UBI can be Achievable and Affordable

I was ecstatic when our Conference voted to back a Universal Basic Income at Autumn Conference 2020 thanks to the brilliant work of many, including our brilliant Welsh Leader Jane Dodds, James Baillie and Dr. Adam Bernard among others. Since then, party processes have been busy whirring away to figure out the details. We first had a specific UBI working group but this was then rolled into the broader Fairer Society working group last autumn. I’m sure we’ll soon see what the outcome of that process is and I hope it follows the mandate laid down by our Conference in 2020. 

In the meantime, to ensure a healthy debate and help frame our thinking about the issues, we as members should be considering what sensible, funded UBI proposals can look like. To that end, I have worked with others in the Radical Association, the radical liberal pressure group that I chair, to suggest a starting point for our UBI ambitions that is politically feasible going into the next election.

In line with the party’s consultation paper written by Paul Noblet and his team, our starting point could be replacing the Income Tax Personal Allowance and the National Insurance Primary Threshold, which are both expensive and fairly regressive tax reliefs, with an equivalent value monthly UBI of £319. To give a reference to this figure, the average spending on food per person is around £175 per month. We would not touch any welfare payments except counting UBI as income for means testing purposes. By adjusting the income tax Additional Rate thresholds and levels, we could keep the UBI simple without benefiting high earners who do not have personal allowances. Finally to make sure we don’t overly penalise working for the lowest earners, we can also cut the UC reduction rate from 55% to 43%.

The “net cost” of this reform, that is the cost not covered by the changes above, is £39bn per year by the PolicyEngine tool. This is a fair amount but is in no way unaffordable and would leave us still in the middle of the pack in terms of state spending as a % of GDP. In fact, this money can be recouped from abolishing inefficient tax reliefs (£5bn), as proposed by Bright Blue, and by a collection of tax reforms mostly focused on those with high incomes or assets. The host of tax changes to Capital Gains Tax (£14bn), Corporation Tax (£4bn), the taxation of dividends (£7bn) and abolishing inheritance tax to be replaced with a lifetime receipts tax (£9bn) are all focused on taxes to income from capital rather than income from labour to help reduce the massive discrepancy between the two. It is unfair that in this country you are taxed less for making money with the money you already have than from the money you earn from hard work.

Funding the starting point of UBI in this way provides massive benefits. Independent economic modelling suggests that it would cut the rate of poverty by a third and the rate of deep poverty by 60%. In addition to having an immediate human impact on the many Brits in desperate poverty, it will also provide significant long term benefits. The Joseph Rowntree Foundation estimated in 2016 that the cost of poverty to the taxpayer was £78bn per year due to the impacts of poverty on health, education and crime. An immediate reduction in poverty provided by this UBI proposal would go a long way towards reducing the huge pressures placed on our public services as well as supporting people with low incomes to afford the basics. 

This funding model isn’t the only possibility – and I’m keen to hear other thoughts from across the party – but it does show that we can do this. We can build income security for everyone, we can fund it in a popular, liberal way, and we can build social security systems that trust people, not bureaucrats, with the support they need. This is our generation’s NHS, and it’s time to build it.

 

Notes:

  • The CGT reform proposal revenue estimate is taken from page 19. It is the 4 year average of post-behavioural revenue from the “total with removal of death relief – indexation allowance” row.
  • The Corporation Tax proposal is for an “Alternative Minimum Corporation Tax” which has a large uncertainty in potential revenue, with £3bn and £12bn given as the rough range. £4bn has been chosen as a conservative option.
  • The Dividend Tax proposal revenue estimate is taken from page 7, specifically 4 year average of the “post-behavioural impact-total” row
  • The Lifetime Receipts Tax has been proposed by IPPR, Bright Blue and the Resolution Foundation. The IPPR proposal raised an estimated £9bn above the current revenue from inheritance tax, which would be abolished.
  • The inefficient corporation tax reliefs include the Patent Box, Film Tax Relief, High End TV Tax Relief and the Employment Allowance, for a total HMRC estimated cost of £5.2bn

* Natasha Chapman is Chair of Lincoln, Sleaford and North Hykeham Lib Dems and Acting Chair of the Radical Association. She is a long time activist and advocate for womens and LGBTQ+ rights.

Read more by or more about .
This entry was posted in Op-eds.
Advert

54 Comments

  • Brad Barrows 22nd May '22 - 6:07pm

    Can I just ask, is this proposal just for England? If not, how do these proposals square with Scotland having devolved control over income tax rates and bands?

  • It is pretty axiomatic in economics that the factor of production with the least elasticity of supply will tend to absorb as much value from production as it can. So if you in aggregate increase the level of “income” of the least well off, we are likely to see increases in rents. Equally, because these are scarcity rents, they are the most amenable to taxation, because they are utterly unearned by the person who claims to own the rent producing/capturing asset.

