Three Pledges on Universal Basic Income

In designing our version of Universal Basic Income (UBI), it goes without saying that we want to end up with a fair system. The current system is not fair in a lot of ways, some of them quite inexplicable. It follows that the changes in income for individuals and households will vary wildly and in ways we will have difficulty in explaining. The simplest I could manage was these three pledges. The numbers are for illustration only and are based on 2020-21 allowances.

Nobody will take home less than £4,000 a year.

Any version of UBI will produce a pledge of this kind. Many people won’t believe that there are people getting less than this now. The millions who are will know it. The chancellor’s attempts to compensate people hit by Covid have illustrated just how many people fall through the cracks between conventionally employed and unemployed.

Nobody on benefits will be worse off.

Since nobody understands the current system, the only way to fulfil this pledge is to keep the entire existing benefits system and adjust the final amount people get for the amount of UBI they are getting and the amount of extra tax they are paying. Any single person getting less than £4,000 and any couple getting less than £8,000  would be taken off benefits completely. We could simplify the system in ways that only made people better off such as upgrading Universal Credit so it always beats the legacy benefits it hasn’t quite replaced yet.

Nobody with an income less than £30,000 a year will be worse off.

This takes a bit of effort in designing the tax changes but it means we can say to the majority of voters in a very large majority of seats that they will see no change or a change for the better.  An example using only direct taxes and the figure of £4,000 p.a. would see Income tax at 25%, NI down to 8% with both allowances abolished. The rest of the money would have to be raised from higher rates that don’t affect anyone on less than £30,000 p.a. Those living entirely on investment income (and hence not using their NI allowance) would break even at £30,000 while for those entirely on earned income it would be £36,000.

 

* I am a Software Developer and Long-term Liberal Democrat based in London

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66 Comments

  • At what age will it start ?

  • Brad Barrows 7th Apr '21 - 6:15pm

    So Income Tax is devolved and Liberal Democrat policy is to devolve more powers as part of a move to Federalism. Is Liberal Democrat policy to allow each country of the UK to decide whether it wishes to have a Universal Basic Income or will power over this be centralised to Westminster?

  • John Marriott 7th Apr '21 - 6:25pm

    @David Raw
    Hopefully when thee and me are attending that big Lib Dem Conference in the sky, Hopefully therefore not JUST yet! Sorry, Mr Davies, I just can’t take the idea seriously.

    I bet that UBI will be big on the doorsteps of Hartlepool next month!

  • @ John Marriott Is that the big Lib Dem Conference in the sky, or is it the pie in the sky, young John ?

    No plans at present, though I can still well remember when the party was led by serious people with serious polices. Now it’s all baby badgers, big chess pieces and battered cod.

  • Peter Davies 7th Apr '21 - 8:02pm

    @David Raw I’ll leave the lower age limit to FPC but you can be confident you’ll make the cut.

  • UBI will only work if all humans on Earth are paid by their nation (free and clear) no less than $3,000/Month for life! With inflation the amount will have to increase over time faster by 3% than inflation rises. In America; $36,000 after all basic expenses are paid man Americans are stilling living in poverty stuck in small apartments and no buying power to increase wealth accumulation or %percentage income growth in an upward steady trajectory. Cost of living is very high in 2/3s of states and 1/3 of states are no longer affordable to the poor in any capacity.

  • Peter Davies 7th Apr '21 - 8:27pm

    @Martin. None of those pledges claims that anyone let alone everyone would be better off. This version gives a relatively small number of significant winners paid for by a relatively large number of the better off losing quite a small proportion of their income.

  • Arthur Clive Trussel 8th Apr '21 - 8:52am

    “Nobody on benefits will be worse off.” ?
    I thought everyone would simply get the same amount – irrelevant of everything!
    Of course taken back in taxes on those that are paying them.
    That’s whole idea!
    It has been said for decades that Automation/AI and computerization will free us all up to a better life _ It has never happened!!!
    This is the start of that dream. A Liberal Democrat future.
    It should be sold to the people as the way to freedom from the rat race.

  • Peter Martin 8th Apr '21 - 9:10am

    @ Arthur Clive Trussell,

    So you’re “selling” the idea that the robots will take our jobs, but “not to worry” because we’ll all have our £4k per year to free us from the “rat race”

    Ok but who on this blog would “buy” that as good idea? Either for themselves or their younger family members?

  • Peter Martin 8th Apr '21 - 9:32am

    The question of the starting age seems to have been dismissed as of no importance.

    It does need an answer. I’ve seen suggestions that it should be something like 24 or 25. I’m guessing that this is because there is no real desire to encourage young people to hang around in the parental home doing nothing but play video games and have £4k per year spending money by courtesy of the tax payer.

    But suppose they aren’t like this? Suppose they are working hard and earning a reasonable income. Will they have to pay the same higher rates of income tax and have a lower tax threshold like everyone else. If they aren’t eligible for a UBI, why should they?

    What was that about no-one being worse off?

  • On what authority does Mr Peter Davies speak ? Is he in a position to ‘make a pledge’ ? Has he been recognised in any official capacity by the Party and is he accountable in any way – or is he just ‘a long term Liberal living in London’ making it up as he goes along and floating a notion ?

    On the question of age at entry is concerned does it begin at 16 (school leaving age ?) or will my one year old grand daughter get it ?

    Similar questions can by asked about BLAC. Are they accountable, democratically elected with some form of recognition by the party in any way or are they just a group of self appointed individuals who have formed a lobbying group ?

