Last week, Alistair Carmichael wrote an article for the Herald calling for a Universal Basic Income to be considered as a key part of the strategy for an economic recovery.
He cites practical examples of the people who are falling through the Government’s various support plans:
Thousands of families will face financial hardship in this crisis due to the current gaps in Government support. The small building firm in Shetland that I have been trying to help in recent weeks illustrates the problem well. It is owned by the two men who started it and runs as a limited company. The owners take most of their income though dividends. Their four employees have been furloughed and their position ought to be secure. As things stand, however, there is no adequate help for the two owners of the business. The purpose of the furlough scheme is to protect jobs now for when productive work restarts. Unless we find a way of helping these business owners, and thousands like them, there will be no business to which the employees can return.
While he is not yet totally convinced by UBI as a long term strategy, he thinks it needs to be properly considered as a way to remedy inequality – and says that the State Pension is essentially a form of UBI for older people:
Yes, a universal basic income risks giving money to people who do not need it. That, however, is something that is easily remedied through the tax system. If you think about it, we already have a form of universal basic income in the state pension. Anyone receiving that who gets more from an occupational or personal pension pays income tax on anything above the tax threshold. This also offers us an opportunity to gather evidence on which to base our decisions about the future of our economy and our society when this is all over. Income inequality has grown in this country and now poses a risk to social cohesion. A Universal Basic Income may be part of the answer to that. I frankly remain to be convinced but I have an open mind and I would like to see the evidence. Sir Arthur Conan Doyle’s most famous creation, Sherlock Holmes, put it thus: “When you have eliminated the impossible, whatever remains, however improbable, must be the truth.”
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20 Comments
I am always confused by the UBI
Could someone please tell me
(i) what is the rate of UBI
(ii) Does it do away entirely with all other benefits JSA, ESA, PIP, Industrial Injuries and Pensions
(iii) are there any disability element top-ups to disabled people
(iv) what about housing costs
Sorry, If this has been discussed on other threads and I have missed it
The party has called for the introduction of a minimum income guarantee https://www.libdems.org.uk/covidbill-update-2303:
“Introducing a Citizen’s Income
It is the Government’s duty to do everything in its power to protect those facing destitution as a result of this pandemic. Those most in need must be given financial security. Liberal Democrats are calling for a Citizen’s Income: an increased benefit of £150 per week for a single person and £260 per week for couples. This should act as the minimum income guaranteed to all UK adults, rather like the universal basic income many are talking about.”
“Our amendment (New Clause 9) would achieve this by increasing the standard allowances of Universal Credit, Jobseeker’s Allowance and Employment and Support Allowance to these rates.”
A minimum income guarantee that integrates tax and national insurance allowances and the basic allowance under universal credit, when it is coupled with housing benefit and other additional elements of social security, ensures that everyone has basic funds to protect against destitution.
It is important to keep a clear focus on the stages of this crisis. The first priority is public health and that includes the provision of an adequate social security safety net for everyone affected – employed or self-employed.
On the economic front there are at least three distinct stages:
Firstly, combating damaging debt deflation and a drastic loss of supply capacity. This is the business grant and loan scheme, furlough payments and payments to the self-employed. Controlled debt monetisation (money printing) and helicopter money (direct payment to the public) should be deployed if necessary in this stage.
Secondly, is economic recovery and rebuilding of public services. This will require job guarantees to reengage the large numbers of newly unemployed and public investment in infrastructure, housing, education and health services largely funded by borrowing.
Lastly, stabilization where a growing economy and higher levels of spending on public services (including debt interest) and investment will require higher levels of taxation (particularly wealth taxation).
We need clear thinking and a clear strategy for a less affluent post-Brexit and Post-Pandemic future where we will need to address the onrushing train of climate change. A minimum income guarantee needs to be part of that strategy as does a rejection of misplaced consumption fuelled growth that destroys the planet all human beings are wholly dependent on.
‘ If you think about it, we already have a form of universal basic income in the state pension.’
And as he said then, those who have enough other income to pay income tax pay income tax on the state pension.
But it’s much more than that. Being aged automatically entitles one to a number of other benefits, not all sychronised with the state pension age, such as free public transport (not much value at the moment) and free prescriptions. None of these are means tested, probably on the true assumption that many of the elderly don’t want ‘charity’ and also that the complex forms necessary to receive other benefits is offputting for many. The state pension is intended to confer a basic stable income and a freeedom to work (if you are able) – whether paid or voluntary – or not. So comparing UBI with state pension also needs to consider these linked benefits.
The State Pension isn’t a form of UBI.
