Minimum Income, job guarantees and basic rental income

The Daily Telegraph reports today that between furlough subsidies, benefit claimants, public sector workers and pensioners more than  half of all adults are now bankrolled by the state

As the prospect of an end to the easing of the lockdown draws nearer thoughts begin to turn to dealing with the fallout from the economic damage and what needs to be done to sustain households over the coming year.

YouGov has undertaken a  survey  that finds strong public support for three economic policies – paying people a universal basic income (UBI) to ensure their financial security, introducing a jobs guarantee to keep employment stable, and bringing in rent controls to limit housing costs.

There has been considerable discussion of UBI on this site in recent weeks with lead articles from Layla Moran and Jane Dodds

The framework for a UBI or more precisely a Minimum Income Guarantee was proposed in the policy paper ‘A fairer share for all’ last year. The simplest and quickest way to introduce such a program is to convert the value of the existing personal tax and increased national insurance allowances to a fixed tax reduction amount of £4000 per year (£77 per week). How that can be administered and increased over time has been discussed earlier Minimum Income Guarantee

Minds need to be concentrated, however, on what can be put in place as the subsidy for furloughed workers comes to an end in June and the moratorium on evictions comes to end at the same time. Of immediate concern is a  job guarantee scheme
With unemployment forecast to rise by anywhere from the Office of budget responsibilities forecast of 2m to the  Institute for Social and Economic Research at the University of Essex forecast of 6.5m having a scheme in place to replace the furlough scheme is an urgent priority.

Lastly, there are rent controls. Lloyd George had to introduce rent controls during WW1 (including mortgage interest increases) following a rent strike as landlords sought to capitalise on the large influx of people into Glasgow that the promise of war and munitions work had brought into the city. There is, however, a better alternative as floated by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) Basic rental income, a form of UBI for tenants. 
As the 2017 Economist article  How to solve Britains housing crisis writes
“…a growing sense of inequity. Britons over the age of 65, a fifth of the population, own over 40% of the housing wealth held by owner-occupiers. Youngsters with rich parents can buy their first house thanks to the “Bank of Mum and Dad”. Everyone else must resign themselves to renting small properties for life, or to continuing to pay off their mortgage long after retirement. At the election in June half of all private renters voted for Labour and Jeremy Corbyn, up from a third who supported the party in 2010. As home-ownership declines, the Conservatives, in particular, are beginning to worry —as indeed they should.”

These are Liberal policies. Now would be a good time to start banging the drum for them while the public mood is receptive.

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

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39 Comments

  • I hesitate somewhat to support UBI since it might inflate prices/rents. Coupled to a policy to modulate/influence prices sounds much better

    Would like to know how we got into this mess, especially how the poorest 10% have become (relatively) poorer in recent decades

  • Peter Davies 5th May '20 - 11:41am

    While a UBI that largely replaces personal allowances and out-of-work benefits is affordable, a basic rental income that is largely new money for the better off who do not currently get housing benefit is not. At the same time, it would leave many unable to pay the rent.

    Every scheme I have seen for replacing housing benefits has massive downsides. That’s because housing costs are so high and so variable. Before we start changing the way we subsidise housing costs, we need to get house prices down (purchase and rental). That means LVT and a massive home-building program.

  • John Littler 5th May '20 - 12:55pm

    UBI was a LibDem policy several decades ago as Universal Citizens Income.

    What I have seen proposed does not replace Housing benefit and a lower rate of it would be paid to Children.

    It is not just affecting the poorest 10% who have been squeezed by UC implementation and various austerity measures, as well as rising rents. There are millions of just about managing with no savings cushion, for which it would be a boon.

    The stock of housing must be increased, including social housing or this risks higher market rents as a result. Low productivity, poverty stricken regions, low investment, little work related quality training and low productivity levels compared to France & Germany, all need to be seriously addressed. Statutory Sick Pay at £94 a week is a joke, when other European countries pay £300

    Neither any of the above, nor repayment of Covid 19 borrowings is going to be achieved without tax rises and most of the taxes will have to be raised on the richer half of society, many of which did very well out of the past two decades. Britain as an especially low tax country for the wealthy and large corporations can no longer be afforded and accumulations of wealth or wealth held overseas will need to be in the mix. I don’t see where else the money will come from as public services are on their knees, transportation is in a mess including roads and at least 1/3 of the population cannot cope with further squeezes.