  • Peter Davies 8th Apr '21 - 10:07am

    @David Raw. I am indeed just floating a suggestion. We have voted in principal for UBI and an FPC appointed panel is currently discussing what version of UBI to back. I hope this will then be put to conference. This is my contribution to the debate.

  • A famous English playwright once wrote ‘ There is a tide in the affairs of men, which taken at the flood, leads on to fortune.’
    During the postwar years, “liberal collectivists” such as Beveridge or T. H. Marshall had mostly promoted socialized services to raise working-class living standards. As an entity, however, the planning state also came under attack by economists, who by the early 1940s had come around to the idea that cash was a better way of providing minimal welfare without letting the state dictate patterns of investment.
    James Meade’s book Planning and the Price Mechanism (1948) offered a representative version of this view. Meade believed that “‘money and the pricing system’ were ‘among the greatest social inventions of mankind’.” Both of these were, in Meade’s words, “an efficient and secure election machinery with the freedom ensured by secret ballot,” granting “each individual a general command over his fair share of the community’s resources.”
    In the 1950s, the rise of mass taxation and of the “sovereign consumer” made his individual choice paradigm into an elegant alternative to postwar planning and service-based redistribution. This shift would slowly legitimize what the economist John Kay called “Redistributive Market Liberalism.” In this perspective, even if the state had to retain a “dominant role in matters of income distribution,” it should completely “discharge this responsibility with as little interference as possible in the workings of the free market.”
    This “RMT” perspective was best illustrated by Juliet Rhys-Williams. In 1943 she advocated for a “new social contract” in the form of a universal benefit allocated weekly, replacing “all other forms of payment” and without means test, to each citizen above the age of 18. An alternative to the Beveridge plan, her idea refuted the emphasis on the male breadwinner at the heart of the Beveridge model. “Married women and those acting as unpaid housekeepers,” Rhys-Williams argued, “would receive the benefits of the contract without being required to register for employment. Her plan established “tax-benefit integration […] as a market liberal cause, rooted in a critique of both Fabian paternalism and the labourist assumptions of the National Insurance system.
    UBI was party policy until 1994. It is unfinished business. The Covid pandemic and the economic response has brought this business back to the fore.. We have at this time that tide Shakespeare wrote of long ago.

  • John Marriott 8th Apr '21 - 12:34pm

    @Joe Bourke
    The trouble in using history as your prop is that you are dealing with a majority of Henry Fords. “We’ve been here before” could be the leitmotif for many of our recent events. That “tide” might have worked for Brutus; but would it work for UBI in general and the Lib Dems in particular. As James Young reminded us, you would need a very clear head to explain it to the general public in words the majority might be able to understand, something, sadly, that the late Charles Kennedy was lacking when he tried to explain LIT back in 2005.

  • Laurence Cox 8th Apr '21 - 1:17pm

    There are a number of options for a UBI; Luke Martinelli of the University of Bath has analysed these in detail:

    https://www.bath.ac.uk/publications/assessing-the-case-for-a-universal-basic-income-in-the-uk/

    Malcolm Torry of LSE has been a long-time advocate of UBI, being also Director of the Citizen’s Basic Income Trust since 2001 and has published extensively on the subject.

    https://citizensincome.org/about/

    Peter Davies’ article recognises that while the details of UBI may be complex, we still need to present it simply as a series of pledges that it will meet. It is essential that no-one on below-average incomes loses out, even if that makes the implementation of UBI more complex.

    The Party already has a policy on UBI for pensioners (the Citizens’ Pension dating from 2004), which would need to be updated to fit with UBI for all adults.

  • @ John Marriott “the late Charles Kennedy was lacking when he tried to explain LIT back in 2005”.

    Not sure whether the baby kept him up all night (Lib Dem Press Office interpretation) ………. or tired and emotional after being up all night. (Jeremy Paxman interpretation)

  • Peter Davies 8th Apr '21 - 2:16pm

    We don’t just need a version that Ed can explain (though it would be disastrous if he couldn’t), we need a version that thousands of individual canvassers can explain after reading the campaign script on MiniVan. That’s certainly a challenge.

  • Joseph Bourke 8th Apr '21 - 2:29pm

    John Marriott,

    a UBI pamphlet along the lines of Beveridge’s Social Insurance and Allied Services may not be the bestseller that saw queues forming down Kingsway to buy the 300 page highly technical report.
    However, in this day and age on Internet communication it is not necessary to sell 600,000 copies of a government report. A simple online explanation of the basics will do it. We can leave it to the PR gurus to come up with the three word soundbites. The “tell Sid” advertising campaign prompted hundreds of thousands of people to buy shares in British Gas in the Eighties. Judging by the response to furlough and self-employment grants in the pandemic, I think it will be broadly welcomed.

  • Peter Hirst 8th Apr '21 - 3:16pm

    The devil’s in the detail. Achieving a fair UBI would deserve a Nobel Prize. This is a good time for a pilot with money slashing about and more people in need. It’s the word universal that will cause the issues. Perhaps there will be an option to return it.