    So it is sad to see a list of options that utterly ignores all of this and suggests increasing, or at least tinkering with the impositions on the productive economy to do something that will almost inevitably end up in the hands of “idle” rentiers, rather than the people we hope it will benefit. You won’t see this effect in small scale non-universal “pilots” because until everyone gets it, the rentiers will find it difficult to push up rents across the board.

    We should be detaxing the processes that create wealth and economic well-being, giving more people the possibility of making sufficient to survive on their own, and switching to tax the unearned economic rents, mainly of land, but of other natural resources and things like regulatory monopolies (but land eclipses them all by a long way since every last human needs some of that and every unit of production needs somewhere to produce).

  • There is about half of GDP accounted for by rents in total (once you detax other processes). And so such a strategy would fund all of government, in a far fairer way – by capturing the value added by society spending its resources on public goods from those who most benefit from it, as well as something around the value of the current pension for every last human in the country per year as a dividend from what’s left over.

    Any other mechanism is addressing one symptom of the problem of unjust distribution of the economic wellbeing from production, by subsidising the poverty while doing nothing about one of its most fundamental causes.

  • Chris Moore 22nd May '22 - 6:38pm

    Also you could do something much simpler: increase transfers to the worst-off.

    But that is effective, targeted and doesn’t imply a whole series of other controversial reforms. Of course, it’s less glamorous than UBI. There is that.

  • Simon McGrath 22nd May '22 - 6:50pm

    Why not spend more to give more money to actual poor people rather than massive tax rises ( targeted at people who may well vote for us) to give money to people who don’t need it ?

  • I’m really excited to see the policy discussion here. I specifically asked the Policy Committee at the last federal conference if they would bring a proposal on UBI to Autumn conference and they said yes – it’s really great to see the party debating the potential options we have 🙂

  • Simon McGrath 22nd May '22 - 6:52pm

    Incidentally the Lifetime receipt tax is a tax on anyone who gives for example their children money to help buy their first home. Just imagine how the Tories are going to spin that in Blue wall seats

  • Natasha Chapman writes,”The Joseph Rowntree Foundation estimated in 2016 that the cost of poverty to the taxpayer was £78bn per year due to the impacts of poverty on health, education and crime”.

    Unfortunately this is a partial and very much out of date quote from the JRF. Five years later (27th May 2021) the Joseph Rowntree Foundation produced a detailed and lengthy report on UBI (available to download on their website) which posed the question, “Is Universal Basic Income a good idea ?”

    The JRF conclusion ? “Universal Basic Income (UBI) could be designed to reduce poverty, improve income security and boost well-being, but could be expensive and challenging to introduce. Many of its goals could be achieved through changes to the existing social security system and addressing the underlying causes of insecurity in the labour and housing markets”.

    As the former Chair of a Foodbank I am as committed as anybody else to fighting and reducing poverty, but unfortunately my political sense is that UBI could well become an albatross round the Lib Dems neck over the course of the next General Election campaign.

  • William Francis 22nd May '22 - 7:36pm

    Whilst I am in favor of most of the funding mechanisms outlined I am opposed to getting rid of the income tax and national insurance to pay for the UBI.

    Whilst these tax breaks are somewhat regressive in that they don’t benefit the very poorest people, I disagree that they are on the whole regressive as a very broad cross-section of the public does benefit from them (and the in the case of the income-tax-free threshold the policy is fairly progressive as the very highest earners are rightly excluded). Eliminating these tax reliefs would unnecessarily reduce a lot of the benefits of a UBI to many low-income people (mainly those who make slightly over the tax-free threshold of £12,000 or so).

    By using alternative funding mechanisms targeted at richer people (such as an LVT or merging income tax into NI or increasing the higher and top marginal rates of tax,etc), a UBI would achieve even greater benefits for low and even middle-income people.

  • Oliver Craven 22nd May '22 - 8:15pm

    @Simon McGrath

    Given we’re replacing the very unpopular inheritance tax, I don’t think it would be as hard a sell as you propose. Additionally, who is giving their kids more than £125,000 for a deposit? Even the median inheritance over the last few years was only £30,000.

    @Jock

    Is there actually any evidence for the replacement theory proposed by Single Taxers?

  • I’d tend to favour a higher starting rate of UBI but making sure that everyone can afford food without demeaningly applying for access to food banks, which Natasha’s proposal would achieve, would be an enormous step forwards towards a civilised society.

  • Simon McGrath 22nd May '22 - 10:00pm

    @oliver – you are right that inheritance tax is very unpopular. Replacing it with a much higher rate of tax that applies not just when people die would seem unlikely to be more popular

  • Mr David Robert Le G 23rd May '22 - 12:58am

    Whilst I do like the idea of UBI surely it should be a higher priority to use government funds to reduce the costs of living so that people’s money goes further rather than lazily throwing money at people which could just get sucked up by inflation.

