The case for a partial UBI

My local party proposed an amendment to the Conference UBI motion setting a medium-term aspiration. We proposed that the UBI level together with existing working-age benefits should equal either the Social Metrics Commission or the Joseph Rowntree Foundation calculations of what a sufficient income for a person is to meet their basic requirements. It was not selected for debate. The reason given was that the Federal Conference Committee thought that it could restrict the implementation options to be considered by the Federal Policy Committee! This seems to me to be an odd reason. I think Conference should have been given the opportunity to set out what level of UBI they are aiming for even if it is only an aspiration for the medium-term which would have given lots of wriggle room to FPC.

When considering a UBI we need to be aware of the gross costs of any proposal and not be misled by the idea that a scheme is affordable because we can make huge changes to the tax and national insurance system we have today.

The Social Metrics Commission state that a single person needs £157 to meet all of their basic needs excluding housing. The gross cost of setting a UBI at this rate would be just over £353 billion. If instead the working-age benefit level was increased to the poverty line of £157 for single people and £271 for a couple, this would cost in the region of £53 billion. A difference of £300 billion.

Some people suggest that a UBI can be paid for with a Land Value Tax. When we agreed to the replacing of business rates with a Commercial Landowner Levy, our name for this land tax, we set the rates at 59% in England and 67.5% in Wales of the ‘land rental value’. We stated that we would raise £25 billion a year from this tax. The maximum rate we could tax the rental income from land is 100% and this rate would only increase government income by less than £17 billion. A small fraction of the cost of a worthwhile UBI but a useful amount in paying for increasing the working-age benefits only.

Luke Martinelli in a paper published by the University of Bath defines a full scheme as one in which the majority of the existing benefits are eliminated. And a partial scheme as one in which the existing benefits are kept. He concluded that one full scheme which kept some of the extra benefits targeted for disabled people and increased income tax by 4% would have:

Increased working-age poverty by about 7%;
Slightly increased child poverty;
Increased the Gini coefficient measure of inequality by around 4%;
Meant a large number of households would lose out from the proposed scheme;
Meant that 42% of households would see their disposable incomes decrease;
Meant that large numbers of poor and middle-income households would be significantly worse off; and
Meant that 7% of the poorest households would lose over 25% of their initial income.

Most people I expect who support a UBI are familiar with the Malcolm Torry partial scheme for £60 for adults aged 25 to 64 and reduced amounts for younger adults, children and pensioners and income tax being increased by 3%. This partial scheme means almost no households will be worse off and inequality falls by 8.6%.

The benefits of a partial scheme are clear and as my local party suggested we should be talking about a partial scheme when introduced with the aim of increasing the combined amount from UBI and existing working-age benefits to the amounts that either the Social Metrics Commission or the Joseph Rowntree Foundation say are needed to meet a person’s basic requirements over the medium-term. I hope that any working group set up to flesh-out a UBI proposal will consider a partial scheme and come to the same conclusion as my local party and I have.

* Michael Berwick-Gooding is a Liberal Democrat member in Basingstoke and has held various party positions at local, regional and English Party level.

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12 Comments

  • Good to see somebody getting stuck in to the detail, Michael.

    There’s a lot going on in Scotland by both the Scottish Government and by the Scottish Greens. Some links below :

    Universal basic income and correspondence with Scottish …www.gov.scot › publications › foi-17-02092
    18 Oct 2017 — Universal basic income and correspondence with Scottish Greens: FOI release … has been redacted from the enclosed Ministerial briefing on Citizens Basic Income because an exemption under section … View this document …

    Citizen’s Income – Green YES briefing 2014 – Scottish Greensgreens.scot › Policy › Citizens-Income-Briefing-Note
    PDF
    The second vision would take a universal approach and abandon means- testing and complexity. The idea of a citizen’s Basic Income is an illustration of this.
    by SG Party · ‎Cited by 3 · ‎Related articles

  • Simon McGrath 6th Oct '20 - 5:26pm

    so in other words not a UBI at all but an increase in benefits?