  • Joseph Bourke 8th Apr '21 - 10:20pm

    I would say that the UBI should be a guaranteed minimum income (GMI) set at £95 per week for adults below retirement age and would replace the current personal allowance and NI threshold. This is the current equivalent of the Universal credit basic allowance for over 25’s.
    The UBI would be paid as a tax reducer or direct benefit payment. The tax reducer can be withdrawn in the same way as the personal allowance is currently withdrawn for those with taxable income over £100k, if desired
    Anyone with gross taxable income below £50,268 will benefit, as will welfare recipients under 25 and those on legacy benefits or receiving lower individual benefits as a result of being in a two person household. The £95 per week would replaces JSA and Income support (currently £74.35) and carers allowance (67.25) .
    Someone earning £30k per year will currently take home £24,062 after tax and NI. With the guaranteed minimum income replacing the tax and Ni allowances they will take home £25,340 i.e, an additional £1278 per year. Anyone earning between £15,437 and £50,268 will take home the same extra £1,278 per year. Anyone earning below £15,437 can claim £4940 in direct benefits to top up their pay in place of a tax reduction.
    At £60k the removal of the benefit of the tax allowance at the higher combined tax and NI rate of 42% (from 32% at basic rate) reduces take home pay from £43,449 to £42,213.
    The weekly GMI is paid for by withdrawal of the the tax allowance pf £48pw at basic rate (£96 pw at higher rate), and NI thresholds – employee NI £22Pw and employer NI £25pw. Smaller employers (most unincorporated businesses and 7 of 10 companies) would pay no employers NI under the LibDem proposal for a £16k employment allowance. Larger employers would pay an additional £25pw per employee. Additional revenue could be generated by removing the upper threshold for employee NI. In this case take home pay for a £60k salary would reduce from £43,449 to £41,240. as a consequence of the employee NI rate continuing to be applied at 12% instead of 2% i.e. a combined tax and NI rate of 52% or 57% for additional rate taxpayers with earnings in excess of £150k.

  • Lorenzo Cherin 8th Apr '21 - 10:46pm

    Excellent sure and consistent backing for a basic income,

    I agree with and value, no pun intended, the figures our exemplary and able economist in residence, offers. Jo Bourke is correct to show their fair and egalitarian purpose.

    Anything less than about a hundred a week is not enough. && pounds is too little.

    We must set it at a hundred to sound easy to remember and worthwhile. We can really consider the approach of Joe, more a basic income, perhaps, than a universal basic income, in it helps those who need it, no question, no pressure, no begging, that is a principle a party like this ought to promote, and in practice, it can work!

  • Peter Martin 9th Apr '21 - 4:25am

    ‘In 1943 she advocated for a “new social contract” in the form of a universal benefit allocated weekly, replacing “all other forms of payment” ‘

    This is the problem! And it illustrates the motivation of the political right in supporting a UBI.

    We all receive or have received payments from the State during our lives. They may not have been cash payments but they are just as important. Milton Friedman described our NHS as one of a number of “ragbag welfare programs”. His proposal was to replace these ” with a single comprehensive program of income supplements in cash”.

    In other words, many on the right see a UBI as a way to achieve an ultra small government which won’t be responsible for health, education, and social welfare. They’ll be telling us ‘here is enough to keep you alive, just about, and if want your children to have a decent education you’ll have to earn the extra yourself to pay for it.

  • John Marriott 9th Apr '21 - 8:00am

    @Joe Bourke
    “A minimum income … for adults below retirement age”. In other words free money? Mind you there does seem to have been a great deal of “free money” around recently. Those printing presses have sure been working overtime.

    The idea might excite Lorenzo; but I can see the pitfalls. Like the winter fuel allowance, “for all adults ABOVE retirement age” it may seem equitable; but why give to those, who are already quite well off, thank you very much.

    Please don’t waste time on ‘pie in the sky’ schemes like UBI. Providing gainful employment for “all adults below retirement age” (and above it, if they so choose) is still far more worth aiming for. If anything has to be minimum it should be the hourly rate for employment. I tend to agree with Peter Martin for once, when he cites the “right wing” take on UBI.

    If only Monty Python’s Graham Chapman were still around. He could don his Colonel’s uniform and interrupt yet another thread on UBI with those famous words, “This sketch has become too silly.” and order us to move on. Of course, it won’t happen. Anyway, if that’s what gets some people up in the morning, who am I to argue? Round two?

  • Peter Davies 9th Apr '21 - 8:19am

    @Joseph Bourke: The PAYE system was devised when employers did their books using actual books. These days a lifetime of direct payments can cost less than one manual intervention. Allowing payments to be deducted from tax massively increases the administration costs with manual interventions by employee, former and new employers and state required every time there is a change of employer or employment status. It also requires the retention of emergency tax codes which often cause cash crises for those entering work and processing delays that do the same but worse for those leaving it.

  • Peter Davies 9th Apr '21 - 8:33am

    @Lorenzo Cherin: I see the value going up to at least £100 rapidly once the structure is in place. Even then there would be some households would need a top up (Try getting a room in London for that). This article is largely about getting us to a place where we can have a sensible debate on levels with a clear idea on who benefits and who pays. Once a UBI is in place and the sky has not fallen, nobody can argue that it is a right wing plot to abolish the NHS or that everybody will retire to their couches to watch daytime TV.

  • “For adults below retirement age”.

    Delighted to hear that Prince Charles and Princess Anne won’t get ubi but disappointed that Prince Andrew and Prince Edward will.

  • Little Jackie Paper 9th Apr '21 - 9:10am

    Surely a UBI has to be from birth? I’ve always assumed that it would have to be from birth.

    It’s either universal or it’s not.

  • Peter Davies 9th Apr '21 - 9:38am

    @David Raw: Princes Andrew and Edward would be substantial net losers under every version of UBI that I have heard proposed.