    Having government build housing for everyone and not just the poor, as is done in Vienna and Singapore would go a long way and would be close to cost neutral in the long run.

  • Chris Moore 23rd May '22 - 8:03am

    And at the end of the series of highly unpopular and controversial tax increases that are needed to pay UBI to all those who don’t need it, we end up with a weighty and ponderous electoral millstone around our necks.

    It’s really simple: transfer money to the people who need it, not to people who don’t need it.

    A reform isn’t positive just because it’s complicated, massive and radical.

    Still it will reduce the number of Lib Dem MPs; that’s got to be good, right?

  • Oliver Craven 23rd May '22 - 9:01am

    @Chris Moore

    If you wanted to make a significant dent in poverty, you’d still be spending at the very least £15-20bn on ‘direct transfers’. Doesn’t change the fact we need to raise a significant amount of money.

    @Simon McGrath
    That may be true. But is there a policy we could adopt that the tories would put ‘the Lib Dems are right, actually’ on their leaflets?

  • Mark Petterson 23rd May '22 - 9:06am

    The benefits to mental health, coming from a reduced risk of sanctions, could provide great benefits to the individuals involved and also reduced the burden and cost to the local health care system. Should we start by a trial for a period to get a better handle on the costs and benefits? I would propose Devon and Cornwall – as this would minimise ‘boundary effects’ of near neighbours being on different schemes – with one caveat … that the scheme would not apply to anyone who has a second home, irrespective of which is designated as their primary residence.

  • Is this proposal too radical or not radical enough? I am not sure, but I am quite confident that it will have very limited electoral appeal for the simple reasons of cost and complexity.

    Politically, I fear it will scare too many of those who may be considering switching to the LDs at the next election, while not being seen as realistic or perhaps even understood by those who might benefit from it …

    The article suggests that Universal Credit will be little changed and that the UBI will be taken into account for means-testing – so that those on the lowest income, those most likely to visit foodbanks, will see little or no benefit from the proposal. Perversely, some may be worse off, if the much lower UC payments reduces the propensity to claim.

    If we have to retain UC for now, then lets focus on increasing the rate of UC and changing the UC reduction rate to benefit more people in work.

    Then let’s develop a plan to migrate towards a more meaningful UBI that permits the abolition of UC in its current form.

    I think this is more realistic, more palatable electorally and potentially more radical than this proposal.

  • Adam Bernard 23rd May '22 - 10:13am

    Mark Petterson is quite right about sanctions. The sanctions aspect of conditional benefits — not just the mental health impact of being sanctioned, but the impact of the uncertainty of knowing that it’s even a possibility — is one of the things that persuaded me that we need an unconditional system. Given that the history of benefits in the UK is basically a history of making people jump through ever-more-difficult hoops, an unconditional system is the only way that people can be cast-iron sure that they’re going to be provided for.

  • And at the end of all the dizzying and very unpopular changes needed to finance this, we increase the incomes of those at the bottom end by merely about 320 quid per month – if I’ve understood rightly – which then reduces
    their UC. Brilliant!

    Increasing UC directly, of course would cost money, but MUCH LESS than giving a UBI to everyone, including the vast majority who don’t need it. Indeed, we could be much MORE generous, if we don’t have to pay everyone.

    UBI will be another wonderful self-inflicted electoral wound. Almost up there with Revoke.

  • Jim Webber asks, “Is this proposal too radical or not radical enough ?”

    Good question, Jim, and I would add a further one. To what extent has the Party consulted the best modern expert economists and specialists from the progressive wing before committing itself to UBI for the next General Election ?

    UBI is a deep and complicated issue. Adopting it requires the brainpower and expertise of the modern equivalents of Keynes and Beveridge (alas both no longer available) to test out its efficacy and viability.

    And, on another level, to what extent have the elected Lib Dem politicians committed themselves to UBI. Most importantly – do they feel capable of adequately defending and justifying it in the White Hot Heat of a General Election campaign ?

    I fear for the party should the Tory tabloids – and more seriously the commentators and interrogators such as Andrew Neil get their teeth into it and start to pull it to shreds. We do not want a repeat of the Student Fees fiasco which so damaged the party’s credibility post 2010. Is UBI unsinkable and storm proof ?

    I make these comments from a radical standpoint and not in the least from any sort of conservative position.