  • Katharine Pindar 6th Oct '20 - 10:02pm

    That would certainly be quicker, cheaper and more effective in tackling poverty, Simon. Which our Leader agreed would be a prime objective for him, when asked in the hustings.

  • David Raw,

    Thank you for the positive comment.

    The only internet link I could find was for your first reference – https://www.gov.scot/publications/foi-17-02092/

    The 2nd March 2017 paper ‘Briefing on Citizens Basic Income’ (https://www.gov.scot/binaries/content/documents/govscot/publications/foi-eir-release/2017/10/foi-17-02092/documents/foi-17-02092-related-ministerial-correspondence-part-1-pdf/foi-17-02092-related-ministerial-correspondence-part-1-pdf/govscot%3Adocument/FOI-17-02092%2B-%2Brelated%2Bministerial%2Bcorrespondence%2B-%2BPart%2B1.pdf) sets out the issues very well. With regard to work it states, “Even at a conceptual level the policy’s rationale in terms of paid work is rather conflicting and confusing”. The report also sates, “it (a Citizens Basic Income) nonetheless will reduce the availability of labour and skills to the economy with unknown longer term impacts”. This report is also negative about the effects a CBI would have on poverty and inequality!

    From Annex D of that paper (https://www.gov.scot/binaries/content/documents/govscot/publications/foi-eir-release/2017/10/foi-17-02092/documents/foi-17-02092-related-ministerial-correspondence-part-2-pdf/foi-17-02092-related-ministerial-correspondence-part-2-pdf/govscot%3Adocument/FOI-17-02092%2B-%2Brelated%2Bministerial%2Bcorrespondence%2B-%2BPart%2B2.pdf) it can be concluded that the RSA scheme would lead to 15% of households in the bottom decile not being better off, rising to 38% for decile 2, 49% for decile 3, and 46% for decile 4.

    Simon McGrath,

    The party has accepted the principle of a UBI, now we must fight for the best version. This means we need to keep the existing benefit system and not reduce benefits when we introduce a low level UBI. So I am not saying “not a UBI at all but an increase in benefits”. I am saying a partial UBI, a low level UBI with our main effort being on increasing the existing working-age benefits. I think we could afford to introduce a UBI of £48.08 a week for people when they turn 18 to replace their Income Tax Personal Allowance, while increasing working-age benefits.

  • Laurence Cox 7th Oct '20 - 10:52am

    @Michael BG

    As I have repeatedly posted in the comments on these UBI articles, the Party has a long-standing policy (since 2004) on a Citizen’s Pension, in effect a UBI for pensioners. Once we break the link between NI contributions and State pension entitlement we can eliminate employee NI as a separate tax and fold it into income tax. This means that both earned and unearned (dividend and savings interest) income would be taxed at the same rate. It would also mean that we could increase the UBI to £3640 p.a. (£70/week) making everyone earning below the current Income Tax personal allowance better off, while those earning above it would be no worse off. The only losers would be those relying on unearned income and I think that this is justifiable on grounds of fairness – the pound in your pocket buys exactly the same whether it is earned, or unearned.

  • Laurence Cox,

    Thank you for making me aware of the Luke Martinelli and his paper for Bath University.

    This 2004 policy did not make it into our 2010 manifesto. It seems that in 2005 a Citizens Pension did make it into our manifesto. On page 11 we had, “From the age of 75 we will give pensioners our increased ‘Citizen’s Pension’ as of right,” and we set out these increased rates for those 75 and over as £109.45 per week for a single pensioner and £167.05 per week for couples. Saying a couple will have “over £140 a month more than at present. This will abolish the need for means tests altogether for a million people.”

    Did Steve Webb fail us then when he reformed pensions increasing the number of years a person has to pay National Insurance from 30 to 35?

    The basic State Pension is £134.25 a week, the new State Pension is £175.20 a week and the Guaranteed Pension is £173.75 a week and £265.20 for a couple. According to the Social Metrics Commission a single person needs £157 a week and a couple £271 to meet their basic needs excluding housing costs.