  • Peter Martin 5th May '20 - 1:52pm

    Whilst there might appear to be a case for a temporary UBI at present, it doesn’t change the fact that it is, by design and definition, totally incapable of directing help to where it is most needed.

    A Job Guarantee is far superior. It would primarily be available to those who have lost their jobs -or to those who didn’t have one to start with. Unlike a UBI it wouldn’t be available to those who are working at home on full pay. We can define the responsibilities of the Guaranteed Job to be anything we like. As a temporary measure it can be simply to stay at home! Or teach and look after children and others in you care.

    Just what any Job Guarantee would look like after the lock-down ends is a different matter. The work would either be directly for the public purpose or involve being contracted out, agency style, to prospective employers in the private sector.

  • I agree with Peter Martin on UBI.

    I don ‘t see money should be diverted to such as Philip Green when it could be directed to those most in need.

  • @ Joe Bourke. Are you saying it’s not universal then ?

    If it’s not universal can you define exactly who will be eligible and who will not i.e. the parameters……. and don’t you think you should get a more accurate name for it than universal basic income for it ?

  • The party has issued a press release that acknowledges the employment problems that we will face when the Furlough scheme comes to an end in June:
    The Lib Dem jobs plan includes:
    1. A “Safe to Return to Work Scheme”
    • A new structured wage subsidy for all employees coming off furlough, with:
    o 50% of salary paid during the first month in work, after furlough
    40% of salary paid during the second month in work, after furlough
    30% of salary paid during the third month in work, after furlough
    • The current £2,500 cap under the Job Retention Scheme would be reduced in line with these percentages. (First month: 50% of salary, up to £1,565 Second month: 40% of salary, up to £1,250, Third month: 30% of salary, up to £940).
    • The scheme would begin from 1st July, or as soon as lockdown has been eased if later.
    • If a company commits to employing the staff member for at least 6 months, this new 3 month wage subsidy could be paid upfront, to ease cashflow further
    2. New “Prepare to Return to Work” flexibility for part-time work in the Jobs Retention Scheme
    • Building new extra flexibility into the existing Jobs Retention Scheme, to help businesses prepare for a return to work
    • From 1st June, a furloughed employee would be allowed to work up to 50% of their time, whilst remaining on furlough, with the existing 80% wage subsidy
    • This flexibility would end as soon as lockdown has been eased, and the “Safe to Return to Work Scheme” can be introduced

    It is a good temporary proposal but the job guarantees will be needed to address the lay-offs and long-term unemployment that has and is occurring well beyond the life of this scheme and into next year.

  • Joe, I’m not being obtuse when I say there is more need for clarity when Willie (who I like and respect) talks about a “Universal Basic Income”. Without clarity the Tories will rediscover the magic money tree and attack the Lib Dems with ferocity and all their usual ‘integrity’.

    Talking of Tories, can you imagine how they would have howled and beat their chests in derision if a Corbyn Government had announced today that the UK now has the highest Covid death rate in Europe……. and no doubt some fellow travellers in the Lib Dems would have joined in at the twitch of a knee jerk. As Dad used to say, they’ve a brass neck….. and, to use a Yorkshire phrase, they’re brussen.

    Frankly, compared to Germany, the incompetence of this government is remarkable. The Lansley 2012 Health & Social Care Act required Pandemic planning including adequate testing and the provision of adequate PPE. What happened ? Johnson is now noticeable by his absence (leaving it to Raab), and why hasn’t Jenrick been sacked ?

  • David Raw,

    you are correct that it is important not to mix the terms Univeral Basic Income and Minimum Income Guarantee, even though I am guilty of it myself from time to time.

    It is also true that there are very serious questions to be asked concerning the preparation and handling of this public health crisis from the outset, even if it is only to be ready for when the next one comes our way.

  • Richard Easter 6th May '20 - 4:20am

    From what I believe, Philip Green does not live in the UK.

    Regardless of the advantages or flaws of UBI, I am not sure anyone would suggest that it is handed over to non resident tax exiles. Equally I am sure there will be significant limitations to stop rich Saudis or Russian oligarchs (neither who should be welcome over here quite honestly anyway) from pocketing the money.