  • UBI is better termed as a Guaranteed Minimum income and can only be effective in achieving its aims if we are prepared to tackle what Beveridge described as the Problem of rents
    “…the Resolution Foundation concludes that the basic system is ill-equipped to cope with structural economic changes and that setting benefits just above destitution levels leaves low-income families exposed to growing housing costs and rising levels of poverty.
    And that message chimes completely with another report from the Joseph Rowntree Foundation (JRF) that highlights housing costs as one of the three drivers of poverty alongside work and the performance of the social security system.”
    “London has the highest poverty rate at 27%, with the tenure mix and high cost of housing a significant driver of poverty. The North East (25%), West Midlands (25%) and Yorkshire and the Humber (24%) have comparatively high poverty rates: poverty there is driven by higher rates of worklessness and the higher proportions of adults in lower-paid ‘routine’ occupations.”
    The solution to the problem of rent lies with what Jock Coats refers to above i.e. tax reforms that shift the focus of taxation from wages and productive capital to land, natural resources and other regulatory monopolies created by the state. Henry George wrote of this in the 19th Century The Crime of Poverty
    For Keynes thoughts on UBI see John Maynard Keynes on universal basic income. There was always a rival to Beveridge’s contributory system Juliet Rhys-Williams and the campaign for tax-benefit integration, 1942-1955 UBI was party policy until it was ditched in 1994.

  • Elizabeth Pears 23rd May '22 - 1:52pm

    I’m not against UBI but I don’t think now is the time for the Lib Dems to be promoting it as a policy. I agree with David Raw’s comment about the Tory tabloids. Unfortunately we are currently on a very uneven playing field and the first priority of the Lib Dems needs to be getting as many seats as possible in parliament with the ultimate aim of introducing a more democratic voting system. This means avoiding the pitfalls of providing the Tory press with any policy ideas that allow them to mock or present the Lib Dems as naïve, unrealistic or incompetent. The Lib Dems need to emphasise their strengths of honesty, integrity and ability to get things done, evidenced by their willingness to roll their sleeves up and get involved in the local community. They can do this by providing sensible, moderate, costed policies that won’t scare the electorate and are aimed at making life in this country better for all and protecting the most vulnerable. I think UBI is too much of a risk in the current climate. It’s something that should be looked at after we’ve secured PR and evened out the playing field a bit.

  • Peter Davies 23rd May '22 - 3:28pm

    Most of that £36 billion is actually targeted at those currently on benefits. of the £319 a month, Those on UC get to keep an extra £181.83 pcm. Those who currently fall through the inevitable cracks in targeting but are often poorer than those who get it get to keep the full £319.

    The attempt to target income from capital is somewhat undermined by the fact that those who get all their income that way don’t pay NI. That means they are getting the equivalent of NI allowance which they did not get before so switching about five percentage points from NI to basic rate income tax would be needed to make up for that.

    Land Value Taxation is the other obvious area to raise money though like the inheritance tax, it would probably take more than one term before it was raising its full potential.

  • Charley Hasted Charley Hasted 23rd May '22 - 8:13pm

    @Elizabeth

    We aren’t tory-lite or labour-lite though. We’re Liberals and it’s past time we remembered that the way we’re going to win seats AND keep them is by finding liberal voters which we do by shouting about liberal policies and not by shutting up and praying the tories who are temporarily annoyed with Boris won’t notice who we are. They know who they’re voting for, they know why they’re voting for us and 99% of them will stop voting for us the second the thing that is annoying them stops being the case or at the next GE when the prospect of a Labour government scares them into voting for the tory party regardless of who’s at the top.

    We should shout about PR and UBI, and Drug Legalisation and Sex work decriminalisation and all those other amazing policies that will make a massive difference to people’s lives

  • Katharine Pindar 23rd May '22 - 9:18pm

    My good friend David Raw’s comments on this, yesterday and today, are apposite as ever. I was pleased that you gave the JRF quote, David, because they are indeed much aware of the relevance of the labour and housing markets to the grim poverty situation in this country, which was movingly described by a JRF adviser in evidence to the Fairer Society Working Group at an on-line meeting last week. The social security system is also much in need of reforms and increases, some of them already Lib Dem policy, others being raised by the group as it prepares a policy proposal. We agree that immediate steps should be taken to reform and extend Universal Credit and other benefits, and it is fortunate that the group wants them, because any major reforms are going to require a new more progressive government, which may think it easier to reform UC than bring in UBI. (Meant for people of working age, Joe, while a MGI should include pensioners.)

  • Natasha Chapman,

    At our spring Conference both Julia Goldsworthy and Lucy Nethsingha said that when the Fairer Society Policy Paper comes to Conference (expected this September) it will include a UBI option. I hope this will be for a meaningful UBI such as was set out in the second UBI consultation paper. This paper proposed a UBI of £71 a week. (This is £307.67 a month, not £319 as you wrote in your article.) It suggested that this could be rolled out over two years. It proposed funding £29.8bn of the £30bn net cost “with four major tax changes: re-allocating the 3 percent corporation tax rise (worth around £10 billion) and capital gains tax reforms (worth around £5.6 billion) already in the Liberal Democrats’ 2019 manifesto, and additionally eliminating capital gains tax uprating at death (worth around £1.2 billion) and reducing pension relief to the basic rate of tax (worth around £13 billion)” (pages 14-15).