The U in UBI is Universal. It can also be interpreted to mean Unconditional. The State pension is calculated on the basis of contributions are made over the course of a working lifetime, so in this respect, it isn’t different, in principle from the operation of any other pension scheme.
It isn’t unconditional and it isn’t universal.
What about a default basic income (DBI). Anyone could apply if their income does not reach a certain threshold. The only criteria would be their income. This would in effect be means tested, reduce the need for unnecessary bureaucracy, be affordable and act as a reassurance that no-one is destitute.
@ Peter Hirst,
“What about a default basic income (DBI).”
A couple of problems.
1) Workers on or just above the threshold will be wondering why they bother to get up in the morning to go to work when they could be paid the same to stop in bed. Some will quit their jobs. Others will carry on working but be resentful of those who don’t. They’d be unlikely to vote Lib Dem!
2) Employers will milk the system. They’ll pay the bare minimum wages. Their personnel depts will be engaged in actively encouraging their workers to seek all available benefits.
Peter Hirst – You could do this through a Negative Income Tax. Although selling any policy whose first word is ‘negative’ could be… challenging!
@ Stephen Howse,
Yes, of course, a negative income tax is essentially the same thing.
Bu how about putting some numbers in for what people will actually receive. The idea is that this isn’t just tokenism. It’s supposed to take everyone out of poverty, right? So we can start by saying that if someone has no income they’ll need to take home at least £1000 pcm So we have:
Income (pcm ) Tax Take Home (pcm)
0 -£1000 £1000
£500 ? ?
£1000 ? ?
£1500 ? ?
£2000 ? ?
@ Joe B,
You’ve mentioned Pavlina Tcherneva several times with some approval. It’s almost as if you’re saying you agree with her. But, and whatever you want to call it, she really doesn’t like the Idea of a UBI, or a basic income or a citizens income.
So she doesn’t agree with your ” A minimum income guarantee needs to be part of that strategy “. Unless, of course, the minimum income is related to payment for work done. Which can be work done to improve the climate. Like tree planting. Fixing PV cells on roofs etc.
Have you read this?
http://neweconomicperspectives.org/2014/01/16-reasons-matt-yglesias-wrong-job-guarantee-vs-basic-income.html#sthash.Yvd1g4aq.dpuf
Peter Martin,
there is little, if anything, to disagree with in Pavlina Tcherneva’s commentary. She concludes her discussion writing:
“I find it ironic that we have to debate each other. Basic Income Guarantee (BIG) and Job Guarantee (JG) stand on much the same principles. Let policy provide an opportunity to all to perform socially useful activities on the ‘participation principle’ through the JG, while supporting those who cannot (the young, retired, disabled, with onerous care burden) and we have a stronger, more stable economy that creates socially useful activities that serve the public purpose.”
This is precisely why we need both a job guarantee and a minimum (or basic) income guarantee for those she references above, although I would include those caring for pre-school children and unemployed through short-term illness or between jobs (under six months).
The minimum income guarantee would start at £77/week (rising to £100 per week in due course) provided as a basic allowance via Universal Credit and supplemented by means-tested benefits for parents, disability and housing. An equal amount of benefit (£77 per week initially) would be made available as a combined tax and NI allowance to taxpayers with no extra relief for higher rate taxpayers.
A full-time job guarantee at minimum wage would be made available to anyone choosing to register for the scheme rather than surviving on the minimum income guarantee plus additional benefits. An individual on the scheme that was registered for Universal credit would have no tax and NI allowance on their earnings, but would have a work allowance equal to their net pay before any earnings taper was applied to housing or other additional elements of Universal credit.
@ JoeB
PT doesn’t conclude her commentary with the passage you’ve quoted. She makes a series of 16 points and you’ve picked out the one that suits you best.
Her conclusion is ‘Yes, sending a check to people is not as “messy,” but let’s stop pretending that it’s a panacea for the fundamental problem of economic insecurity.’
She does concede that there could be a Basic Income Guarantee for some groups such as those looking after children, the disabled or those who are sick. But I’d have to disagree with her slightly here. Why can’t looking after children be the job itself? Being disabled isn’t a reason to treat people differently. Look for what people can do rather than what they can’t. If workers are sick, then put them on sick leave.
However I don’t disagree with her point 14.
“BIG may lull the recipients into a false sense of security. Once the BIG grant proves inadequate to liberate the poor from their poverty, and the poor decide to search for better paying jobs and opportunities, they will not be there. Just like they aren’t now. As research has shown the mark of unemployment is devastating and unemployment breeds unemployability”
@matt
Those aren’t stupid questions at all.
And the answer is:
It depends which version of UBI we’re talking about.
Some will keep most benefits (and as a result, will need enormous tax increases).
Others will cut many benefits, and as a result, leave some of the most vulnerable in our society worse off.