  • @ Peter Davies That’s an assertion. I would be grateful for an explanation.

    And of course, you’d better be prepared with a convincing response when the right wing tabloids turn their fire on it.

  • Antony Watts 9th Apr '21 - 11:54am

    In the ever increasing neo-liberal atmosphere UBI is a difficult sell. We have become immune from the concept of shirking and striving as we have been sold by governments over the years. The concept of equality seem lost. But this is what we need to focus upon.

    People are people, a person is a person. Each has his/her value, ability and self satisfaction through achievements. Starting fro this point sure UBI is valid, it means people do not have to worry where the next penny is coming from, and can be free to follow their abilities. And this is good, this is good for them and good, balanced from our society – not everyone is Einstein!

  • Peter Davies 9th Apr '21 - 12:27pm

    @David Raw. If we get our act together, we will only have to defend one version against attacks from the right wing press. To take my example, Both are known to have “earned” incomes in excess of £36,000. They could therefore be expected to pay 1% more on earned income between there and the higher rate boundary plus 5% more on their investment income. I believe Joseph and Lorenzo’s versions would involve bigger rises as would the Green party version and most of the academic papers.

  • Joseph Gerald Bourke 9th Apr '21 - 1:28pm

    Peter Davies,

    the PAYE system is now operated through what is called Real Time Information (RTI). Paye codes and benefit payments are automatically adjusted during the year. The monthly universal credit is based on work allowances that are calculated from the earnings reported each pay period. The integration of tax and benefit systems is essential to the working of the universal credit system.
    A guaranteed minimum income is not universal. It serves two purposes. It replaces tax and NI allowances with a flat rate allowance that supplements average earning by £25pw. There is no need for benefit payments to anyone with taxable income . They will simply pay no tax or NI.
    Benefit payments are made to anyone registering for Universal credit. This can be done by simple self-certification that the applicants income is below £15,537 and there spouse/civil partners income is below £50,270. Benefit applicants will not receive the GMI as a tax/NI reducer, but rather as a direct payment.
    The UBI policy has been adopted by conference and the Federal Policy Committee will now bring forward proposals for implementation.
    In the 2010 election, the headline manifesto commitment was increasing the personal allowance to £10k putting over £705 in everyone’s pocket. This was endorsed by political commentators all around. A GMI of £95pw would put £1,278 in the pocket of middle income earners and ensure a minimum benefit equivalent to the current universal credit basic allowance of £95pw to all claimants. Higher income earners (above circa £54k) would see a fall in their after tax income of between 5% of net pay at £60k and 9.25% at £100k.

  • >The integration of tax and benefit systems is essential to the working of the universal credit system.
    There are many around here who object to the idea that the benefits system and tax system should be integrated. Personally, I think it is daft, given the current rigmarole workings of Tax Credits et al, and requiring people to get familiar with the idiosyncrasies of two systems, for the two systems not to become one.
    However, the downside to this is that some will regard the payment of benefits/credits as “lost tax revenue” and thus will attempt to minimize these pseudo outgoings by implementing hoops and hurdles and minimizing their value. Also, these people will be vexed, as the action of making the benefits/credit system more transparent will potentially encourage more people to claim what they are actually entitled to claim, but don’t presently due to the hoops and hurdles of the current benefits system.
    I think we need to get a little more relaxed, and treat UBI more like the furlough scheme (ie. treat people as adults) and provide encouragement and incentives (carrots not sticks) to set up businesses without having to worry about the impact of their fluctating and uncertain earnings will have on their benefits.

  • Peter Davies 9th Apr '21 - 2:25pm

    The government end of PAYE may be highly automated but the small employer end isn’t. They generally take one or two months to get you on the right tax code and nowadays people can turn over employers faster than that. If you gave people a choice when they entered employment of doing nothing, continuing to receive their UBI directly and having all their income taxed or asking their employer to deduct it from the tax payed, I don’t think many people would choose the latter, their employer certainly wouldn’t thank them for it and neither would the government.

  • Peter Davies 9th Apr '21 - 2:41pm

    Back in the early nineties when a customer was not entirely satisfied, we’d knock a bit off their bill and they’d give us a smaller cheque. Ten years later none of our customers could handle that. We had to create a credit note and make a counter payment. When PAYE was invented, people got their money from the same single employer in a small brown envelope. The idea of giving them two envelopes would have been shockingly wasteful. Things have moved on.

  • Joseph Bourke 9th Apr '21 - 2:58pm

    Peter Davies,

    I do small employer payrolls and furlough claims all the time. All payroll is automated now including small employers using HMRC or commercial software. PAYE codes are updated automatically online by most cloud accounting applications which is what is almost universally in use now.
    GMI is a tax reducer or a basic allowance benefit of the same amount. If you are on benefits you will not receive a tax reducer. Every employee completes a declaration when they take up employment and/or provides a P45. That is how PAYE codes are set and updated.

  • Joseph Bourke 9th Apr '21 - 3:09pm

    Roland,

    the USA operates what is called an earned income tax credit. Gordon Brown modeled working tax credits on that system but did not integrate the systems resulting in frequent overpayments and clawbacks. Universal credit is designed around integration of six benefits and real time reporting of earnings for calculation of work allowances.
    Redistribution and social security requires an element of taking from Peter to pay Paul. Ultimately, tax and benefits are two sides of the same coin.

  • @ Peter Davies So we have at least three versions : the Peter Davies version, the Joseph Gerald Brentford version, and the Lorenzo Cherin monarchist version. Presumably there’s a fourth – the ‘must have it from birth’ wee Jackie Paper version.