    With a Universal Credit taper rate of 55% a person on benefits will only be better off by £31.95 a week from a UBI of £71 a week.

    If a £20 a week increase in the Universal Credit rates cost £7 billion a year then increasing them by £71 a week should cost around £25 billion. Doing this would mean that someone living on benefits would be better off by the whole amount.

  • Peter Davies 24th May '22 - 7:15am

    @MichaelBG With the elimination of personal allowances, a UC withdrawal rate of 55% would mean an effective tax rate on earned income of 70% even on very low incomes which is why the article suggests reducing it to 43% (62% after tax and NI).

  • Peter,

    The National Insurance threshold will increase to £12,570 in line with the income tax personal allowance from July this year. The combined income tax in England and Wales (20%) and employee NI rate (12%) is 32%. The tax and NI relief is then 32% of £12,570 i.e. £4022 annually or £335 per month (£77.35 per week)
    The National Minimum wage is currently £9.50/hr (and likely to be £10+ from next year). For a 35 hour week the minimum wage is currently £17,290 per annum. Net of 32% tax and NI (i.e. £5532), net pay after tax and NI is £11,758. Adding a UBI of £4022, annual net income after tax would be £15,780 as it now for a minimum wage earner. There is no change as long as the UBI is £335 per month, ignoring any other benefits.
    Increasing the UC work allowance to £11,758 (net after tax pay at minimum wage) could be more beneficial than lowering the taper rate to 43% for the lowest paid. Ideally, there would be no withdrawal of benefits before this minimum level of earnings is reached.
    The Bright Blue proposals include replacing Business rates with a Business Land Tax levied on commercial landowners, based on unimproved land values (as is currently LibDem policy). This would move the Business Rates system away from taxing investments in commercial property, and focus the tax squarely on the economic rent flowing from the value of unimproved land i.e a Land Value Tax. A proprtional property tax of the kind advocated by the fairer share campaign would progress the tax shifts advocated by Bright Blue a little further.

  • The work of the Radical Association in identifying approaches to delivery of a basic income/minimum income guarantee is to be welcomed. Natasha rightly focuses on political feasibility as a key issue. What is feasible depends to a large extent on the mood of the public. Post-Covid and with a cost of living crisis likely to be exacerbated with a recession and/or stagflation there is a need for radical solutions that can gain broad public support.
    It will be important to be well prepared to meet the kind of arguments that saw the Citizens Income plan dropped at the 1994 Conference in Brighton https://www.independent.co.uk/news/uk/liberal-democrats-conference-citizen-s-income-plan-dropped-1450315.html.

  • Peter Davies 24th May '22 - 7:26pm

    Raising the UC work allowance to £11758 would leave the majority of the population on means tested benefits including some single-earner households in London paying higher rate tax.

  • Peter,

    increased work allowances are a common call by both the JRF and Resolution Foundation
    Higher work allowances are particularly relevant for single parents who rent.
    When you speak of leaving the majority of the population on means tested benefits, I assume you mean the working age population that is currently in receipt of UC benefits over and above basic JSA or incapacity benefit (if these benefits are to be replaced with a UBI). Increasing the work allowance and/or lowering the taper rate should neither reduce or increase the need for means testing. As to higher rate tax, presumably you are referring to the effective withdrawal rate rather than income tax as housing benefit (and many other welfare benefits) is not taxable. The tax and NI rate on earned income is still 32%. An additional £100 of earned income over the work allowance is £68 net. Benefit payments are reduced by 55% of this sum i.e. by £37.40 for each £100 of gross income over and above the work allowance leaving £30.60 of increased income for every £100 over the allowance. Again, it is a matter of targeting. As a large element of in-work poverty is associated with minimum wage earners, raising the work allowance to the level of the after tax minimum wage is going to avoid a large proportion of those facing working poverty from having any tapering of benefits as a consequence of earned income at all i.e. the marginal withdrawal rate becomes largely irrelevant for minimum wage earners.

  • Peter Davies,

    Replacing the Income Tax Personal Allowance and NI threshold with a UBI of the same value means that anyone earning more than £12,570 will not be worse off, and those earning less will be better off.

    I would restore the Universal Credit Work Allowances to singe people and couples without children, so the taper wouldn’t take effect on the first pound a person on benefits earns. With no Income Tax Personal Allowance and NI threshold it should be set at £167 a month and the current ones increased by 33.5% so people working while receiving benefits don’t lose any further income from the changes we propose.