    When I think of a UBI I think in terms of working-age people and not retired people. Therefore having a policy of increasing the old basic State Pension to £173.75 a week for a single person is fine, but I would want the couple rate to be at least £271 not £265.20. Our policy seems to be to introduce these for those 75 and over and then expand it to those between 66 and 75 over time. I don’t think this should affect our future UBI policy.

    If we abolish the need for the paying of National Insurance to be entitled to a pension then a UBI of just over £70 a week would be fine linked to the abolition of the National Insurance threshold and the Income Tax Personal Allowance.

  • Katharine Pindar 9th Oct '20 - 1:15am

    Pensioners have now a decent income; working-age people do not have a decent level of income from benefits when they are unable to work. We are as a party committed to preventing people being made unfree through poverty, and that commitment in our Preamble precedes the new commitment to a UBI. It seems essential to me therefore that we should be campaigning first for increased welfare payments, to lift people to at least the poverty level of 60% of average income. We should be doing that before working out what taxes are necessary (possibly a general increase of 3%) for a UBI. I think the general working public, already managing on 80% of their normal pay but often now facing redundancy and having to live on Universal Credit, will discover the inadequacy of the current benefits and be glad of our campaigning to increase them. The broader justification for such a campaign could be the need for a new Social Contract, in which the government commits itself to provide sufficient income for everyone, as well as enough for their health and social care, better training for the challenges of the digital age and climate change, jobs fitting the training, and affordable homes for all.

  • Katharine,

    According to the Social Metrics Commission 11% of pensioners, 1.3 million, are living in poverty. They state that about 11% are in deep and persistent poverty and more than 12% are in deep and non-persistent poverty. It is surprising that so many pensioners are living in poverty as I would expect most of them to have good pensions from their ex-employers. As the guaranteed pension is above the single person’s poverty level then part of the cause must be because pensioners are not claiming their pension credits. Another cause could be that housing benefit does not pay people’s rent rate any more. We don’t have a policy to sort this cause out, it will only improve the situation slightly.

  • Katharine Pindar 10th Oct '20 - 10:19am

    Michael, do you mean that 11% of the 11%, the 1.3 million, are in deep and persistent poverty? It is certainly good to include pensioners in our intentions for a new Social Contract, because we know that though their fortunes were much improved by the triple lock, numbers in poverty are now rising again.

  • Yesterday I added a shortish comment to this thread, drawing attention to the important new development in the theme, the arrival of M M T as very relevant to UBI, and something, therefore, which the LDs must understand and embrace.

    Now, within the last 15 hours, my contribution has disappeared. Can someone please tell me why? I saw nothing to suggest that the thread had closed.

  • I ought to have included, just now, the vital message the the initials MMT — which will soon become more widely familiar — stand for Modern Monetary Theory. I think it emerged first in the USA. Get and read the book : “The DEFICIT MYTH:Modern Monetary Theory and How to Build a Better Economy.” And I believe it stops half an inch short of UBI. LDs must unite the pair, and that must be the main thrust of our campaign in the next General Election. The book and the theme of MMT emerged just before Covid.

  • Katharine,

    Indeed, I do mean about 11% and more than 12% of the 1.3 million (11% of pensioners). This works out as about 143,000 pensioners in deep and persistent poverty and more than 156,000 pensioners in deep and non-persistent poverty.

    Roger Lake,

    I assume you haven’t read the article by Geoff Crocker on a UBI and all the many comments – https://www.libdemvoice.org/basic-income-from-party-policy-to-electable-manifesto-commitment-65998.html.

    If you had you could have watched Stephanie Kelton and her talk on ‘The Deficit Myth’ today at 18.00. You might be able to watch it at https://www.crowdcast.io/e/festival-of-ideas-stephanie-kelton.

    Stephanie was asked about a UBI and she said she didn’t know what problem it was solving, unlike a job guarantee which was a solution to unemployment and was counter-cyclical.

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