What I wish proponents of UBI would do is provide a link to a paper which describes the kind of UBI they want. And that the paper describes, in detail, what the UBI will offer, how it will be paid for, who will be net beneficiaries, and who will lose out.
George,
one of the best resources that brings together research and articles on UBI is at https://citizensincome.org/research-analysis/
Thanks for the link, Joseph.
I asked for a link to a specific scheme that someone is recommending.
Your website has a plethora of articles. But digging into the site, I did find https://www.iser.essex.ac.uk/research/publications/working-papers/euromod/em12-17a.pdf
Is that the one you support?
However, your website could be useful.
Although it’s pro-UBI, and what is read there should be treated cautiously. the article critiquing the Green party manifesto proposal for UBI was honest enough to point out some of the problems with it.
https://citizensincome.org/news/a-review-of-the-green-party-manifesto-universal-basic-income-proposal/
For example:
“It is not clear to what extent the proposal has been tested for financial feasibility, nor have we been shown the evidence for the claim that no-one currently in receipt of benefits will be worse off”
…
“It is possible that nobody currently receiving benefits would be worse off: but it is also possible that the scheme as a whole could prove to be regressive.”
The site also seems to be willing to seriously address problems with UBI.
Whether they address them adequately, I don’t yet know.
For example:
https://citizensincome.org/news/paul-spickers-summary-of-his-recent-reports-on-basic-income-and-a-response/
Which includes quotes from Paul Spicker, including:
“Basic Income schemes are all very expensive. The first question to ask is not whether we can afford BI, but whether we should – whether the money would not be better used in some other way.”
To me that is the $64k question.
Also:
“All the Basic Income schemes which have been developed to date make some poor people worse off. That mainly happens because they try to pay for BI by cutting or reducing existing benefits. Any scheme which does that it is going to benefit some people on higher incomes more than it benefits people on lower ones.”
If they are willing to grapple with those questions, rather than handwave them away, all power to them.
I am unclear of the difference between UBI and Universal Credit (or negative income tax for that matter). They all seem to have convergent aims. If we were rebuilding from scratch any of these schemes could be very plausible, providing a coherent guarantee of financial welfare.
Like George, I note that changes of this sort produce losers as well as winners. Amongst the losers will be hard cases that will discredit the changes. In reality we are not building from scratch; any discussion needs to concentrate on where we are now and how a transition could take place.
@ Martin “I am unclear of the difference between UBI and Universal Credit (or negative income tax for that matter)”.
Come on, Martin. Don’t you know that the Lib Dems voted for Universal Credit when they were in government…….. and it’s had a few unfortunate side effects…… as illustrated in a court case reported yesterday.
The Guardian 13 May, 2020 “The government acted unlawfully when it refused to compensate two low-income households left up to £180 a month out of pocket when their legacy benefits were wrongly stopped and they had no choice but to move on to universal credit, the appeal court has ruled.
Although the households were significantly worse off on universal credit – and had successfully challenged the official error that ended their previous benefits – the Department for Work and Pensions (DWP) argued it would be too costly and administratively complex to move them back to the old system”.
@David Raw
It’s very sad that people engaged in politics, like yourself, have fallen for Tory propaganda and repeat it on social media. The Tories would like to pretend otherwise, but the Universal Credit (UC) of today is a totally different beast from what Lib Dem MPs voted for in 2010.
The key event was in 2015, when the new Tory majority government introduced swinging cuts to benefits.
https://www.newstatesman.com/staggers/2015/07/budget-2015-what-welfare-changes-did-george-osborne-announce-and-what-do-they-mean
Following a political backlash, they softened cuts to tax credits by cutting funding for UC. For example, see:
https://www.telegraph.co.uk/news/politics/georgeosborne/11978675/George-Osborne-to-raid-Iain-Duncan-Smiths-Universal-Credit.html
The Lib Dems have consistently opposed those cuts. For example, being the only major national party to allocate funds to fully reverse them in 2017. https://www.ifs.org.uk/publications/9235
But, of course, we get no credit for this, because too many Lib Dem members believe the deceit of those who wish us ill.
George,
yes, the Malcolm Torry proposal is well researched and is based on:
“A Citizen’s Basic Income for every UK citizen, funded from within the current tax and benefits system. Current means-tested benefits would be left in place, and each household’s means-tested benefits would be recalculated to take into account household members’ Citizen’s Basic Incomes in the same way as earned income is taken into account.”
As Paul Spicker writes in his critique “Basic Income cannot be ‘adequate’, but it does not need to be; it only needs to be basic. A modest income could be provided without damage to poor people, so long as it does not affect the status of other benefits.”