    My ideal would be to have a Minimum Income Guarantee for households of £157 a week for single people and £271 a week for couples. We already have the policy to increase Universal Credit and the legacy benefits by £20 a week. Therefore to increase the single rate by a further £60 a week would cost £15.6 billion and to increase the coupe rate by a further £130 a week would cost £19.5 billion (Total £35.1 billion less than Natasha Chapman says it would cost to have a UBI).

    Our policy is to abolish the sanctions regime but this does not mean that our policy is to make benefits unconditional. If we made the Minimum Income Guarantee unconditional this would have an extra cost.

  • Peter Davies 25th May '22 - 8:46am

    @Joe Bourke: Increasing the work allowance does mean increasing the number of people subject to means testing. If you increase the point at which you start tapering, you increase the point at which the taper runs out by the same amount. An increase of that amount would mean some households on above median income would still be eligible. I did mean the majority of people. Most children are in households that would be eligible. Pension credit is also means tested.

  • Peter Davies,

    Some people on above median income can receive Universal Credit today. A couple aged 25 or over with two children born after 7th April receive £234.20 a week, and if they lived in Nottingham and rented a two-bedroom home they could receive £156.49 a week to pay their rent. If they had earnings of £33,000 they would receive £26,207.03 after tax and NI (after NI threshold increased to £12,570) – £503.98 a week. They have a work allowance of £344 a month – £79.38 a week. The 55% taper on £424.64 is £233.52 so that is how much Universal Credit they lose. They still receive £157.17 a week Universal Credit. After paying their rent they have £504.66 a week. The Social Metrics Commission’s poverty level was £439 a week in 2018/19. Once inflation is added it is now about £509. Therefore this family are living just under the poverty line. Just because a household has one earner earning above median income does not mean they are not living in poverty depending on how much rent (or mortgage) they pay.

  • Peter Davies 25th May '22 - 11:30am

    Indeed. Since they only have one earner, under the scheme they lose their £157.17 but will be left with £161.83 extra (because the non-earner gets UBI and didn’t use their personal allowances). This will put them significantly above the poverty line. They will also have escaped means testing. This is exactly the sort of household that UBI helps.

  • May I add a comment slightly off the point, made a few days ago in response to the call by Humphrey Hawksley on LDV for Weds 11th May, for a Lib Dem ‘Big Idea’ on which to campaign?

    I suggested, in effect, that “UBI” is looking a bit tired, after so much discussion down the recent years. And I proposed a new name for our best “big Idea” , and a strategy for pursuing it — UBI, that is.

    Let us establish a new and better name for it: NATIONAL INCOME DIVIDEND. Don’t laugh –listen to it; and consider, how does it sound, and what does it suggest?

    A brief explanation can be found , in a rather late offering under my name, at the end of the numerous responses to Humphrey’s call to arms

  • Peter Davies,

    Please can you explain what scheme you are talking about? You write that two people will receive £161.83 extra. Where do you get this figure from? The second consultation paper talks of £71 a week. Twice 71 is 142. Joe Bourke has £77.35 a week. Twice 77.35 is 154.70. I think his calculation is a bit out. The combined Income Tax and NI rate is 33.25% (20+13.25). 33.25% of £12,570 is £4179.52 which is £80.38 (rounded up) a week. Twice 80.38 is 160.76. Natasha Chapman has £319 which is £73.62 (rounded up) a week. She also seems to be keeping the policy that a claimants Universal Credit is reduced by the amount of the taper on the UBI amount. With a taper of 43% they would lose £63.31 from their combined UBI of £147.24.

    Please can you explain why you think this couple would lose the £157.17? This amount should increase if the taper rate is reduced from 55% to 43%.

  • Peter Davies 26th May '22 - 6:52am

    I think the actual figures for UC and allowances are being taken from different years. They won’t be correct by the the next election anyway but I’m assuming that we would hold to the principle that UBI directly replaces the current allowances. £319 is the figure I assumed for both.

    Actually I was slightly wrong. At 43% they wouldn’t quite get out of means testing. They would actually be £181.83 better off if they bothered claiming the remaining £20 per month. The take up rate for UC at that level is very low (the return on effort for claiming is probably well below minimum wage) so £161.83 and no means testing is more likely.

    As a single earner couple they gain £638 in UBI but lose £319 in allowances. For the purpose of UC, their income is increased by £319 after tax. Which would reduce their UC by £137.17 at 43%. That leaves them £319 – £137.17 = £181.83 better off.

  • Peter Davies 26th May '22 - 8:05am

    Actually, I’m mixing up your monthly and weekly figures. This scheme does leave single earner couples like this on UC until well over £50000 p.a. where it will combine with child benefit withdrawal. If they were renting in London, it would go even higher. For UBI to work, it needs to be replacing at least some of UC.