  • The Guardian in 2016 :
    “Like other economic titans, Green depends on the largesse of the British state. Because he paid his workers wages they could not possibly live on, the taxpayer had to shell out an estimated £367m in tax credits to top up their pay packets”.

    Presumably that will still operate in future ?

  • David Raw,

    Philip Green’s companies, as with most high street retailers, paid shop floor staff the legal minimum wage. Many would have their wages topped up with tax credits and housing benefit so they could meet their housing costs.
    This is the problem with benefit payments, as Chris Love notes in the first comment above -“I hesitate somewhat to support UBI since it might inflate prices/rents.” Increases in benefits do indeed lead to increases in rents as Churchill observed long ago http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html
    “No matter where you look or what examples you select, you will see every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream for himself, and everywhere today the man or the public body that wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it to an inferior one, and in some cases to no use at all. All comes back to land value, and its owner is able to levy toll upon all other forms of wealth and every form of industry. A portion, in some cases the whole, of every benefit which is laboriously acquired by the community increases the land value and finds its way automatically into the landlord’s pocket. If there is a rise in wages, rents are able to move forward, because the workers can afford to pay a little more. If the opening of a new railway or new tramway, or the institution of improved services of a lowering of fares, or of a new invention, or any other public convenience affords a benefit to workers in any particular district, it becomes easier for them to live, and therefore the ground landlord is able to charge them more for the privilege of living there.”

    “Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public con-science, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted!”

    “And a friend of mine was telling me the other day that, in the parish of Southwark, about 350 pounds a year was given away in doles of bread by charitable people in connection with one of the churches. As a consequence of this charity, the competition for small houses and single-room tenements is so great that rents are considerably higher in the parish!”

    This is why Land Value Tax has to be assessed. To recoup these gains from landowners to pay for public services and to finance the building of homes to increase the supply of housing available.

  • @Joe Bourke that’s rather like the relationship between interest rates and house prices – they being based on affordability, meaning that as interest rates drop, assuming wages remain broadly the same, the value of houses gets bid up (that being, of course, land ultimately).

  • Peter Martin 6th May '20 - 2:58pm

    @ Joe B,

    We do hear a lot about the benefits of a Land Value Tax in your various posts and comments. I’ve often said it is over-hyped. The money isn’t really there in land and property. Except in valuations. I’m not saying we shouldn’t have a LVT. Many countries, in fact, do. But, it will just be another tax and won’t make that much difference.

    Land value taxation is currently implemented throughout Denmark, Estonia, Lithuania, Russia, Singapore, and Taiwan.

    So which comes closest to your idea of how it should operate?

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

  • Daniel Walker 6th May '20 - 3:27pm

    @Peter Martin “But, it will just be another tax and won’t make that much difference.

    I think the point LVT proponents make, and I find their arguments persuasive, is that LVT is qualitatively different from other taxes. It is definitionally progressive (you have more land, you pay more tax), it encourages development of the land (adding a loft conversion to your house doesn’t increase it) discourages leaving land unused (viz. “land banking” by supermarkets) captures land value increase due to community activity (e.g. in Churchill’s toll bridge example, quoted by Joe above) and is exceedingly difficult to avoid.

    I don’t think anyone is suggesting it’s a magic bullet. But if it was, for example, used to replace business rates¹ and Council Tax (which is appallingly regressive, especially in London) it could be revenue-neutral and still improve the situation simply by being generally fairer.

    I think the telling phrase in the Wikipedia article you linked to is in the section on Estonia; “The tax has contributed to a high rate (~90%) of owner-occupied residences within Estonia, compared to a rate of 67.4% in the United States”

    1. which is LibDem policy: https://www.libdems.org.uk/autumn-18-replacing-business-rates

  • Nonconformistradical 6th May '20 - 3:41pm

    Land can’t just get up and fly off to a tax haven. If the owner doesn’t pay the LVT then confiscate (some of) the land.

    Job done.

  • Peter Martin 6th May '20 - 4:04pm

    @ Daniel Walker,

    It is curious that Estonia has such a high rate of owner occupation. But we shouldn’t jump to the conclusion that there is a direct link to Estonia’s LVT.