    Isn’t it make your mind up time, folks ? I’m going dizzy with choice and can hear the Express and Mail pencils being sharpened.

  • Peter Davies 9th Apr '21 - 11:14pm

    Yes. In the period between agreeing the principle and making our mind up about the details we are very vulnerable to the Mail and Express. They are only not attacking us because they have the option of ignoring us.

  • Peter Davies,

    I understand that the UBI working group will produce a consultation document that members will be able to respond to in due course.

  • Peter Martin 10th Apr '21 - 4:06am

    We are often told that the UBI is an idea whose time has come. Not just by its proponents in the UK but internationally too. But, apart from a few small scale trials, with inconclusive results, nothing much has happened,

    Hilary Clinton was reported to be interested in extending the Alaska oil dividend scheme to the rest of the USA but dropped the idea because she “couldn’t make the numbers add up.” This is always likely to be the problem. It looks superficially to be an attractive idea but the details show otherwise.

    So why not wait and see how others go with it and learn from their experience? Why does the UK have to always ‘lead the world’? Maybe we should recognise that our imperial days are over and concentrate on being more successful in a more limited way. The Swiss seem to do well enough with this approach.

    In the meantime, we need to address the question of where to find enough carers and health professionals, and also how to find jobs for all those who have lost out and will lose out due to the ending of furlough payments.

    There does seem at least a partial, but obvious, solution to both problems. If we can just bring ourselves to pay them a bit more we can take people out of poverty too. It won’t even add to the deficit! The extra money will be spent and respent in the economy and come back in taxes soon enough.

  • Peter Martin,

    you write “Hilary Clinton was reported to be interested in extending the Alaska oil dividend scheme to the rest of the USA but dropped the idea because she “couldn’t make the numbers add up.”
    The problem with a monetary economy based on exponential debt growth is that it requires the continual creation of inflation. Central banks continually intervene to counter deflationary factors. These factors include globalisation, automation, demographics in the west and the role that technology plays in being able to deliver goods and services cheaper.
    While retail prices may actually rise, hedonic adjustments in CPI indexes discount price rises based on improved quality of products and services, so do not reflect many experienced price increases https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm
    A basic income can obviate the need for continual excess money creation by central banks to support demand and counter debt deflation and serve to address the inequality that comes with programs like quantitative easing.
    Basic income, job guarantees and minimum wages work together. Production and consumption cannot be economically or politically hived off from one another. Producers understand that you need consumers with spending power to purchase goods manufactured by automation. Electric cars made by robots don’t buy themselves.
    Switzerland had a referendum on basic income in 2016. A key argument believed to have swayed an NO vote in Switzerland was put forward by the right-wing Swiss People’s Party (SVP) that the UBI will cause widescale immigration due to Switzerland’s agreement to the free movement of people with all 28 EU member states. An SVP spokeswoman said: “Theoretically if Switzerland were an island [basic income] would be possible.”
    So if someone is going to go first, it should be an Island nation with effective immigration controls. It also requires a progressive government. That could be the UK, Australia, New Zealand, Canada or even an independent Scotland.

  • Jenny Barnes 10th Apr '21 - 11:07am

    “the numbers don’t add up” “shortage of health workers & care staff”…
    The Economist paper recently argued that a carbon tax, while the best theoretical option to reduce CO2 emissions, suffered from the lack of public support. Suppose a hypothecated carbon tax, with the tax take used to fund a small UBI? Add on the net tax take from the tax free income allowance. Losers would be those using lots of carbon, gainers those with no or low incomes and using not much carbon. I don’t know if you could live on it, but it gets the thing started.

    As for shortages of nurses etc – reintroduce the training bursaries, put the pay up. Why is it that whenever there’s a ” shortage” of a particular kind of worker, it’s represented as that, rather than simple supply and demand? Better pay gets you more workers.

  • Peter Davies 10th Apr '21 - 11:44am

    My illustration using only taxes on income was just a way of producing exact figures. Carbon Tax, Inheritance Tax and Land Value Tax are all better taxes but I’d need better data than I can find to work out the levels of UBI they could fund.

  • Peter Martin 10th Apr '21 - 12:31pm

    @ Joe,

    “Electric cars made by robots don’t buy themselves.”

    True enough. However there is still a popular misconception that workers, generally, can price themselves into employment by a willingness to accept lower wages.

    “Basic income, job guarantees and minimum wages work together.”

    I notice you don’t include the word ‘Universal’. JAny significance in that? Job Guarantees and the provision of a minimum wage level, possibly subsidised at times by the State can play a definite and quantifiable role in the application of fiscal policy. There will be an increased requirement for Government spending when the economy is running cool and a lower one when it is running hot. The provision of a UBI wouldn’t have this effect unless it were continually altered. This might be popular when it is increased but a definite vote loser when it is reduced.

    “Central banks continually intervene to counter deflationary factors”.

    Again true enough. But should they? The BoE can’t adjust fiscal policy. If the government insists on a too tight fiscal policy all they can do is try to compensate with a too relaxed monetary policy. This is why interest rates are just about at zero and the average house price in Amersham is, according to your own figure, £615,070. Slightly out of the reach of most first time buyers!

    There needs to be a recognition that running a trade deficit is deflationary. Someone has to counter it, as both neoliberals and myself would agree upon. The difference is that neoliberals want it all to be done by the private sector borrowing ever larger sums. This cannot be allowed to continue.