  • Employees Ni is increased temporarily for 1 year only this year by 1.25% from 12% to 13.25%. Next year there will be a separate Health and Social Care levy of 1.25% ringfenced to support UK health and social care bodies.
    Individuals above State Pension age will not be affected by the temporary increase to National Insurance contributions for the 2022 to 2023 tax year but will be liable to pay the levy from April 2023. If the NI threshold is removed and pensioners are not in receipt of a supplementary UBI on top of pensions, then some compensating measures may be required.

  • Peter,

    the Chancellor in his remarks today noted that there are some 8 million households (about 30% of households) in receipt of means tested benefits including pensioner households. This is a long way from Beveridge’s vision of a system that would eventually see the falling away of means testing as the contributory principle provided for a system of social security from cradle to grave.
    I would certainly endorse the aim of replacing to the greatest extent possible means testing with a minimum guaranteed income as a basic right. The reduction of the UC work allowance, however, has been a significant contributory factor to in-work poverty as pointed out by JRF and the resolution foundation and an area that needs attention.

  • Peter Davies 26th May '22 - 4:27pm

    That’s over 28% of households but the percentage of individuals in those households is higher and the percentage of children those households is ridiculously high.

    Yes the temporary rise in the work allowance was of great benefit to those who got it but there are plenty of others that didn’t, many of them poorer than those that did.

  • Peter Davies,

    As I wrote earlier, I believe that the single person rate for benefits should be £157 a week and for a couple £271 as this would have been enough to ensure they had enough to live on in 2018-19 according to the Social Metrics Commission. Until the total of Universal Credit and UBI reaches at least £157 a week for a single person the Universal Credit rate should not be reduced. One of the main arguments for a UBI is to help the poorest in society. To provide a UBI and then reduce Universal Credit by the same amount will not do this. I agree increasing the rates of Universal Credit is better than increasing the existing work allowances. Our policy is to increase Universal Credit and the legacy benefits by £20 a week. We could at the same time scrap the decrease in the taper to 55% as this only helps those in work and the £20 uplift is worth more to those in work than the change in the taper.

  • Peter Martin 28th May '22 - 8:56am

    If a UBI is so close to Lib Dem hearts why not use the upcoming by-elections to explain what it actually entails to a wider audience? I don’t remember this being done previously.

    Mark Pack says that fewer than one in ten voters say they know what it means. I would say even this may be an over estimate. It may only be anecdotal evidence, but from conversations I’ve had, many think it is something to do with a minimum wage.

    https://www.markpack.org.uk/166694/less-than-one-in-ten-say-they-know-what-universal-basic-income-ubi-is/

  • Peter,

    You ask “If a UBI is so close to Lib Dem hearts why not use the upcoming by-elections to explain what it actually entails to a wider audience? I don’t remember this being done previously.”

    I would suggest you consider the following factors
    1) How long would it take to explain UBI to an average voter?
    2) How many extra canvassers would be needed to do that within the campaign?
    3) How many voters would be interested?

    Strikes me as a proposition we deliberately do our best to totally scupper our chances.

  • Joe Bourke,

    Indeed, the government is planning to bring in a new Health and Care Levy. They might even do it. If they do, I would expect that the National Insurance threshold would apply before anyone has to pay the levy (tax). Therefore scraping the National Insurance threshold will make no difference to pensioner net income. We can hope that the party will keep its policies of increasing the work allowance, and bringing one in for the second earner. I hope we will soon have the policy of restoring a work allowance for single people and couples who have no children. I support increasing the work allowance rather than increasing the taper rate as I hope that doing so would not increase as amount people can still earn as much as increasing the taper would do. However, I think it unreasonable to increase the work allowance to £11,758 a year. For someone with children who doesn’t receive the housing element your proposal could increase the amount they keep by £2685.10 a year (£51.64 a week). I would prefer to increase the rates of Universal Credit above inflation and the work allowance to at least £217 a month for people without children and if our UBI is introduced then £290 a month. (The current higher and lower rates increased to £647 a month now [£149.31 a week] and £827 if our UBI is introduced.) And then these rates increased by the rate of inflation each year.

  • Peter Martin,

    In addition to those given by David Evans here are some more reasons why the Liberal Democrats will not fight a by-election with pushing a UBI:

    1) It is a by-election and so not about our programme for what we would do if we were in power (winning the by-election will not put us into government).
    2) We have not set out what level of UBI we want, how we would implement it or how we fund it. (We have only agreed that we agree with the principle of a UBI and demanded that Federal Policy Committee come back to Conference with a policy motion on UBI [this is expected at our next conference in September].)
    3) The party is divided on the issue of a UBI. There is a vocal minority who oppose it and believe alternatives are better policies. (When a detailed UBI policy motion is discussed and voted on in September we will find out if this is still a minority.)