    Denmark, also with a LVT, only has a rate of 62% home ownership. Maybe that’s because Danes are struggling with their 25% VAT rate! An LVT doesn’t seem to have done much to help lower that.

    https://tradingeconomics.com/denmark/home-ownership-rate

  • Daniel Walker 6th May '20 - 5:04pm

    @Peter Martin “it is curious that Estonia has such a high rate of owner occupation. But we shouldn’t jump to the conclusion that there is a direct link to Estonia’s LVT.

    Yes, fair point, that’ll teach me to quote Wikipedia without checking! The citation doesn’t really support that conclusion, although the rest of my point re: replacing rates & council tax with LVT stands.

    Danish VAT is indeed high, and VAT in general is regressive, but Danes are generally quite happy, however, so possibly “It Turns Out It’s More Complicated Than That” is, as ever, a useful phrase.

  • Peter Martin 6th May '20 - 8:22pm

    @ Joe B,

    Singapore may appear to be “market oriented” in its international trade but that does not extend to the value of the Singaporean dollar on the forex markets and neither does it apply to the internal housing market.

    Only Singaporean nationals and permanent residents can avail of the subsidized housing by the Housing & Development Board (HBD). HDB flats are government-subsidized housing units that are sold by the Housing & Development Board under a 99-year lease agreement. So can we say that owning a 99 year lease is the same as owning the property? The public sector HDB is a monopoly supplier. Therefore there isn’t the same kind of market in housing that we would be familiar with in the UK.

    It is the direct Govt control of the residential sector, and not “the free market”, in Singapore which creates high levels of “owner” occupation. It is simply not true to say that a LVT provides the government with the money to be able to pursue this policy.

    But, I’ll repeat what I previously said. There’s nothing wrong with a LVT in principle. Its a useful tax but just one of many. It doesn’t fundamentally change the nature of the Singaporean govt.

  • The resolution foundation report issued today focuses on the job prospects for graduates and school leavers this summer https://www.resolutionfoundation.org/publications/class-of-2020/
    “The economic fallout from the coronavirus has taken the UK into uncharted territory, with fears that an additional 640,000 18-24-year-olds could find themselves unemployed this year alone. This briefing note focuses specifically on the prospects facing young people leaving full-time education today, highlighting the size and length of employment and pay scarring that they could experience.”

    For instance, even three years after having left full-time education, the employment rate of today’s graduates are projected to be 13 per cent lower, three years down the line, than they would have been absent the crisis. Employment rates for mid- and low-skilled workers could fall even further: 27 per cent and 37 per cent respectively. Moreover, a large proportion of non-graduate leavers tend begin their careers in sectors that are currently shutdown and likely to suffer declines over the medium-to-longer term – such as retail and hospitality.”

    Given the challenges facing today’s education leavers, the report highlights two sets of policy options, helping more young people to stay in education for longer, and targeting job support at those who are entering the labour market for the first time.

  • TCO,

    “…the relationship between interest rates and house prices – they being based on affordability, meaning that as interest rates drop, assuming wages remain broadly the same, the value of houses gets bid up.”

    It is a key point. Mortgages are ultimately based on the maximum your income will sustain. If interest rates fall, housing (land) prices jump. From the financier’s point of view, whether his collecting £10,000 interest a year on a £200,000 mortgage at 5% or a £400,000 mortgage at 2.5% makes little difference. The financier is still collecting £10,000 on the same house that has doubled in price. From the homebuyers point of view he is having to devote a much larger share of earnings to capital repayments then
    before and his disposable income is much diminished.
    It is in the financial system, through interest and debt payments, where much of the economic rents on land values are ultimately captured – whether it is homeowners buying or landlords borrowing to finance a property rental portfolio.

  • Peter Martin 7th May '20 - 7:55am

    @ Joe Bourke,

    This obsession with land harks back to the 19th century when the emerging capitalist class, who owned the industry, clashed with the aristocracy who owned the land. The industrialists naturally didn’t like paying rent. Out of this developed the fundamental Georgist dogma that everything would be fine if rents were replaced by taxes to the state.

    Of course, from a socialist perspective, this can be be seen as a call to effectively nationalise all land without compensation to the owners. But, also from a socialist perspective, it can be understood as, at best, a partial solution to the problem of worker exploitation generally. It does nothing to stop the capitalists exploiting workers afterwards.