    “A key argument believed to have swayed an NO vote in Switzerland was put forward by the right-wing Swiss People’s Party (SVP) that the UBI will cause widescale immigration…..”

    It’s an issue Lib Dems probably don’t want to raise! But it needs an answer. The same goes for Job Guarantees too. It wouldn’t be politically or economically feasible to offer a Job at a living wage to all the EU’s unemployed, for example. So there would have to be some rules to decide who will and will not qualify.

  • Peter Martin 10th Apr '21 - 1:42pm

    @ Jenny Barnes,

    I’m in favour of better pay for nurses and social care workers. So why not put any tax revenue towards doing that? The less that is spent on a UBI the more that is available to offer decently paid jobs who need the extra money, and the more that is available to help those who cannot work in a normal way due to personal health or other circumstances.

    Mind you, I don’t like to frame the taxation / spending relationships in this neoliberal way but it’s hard to change the way people think on this. The correct way is to raise taxes to cool inflationary tendencies.

    As Ann Pettifor explains:

    “Taxes are not the source of government financing, and are not necessary for government to spend. ”

    https://www.annpettifor.com/2018/02/do-tax-revenues-finance-government-spending/

  • Peter Martin,
    Actually the economist article Sacred cows no more is more economically literate than Ann Pettifor’s.
    The economist writes:
    “DENIS HEALEY had a bittersweet message when he took to the stage at Labour’s annual conference in 1973 with a pledge to increase taxes. There would be “howls of anguish” from the rich, but he added: “Before you cheer too loudly, let me warn you that a lot of you will pay extra taxes, too.”
    “…the reality of Britain’s financial straits is forcing a rethink. The best estimates say that the NHS needs another £20bn ($28bn) per year by 2022, equivalent to 1% of GDP. ”
    “If the public want to maintain current levels of public services, they must pay. Eventually the government, and the opposition, will have to take their lead from Healey and admit it.”
    Ann Pettifor writes: “While it will always be right to ensure that the rich pay taxes, and that HMRC is resourced to tackle tax avoidance, draining more income from the weakened economy – at this point in time – would not be wise. What the economy desperately needs is the injection of more finance and investment, not the extraction of income [Note: there are no plans to drain income from the weakened economy]
    …the most flawed aspect of the Economist’s argument for “raising taxes” is this: governments do not finance their investments, or even their activity, from tax revenues. Most of the government’s big expenditures are financed via the issuance of gilts – government bonds. The sale of gilts provides the government with finance for investment and expenditure. (And at the same time gilts provide a safe haven for pension funds to invest savings deposited with them. In due course (when we retire) those pension funds return the gains from investing in gilts to us, the UK’s pensioners, savers and taxpayers.)”
    The problem, of course, is that governments have not been investing funds raised by Gilt issuance in productivity enhancing structure and gilts are not a safe haven for pension funds. The purchasing power of gilts is constantly eroded by inflation, such that pensioners will at best receive back what they paid in 20 or 30 years ago from gilt invsestments, but will face living costs perhaps double that of what they were when they paid-in those savings. Pension funds have to invest in shares and corporate bonds to at least generate returns that keep up with inflation.

  • Peter Martin 10th Apr '21 - 6:09pm

    @ Joe,

    I was in two minds whether to quote Anne Pettifor. I’m not totally in agreement. For example, she writes:

    “Taxes provide the income needed to pay back the government’s debts, and ‘balance the books’.”

    No they don’t. Not usually. It’s very rarely the Govt repays debts. It’s even rarer they ‘balance the books’! It might swap one type of debt for another but that’s not a repayment. So, you’re right. Not very “economically literate”.

    She also says “Most of the government’s big expenditures are financed via the issuance of gilts – government bonds. ”

    This too is questionable and several comments are included on the point at the end of the article.

    Having said this, she is nearer to getting it right than are most Lib dems.

  • Joseph Bourke 10th Apr '21 - 11:34pm

    Robert Skidelsky gets to the heart of the economics behind basic income in this article https://www.theguardian.com/business/2016/jun/23/universal-basic-income-could-be-the-best-way-to-tackle-inequality with his focus ob the distribution of productivity gains:
    “The explosion of robotics has given the demand for UBI renewed currency. Credible estimates suggest that it will be technically possible to automate between a quarter and a third of all current jobs in the western world within 20 years. At the very least, this will accelerate the trend toward the precariousness of jobs and income. At worst, it will make a sizeable share of the population redundant. A standard objection to UBI as a way to replace earnings from vanishing jobs is that it is unaffordable. This partly depends on what parameters are set: the UBI’s level; which benefits (if any) it replaces; whether only citizens or all residents are eligible; and so on.

    But this is not the main point. The overwhelming evidence is that the lion’s share of productivity gains in the last 30 years has gone to the very wealthy. And that’s not all: 40% of the gains of quantitative easing in the UK have gone to the wealthiest 5% of households, not because they were more productive, but because the Bank of England directed its cash toward them. Even a partial reversal of this long regressive trend for wealth and income would fund a modest initial basic income.

    Beyond this, a UBI scheme can be designed to grow in line with the wealth of the economy. Automation is bound to increase profits, because machines that make human labour redundant require no wages and only minimal investment in maintenance.

