
@Peter, the older people you mention have already worked, and society seems to survive with a few people taking early retirement. It creates space for younger people to work, so I don’t think it’s a sign of society grinding to a halt. Do you know how much unearned inheritance they were given in order to afford to retire early? Do you think their early retirement is a problem for society?
Many teenagers do like staying in bed, but I would argue that most teens you mention are the ones living rent free thanks to their parents are living in greater comfort than those attempting to fund their entire lives via benefits or UBI. Dare I suggest that most parents are already giving their older teenagers the equivalent of a basic income, and if they are doing so long term while their older teens and adult children refuse to work, then they are irresponsible parents. I presume you already expect all parents to charge their grown-up children a meaningful amount of ‘house-keeping’ to avoid this? But I’m not sure why you think this couldn’t continue and be increased in a world where we have UBI.
I support a UBI because it cannot be right that in a country as wealthy as the UK, there are people who slip through the cracks/trip over the hurdles and end up with no money at all.
A Job Guarantee looks interesting. How does one compel an employer to take on a particular employee? Being unemployed for 6 years in my late ’50s, I did not find employers eager to take advantage of my years of experience; rather it appeared that I did not fit with their perception of a suitable candidate, but would be bored in the job and soon leave, or would be bored in the job and therefore not productive, or would be bored in the job and then take their one! I’d like to know how that sort of innate prejudice would be countered. At least a UBI ensures that everybody has something.
@ Jane Ann Liston,
“A Job Guarantee looks interesting. How does one compel an employer to take on a particular employee? ”
The idea is that JG work should be done for the public purpose. So there won’t be any compulsion for employers to hire anyone. We could start by asking local councils what jobs they would like done but can’t do because they don’t have the money. The exact details would need to be established by the normal process of discussion but my preference would be for it, at least initially, to aim at younger people and involve a mixture of what we might term normal work and education/training in the form of day release and apprenticeships .
This isn’t pie-in-the-sky thinking. It has been done before:
https://en.wikipedia.org/wiki/Works_Progress_Administration
Jane,
That is the Socialist vision of paradise – everyone eventually working for the State. It just needs us all to believe in a fairy tale.
Oh dear. The JG that Peter Martin describes has a whiff of workfare about it. Square pegs will be forced into round holes, damaging both pegs and holes.
@ Jane Ann Liston,
No it’s not workfare. There is an offer of a job on a living wage. It’s not compulsory.