    If we fast forward a couple of centuries we can see that there is no longer any real class between the land and industry owning classes. The two former ruling classes have largely merged through a process of inter marriage and an acceptance of compromise. Land is now more likely to be owned by a finance company than the Dukes and the Earls that once formed the British ruling class. It’s time Lib Dems moved on too.

  • Peter Martin 7th May '20 - 8:08am

    @ Joe B

    “From the financier’s point of view, whether his collecting £10,000 interest a year on a £200,000 mortgage at 5% or a £400,000 mortgage at 2.5% makes little difference.”

    So, you think it would make “little difference” to you if you were to lend me £2000 at 5% interest or £4000 at 2.5% interest? Can I choose the latter please?

    That sounds a much better deal. Especially as inflation at 2% needs to be factored in !

  • @Peter Martin “So, you think it would make “little difference” to you if you were to lend me £2000 at 5% interest or £4000 at 2.5% interest? Can I choose the latter please?”

    If you’re borrowing the money to buy property, which is only what a mortgage permits, you may have borrowed twice as much, but so has everyone else. Hence as the supply has not changed, the demand will bid the prices up by a factor of two, so you’re no better off in terms of house bought, but much worse off in terms of debt.

  • Peter Martin 7th May '20 - 2:42pm

    @ TCO,

    OK but you have to look at the transaction from the POV of the lender too. So I’m sure we would both be in the position of lending out half the money at twice the interest.

    Tempting as it might be to blame the banks, and the landowners for monetarism, it’s the Govt that calls the shots on interest rates. They are now ultra low because the Govt wants them to be ultra low.

  • Peter Martin 7th May '20 - 3:00pm

    @ TCO,

    It perhaps doesn’t come across that I’m mainly agreeing with you! The banks doing the lending, obviously, aren’t better off at lower interest rates. The borrower has to borrow more to buy the same property and is unlikley to see a rise in the value of his/her asset and further reductions in interest rates are much more unlikely.

    Another way of looking at it is to say that everyone wins as interest rates track down to zero except the ones at the end of the line who effectively end up holding an inflated asset when the bubble bursts.

  • @Peter Martin “Another way of looking at it is to say that everyone wins as interest rates track down to zero except the ones at the end of the line who effectively end up holding an inflated asset when the bubble bursts.”

    Yep – another way we GenXers will be stuffed 🙁

  • Katharine Pindar 7th May '20 - 4:22pm

    Joe, thank you for this wide-ranging survey. I am all for the solutions you favour, including Job Guarantee schemes, and it’s good that the party is proposing a gradual ending of thee furlough scheme which would prevent sudden loss of income. I just wonder, though, if the voters were given a wider choice of options for after the Corona Virus, they might like others too. Imaginative new solutions should be offered as part of the mix.

  • Peter Martin 7th May '20 - 7:19pm

    @ JoeB,

    You obviously don’t like anyone owning land! To declare an interest, I own the the block that my house sits on!

    In one comment (7th May 8:08am) you’re suggesting that interest charged on loans is too high. Later in the day (4.54 pm) you’re complaining that savers are losing out because interest rates are lower than inflation. Somehow, this is all connected with the ownership of land and a lack of a LVT???

    Look, if you want to nationalise land without any compensation, please just get on and suggest that. Including my little bit of the UK! I’ll then be paying £1500 in “rent” to the Government instead of my usual £1500 in council tax? Is that right? I can live with that.

    Incidentally I’m never quite sure what you mean by “rent”. Sometimes you seem to use the word interchangeably with “tax”.

  • @Joseph Bourke “King Louis XIV organized handouts of bread and obliged the aristocracy to do the same. He also attempted to register all grain stores in order to avoid hoarding, sending out inspectors to ensure that the rules were obeyed. But against the unrelenting misery of the times, such measures must have seemed paltry. Episodes of violence ensued, and peasants who had been reduced to eating soup made of ferns formed gangs to raid bakeries and ambush grain convoys.”

    I’ve recently read up on the Holodomor (Stalin’s deliberate starvation of Ukraine, and the resulting 3-4 million deaths in the winter of 1932-3, in order to sell grain to fund the “socialist miracle” of rapid industrialisation, and forced collectivisation of farming). What you describe mirrors what happened in Ukraine, which had the added horror of cannibalism.

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