    Unless we change our system of income generation, there will be no way to check the concentration of wealth in the hands of the rich and exceptionally entrepreneurial. A UBI that grows in line with capital productivity would ensure that the benefits of automation go to the many, not just to the few.”
    As this Labour blogger https://www.policyforum.labour.org.uk/commissions/adopt-universal-basic-income writes “Nicola Sturgeon now backs UBI as part of a new, more comprehensive welfare state, and is considering piloting it in Scotland. Plaid, the Greens and Alliance in Northern Ireland all support this policy. The Labour Party risk being left behind (and politically outflanked by the Lib Dems and SNP) on one of the most important policies of our time.”

  • A “basic income” funded from production will never eradicate poverty. We already punish, unfathomably, people doing the economic things we want people to do – work, invest in productive capital and trade, and shovel vast amounts of that to land owners, including home owners.

    Shovelling yet more via a basic income to landowners by making people *feel* like they are getting a bit more cash in their pockets, will just further subsidise poverty.

    Abolish taxes on production entirely. Switch to only taxing the use of the planet and artificial monopolies created by politicians, and you will eradicate poverty: https://jock-coats.medium.com/nobi-progressives-and-liberals-should-be-eliminating-not-subsidising-poverty-6868f01aed92

  • Peter Martin 11th Apr '21 - 6:34am

    @ Joe,

    So you’re saying we have to have a UBI because the Robots will take many of our jobs.

    So what will you say to the voter on the doorstep who asks the following:

    1) If there is going to be less work available why don’t we have shorter working hours for all, rather than no work at all for many and the same number of hours for most?

    2) Why do Lib Dems say we need to have open borders and free movement of labour to be able to recruit the workers we supposedly need when the work is being done by robots?

  • Joseph Bourke 11th Apr '21 - 12:55pm

    Peter Martin,

    automation will undoubtedly change the type of work undertaken. Both homeworking and a shorter working week are likely to be features of work in this century. That is not, however, Skidelsky’s main point.
    “The overwhelming evidence is that the lion’s share of productivity gains in the last 30 years has gone to the very wealthy. And that’s not all: 40% of the gains of quantitative easing in the UK have gone to the wealthiest 5% of households, not because they were more productive, but because the Bank of England directed its cash toward them. Even a partial reversal of this long regressive trend for wealth and income would fund a modest initial basic income.”
    That skewed distribution of surplus value created is related to what Jock Coats refers to in his comment above. The productivity gains of the last 30 years have been siphoned off to rents and the financing of mortgage debt and the house prices increases of the past decade have been driven by zero interest rates and quantitative easing,
    The tax and benefit system needs to be integrated and policies introduced to capture the economic rents derived from artificial monopolies (including credit creation) and the uplift in land values for the public benefit.
    There is no point increasing working tax credits and minimum wages, if it is wholly absorbed by higher rent payments or servicing higher levels of debt repayments. This is the fallacy of interpreting national accounting identities as economic outcomes – one persons spending is anothers income. Spending on rents and debt repayments do represent the income of land owners and financial institutions; but when the spending is such that what is left of wages or benefits is barely adequate for subsistence then it creates widespread poverty.

  • @ Joseph Bourke Joe, I’ve come across an article by Dr Ian Packer which I thought you might be interested in if not already familiar with it :

    “The Land Issue and the Future of Scottish Liberalism in 1914”. Published in The Scottish Historical Review, Vol 75, No. 199, Part 1 (April, 1996) pp53-71

    It’s downloadable on Jstor, and it certainly disposes of Dangerfield in Scotland.

  • Thank you for that interesting paper, David.

    This article from Liberal History on the National Library of Scotland https://liberalhistory.org.uk/resources/national-library-of-scotland/ writes:
    “How does the scholar decide whether Liberal policies are either radical or thoughtful without testing their evolution by returning to the documents that the party, its branches, and its members have left behind?”

  • Peter Martin 12th Apr '21 - 3:29pm

    ” This is the fallacy of interpreting national accounting identities as economic outcomes – one persons spending is anothers income.”

    There’s no real fallacy providing you are interpreting them correctly. They don’t tell us how the wealth generated in the economy should be distributed. That’s a political decision. So if you are arguing that the already wealthy are becoming too wealthy then apply a wealth and a high level of the upper rates of income tax. I’d just say that Jock Coats is into the purity of the so-called “single tax” on land which is never going to be enough.

    But you are getting off the point of the thread which is the UBI. You’re not answering the two questions I put on the 11th April at 6.34 am. Our doorstep voter won’t want you to change the subject to wealth inequality when they are asking why the reduction in working hours can’t be evenly spread amongst all workers, and why we need to recruit lots of new EU workers at the same time as we are telling the existing ones there aren’t enough jobs for them.

  • Peter Martin,

    Lionel Jospin, the French socialist prime minister cut the working week from 39 to 35 hours to reduce unemployment. It didn’t create more jobs, France still has very high unemployment, but it does spur further automation and productivity.
    Immigration is required to fill skill gaps. There simply are insufficient numbers of appropriately qualified staff in the UK due to a long-term decline in interest in science and maths degrees over many years.

  • Peter Martin 12th Apr '21 - 5:09pm

    Your’re saying we can’t cut the working week by N% to reduce unemployment by N% because there is no evidence this will work, but on the other hand we can take those N% out of poverty, which why anyone needs a job in the first place, by paying them £4k p.a.

    And you know this will work because the evidence is….. ??

  • Peter Martin 12th Apr '21 - 5:27pm

    “Immigration is required to fill skill gaps. There simply are insufficient numbers of appropriately qualified staff in the UK due to a long-term decline in interest in science and maths degrees over many years.”