  • Peter Davies 30th May '22 - 6:54am

    Those are all good reasons for not putting it at the centre of a by-election campaign but we need to produce a clear simple message for the next general. The Tory version is already simple and they don’t have to wait for us to define ours. “The Liberal Democrats will put up your taxes to pay scroungers”.

    Our message is harder to put into a slogan but it should be possible to sell a policy in which the majority of people in a majority of seats would be better off.

    When we have the proposals nailed down, we should have an calculator, independently verified on all our websites and on every canvasser’s phone that would let households who were interested work out how it affected them.

    It’s true that many of our core supporters would be worse off financially (I would be) but they are core supporters because they have a sense of fairness which will override self-interest if the amounts are not silly.

  • Peter Davies,

    Our message might be ‘a fairer, greener and caring society’. I think Ed would be happy with such a message. It seems you are assuming that Conference will support a UBI policy. This assumes that it will be offered a policy of a stated sum for a UBI to be introduced in the next Parliament. (As I wrote above I hope this will be £71 a week as proposed in the second UBI consultation paper.)

    The four taxes proposed in the second UBI consultation paper to pay most of the unfunded cost of our plan would not put taxes up for most people. However, changing inheritance tax into a lifetime gift tax would be a tax change that the Tories would attack and would affect many people in south-east England (where many of our target seats are) if £125,000 is the tax free amount. If a parent’s home is inherited by two children they are likely to have to pay some tax on the inheritance. Average house prices in England were £296,000 in February 2022.

  • The majority of people will see no benefit from our proposed UBI. Also they will not be worse off. One of the groups which benefits are those couples where one can afford not to work. This is harder to defend as these people are already well off. (Considering that couple with two children needs about £509 a week to be living at the poverty level. A mortgage of £250,000 with 5% interest would mean paying £240.38 in interest payments each week. If we add an extra £61.62 so they are not living in poverty then the one person in work would have a net income of £42,172 and a gross income of over £63,000.)

    I would like one of our slogans to be vote Liberal Democrat and we will fix the broken safety net and remove everyone from poverty over two parliaments. (We know the safety is broken because even a Conservative government recognises that when there are economic difficulties more has to be done to help those on benefits {e.g. £20 Universal Credit uplift and £650 extra for people on benefits this autumn}.)

  • Peter Davies 30th May '22 - 4:37pm

    A bigger group is couples who need both partners working to make ends meet but only one does. Single earner households account for a very large proportion of those living below the poverty line and an even greater proportion of child poverty. Conversely these days high earners tend to marry other high earners. Couples who can afford for only one partner to work overwhelmingly have both working. The “Footballers’ Wives” example that opponents usually give is completely bogus. They may not do what you might regard as work but I doubt you would find one in league 2 or above that was not using up their own tax allowance.

  • Peter Davies,

    If both members of a couple are working and earning over £12,570 a year they will not benefit from our UBI. With the proposal set out in the second UBI consultation paper a couple on benefits would benefit by £63.90 a week. A student would benefit by the whole £71 a week. A couple with one working earning over £12,570 a year and the other not earning would benefit by £71 a week, no matter how much the one working earns. (The number of people who don’t work and don’t need to work because the income of the one earner in the household is sufficient for them to be well-off could be between 1 and 3 million. It would be interesting to know the correct figure.)

    A UBI is an expensive way to help those on benefits. It costs according to the second UBI consultation paper £30 billion on top of the funds raised from the changes that we set out alongside introducing our UBI of £71 a week and a couple on benefits would only be £63.90 a week better off and a single person £31.95. We could spend £25 billion and couples and single people on benefit could be £71 a week better off and there would be no changes to Income Tax personal allowances and the National Insurance threshold.

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

To have your photo next to your comment please signup your email address with Gravatar.

Your email is never published. Required fields are marked *

*
*
Please complete the name of this site, Liberal Democrat ...?

Advert



Recent Comments

  • Ann Bailey
    I find the term 'pro-life' a misnomer..There will.inevitably. be an increase in infant deaths and female suicides because of this ruling.. When incest and ra...
  • Andy Boddington
    This is a very male dominated discussion, which is a surprise given its subject. We editors will hold back some comments from people who have already spoken to ...
  • expats
    Far too many, "Nah, nah, nah', we did better than you did", comments.. Please, just grow up and concentrate on removing this government!...
  • Jeff
    Paul Barker 24th Jun '22 - 2:11pm: The thing that has struck me about coverage of last night is how everyone is running down the Solid Labour win in ...
  • Cassie
    ...also, wouldn't he have to be an MP? Mordaunt maybe, but she'd need to up her public profile. A lot....