    This kind of thing has been said for as long as I can remember. When I did my Physics and Electronics degrees I was given a grant and the cost of tuition was free. Even so, it was still said there weren’t enough graduates in engineering and science.

    So the neoliberals in charge of government decided the way to increase the number was to replace grants by loans and to charge students £10k p.a. for the privilege. It’s been the same with nurses. We need more nurses so the way to have more is to remove their training pay and actually make them do the paying!

    Go figure!

    And we all thought that neolibs believed in the workings of the price mechanism. In other words if there is a shortage we should pay more, rather than less, to rectify the imbalance.

  • There is copious evidence that the tax credit system introduced by Gordon Brown reduced in-work poverty and child poverty in particular. Child poverty has increased in recent years, particularly since the big welfare cuts brought in after 2015.
    The Nuffield foundation report. ends with four recommendations:
    1. Put in-work poverty on the policy agenda
    Given that six in ten people in poverty live in households where someone is in work, a serious attempt to tackle poverty in the UK requires addressing in-work poverty.
    2. Support for parents who wish to take up (additional) employment.
    …childcare remains a significant barrier to employment for many families, and it is no surprise that families with children are represented amongst those who struggle to exit poverty as they enter work. Supporting families in terms of their work-life balance and the ensuring adequacy of their supports is crucial.
    3. In-work supports for low income working families should be retained and strengthened,
    Almost one-half of people experiencing working poverty live in households without children, yet tax credit coverage for such families is very low (<10%). Further consideration should be given to how to support families without children who experience in-work poverty.
    4. Do more to tackle high housing costs
    It is important to recognise that the continued growth of the private rented sector, with the high housing costs that that often implies, will eat up many of the gains that may be made elsewhere –for example, in terms of the increased minimum wage (National Living Wage). In absence of a more active housing policy that seeks to bring housing costs down, politicians will increasingly find themselves needing to do more (e.g. spend more on the housing element of Universal Credit, or on social security generally) just to stand still in terms of poverty rate.

  • As this 2013 article indicates https://www.theengineer.co.uk/the-week-ahead-should-immigration-fill-the-skills-gap/
    “Three quarters of respondents to the firm’s 2013 People and Productivity Survey, said that their business was suffering from a skills shortage, and that middle managers are increasingly having to step in to address technical problems.
    Festo claims that the report indicates a growing requirement for appropriate on-the-job training and development. ‘The pressure is on for companies to develop their existing talent pipeline, because the majority of employees within engineering and manufacturing are between the ages of 40 and 50,’ said a company spokesperson. ‘As the capable workforce narrows, it will be this age group, typically in middle management, who will bear the most stress.”
    The numbers attending university in recent decades has grown significantly since these middle-aged engineers and managers graduated, but the skills shortages continue to worsen.
    Bursaries for student nurses are a minimum of £5k per year. The current average starting salary for a Band 5 Nurse in the UK is £24,907 per year (excluding pensions).This is according to the Agenda for Change, as of April 2020.(That’s the minimum and does not include any allowances or location weighting.)Roughly after all stoppages, nurses get between £1,600 – £1,800 per month. It is not poor starting pay that stops young people taking up this vocation.

  • @ Joe Bourke “the big welfare cuts brought in after 2015.”.

    Come on, Joe, you know it perfectly well, before 2015 as well.

  • David,

    LibDems ( as well as the SNP, Plaid Cymru and the Greens – but not Labour) did vote against the Welfare reform and work act 2016, on the basis that welfare could not be reduced any further.
    The act lowered the overall household benefit cap from £26,000 a year to £20,000 outside of London, and £23,000 in London. From 2016 a four-year freeze on all working-age social security payments was introduced. It was anticipated that it would affect 11 million UK families and reduce expenditure by £9 billion, a figure later increased to £13 billion.
    Analysis in 2018 by the Resolution Foundation indicated that by April 2019 the freeze in social security payments would have resulted in more than 10 million households experiencing a loss of income in real terms, with the lack of an inflation-related increase in 2019 resulting in the average low-income couple with children losing an additional £210 per year. The analysis also said that the cumulative effect of these social security limitations had been to reduce the value of working-age benefits by more than 6% in real terms. Child Benefit had become worth less than it was in 1999 in real terms, and for a second child it was worth 14% less than when it was introduced in 1979.
    While certain welfare reforms around work incentives might be retained, these real terms cuts need to be addressed going forward together with post-pandemic unemployment and housing costs.

  • Peter Martin 13th Apr '21 - 8:59am

    @ Joe,

    “Bursaries for student nurses are a minimum of £5k per year.”

    OK, but what about this time last year? This payment started for courses commencing in Sept ’20 so are you suggesting it should have produced an immediate effect? The other big factor to be considered is staff retention. There probably wouldn’t be any shortage of nurses or teachers had fewer drifted off to do something else.

    There’s been no similar incentives for the sciences, mathematics and engineering courses. The ‘liberal’ position, as I thought I understood it to be, was that a university education wasn’t about training for a job. It was about studying for something that was of personal interest. I do remember being asked, at my Uni interview, why I wanted to go, and muttering something about “getting a better job”. The interviewer looked at me quite disapprovingly and asked if I had any other reasons. It took a while for the penny to drop and for me to realise what he was getting at.

    So there is likely to be significant opposition, from the liberal educational establishment, to supporting some courses this way but not others. Then there will be the problem of where to draw the line, there will be anomalies thrown up which will be difficult to justify.

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