To be quite blunt, I’ve been spending a lot of time lately thinking about where it’s all gone wrong for the Liberal Democrats. I’ve been a member of the party for seven years now, three-quarters of a decade no less, and in that time we have scarcely polled into the double digits.
Amongst the young, the people who you may think would be the natural supporters of an anti-Brexit, progressive party, the outlook is especially bleak. In the latest Times tracker conducted by YouGov, a mere 4% of 18-24-year-olds plan to vote Liberal Democrat at the next election. The number shoots up to a comparatively lofty 7% of 25-49-year-olds but it’s still nowhere near good enough for a party such as ours.
It’s time to face a stomach-churning truth. The Liberal Democrats are not a party that speaks to modern Britain, and we most certainly do not represent Britain’s future. Not the way things stand, anyway.
As someone who is (just about) inside that 18-24 bracket, I think I’ve got a decent idea about why the party has haemorrhaged youth support so drastically (and no, it’s not just about tuition fees – although that is a huge factor as I wrote for the New Statesman in 2015.)
In my view, it comes down to this. When my generation was growing up, we were all sold a story, the same story our parents were sold. Specifically, the story that if you work hard, apply yourself and ‘get on’, then you’ll do well. Our parents bought into that story because it was broadly true for them. But we aren’t buying into it because it’s a lie for us. Millennials are the first generation set to earn less than our parents, so I think we can be forgiven for thinking that the system has not worked.
And it is this broken system that, to me, explains my generation’s disinterest in the Liberal Democrats and our collective adoration for Jeremy Corbyn. The Liberal Democrats want to make the system fairer. But Corbyn wants to tear the system down. That is his appeal, and it’s why we are falling by the wayside.
But we can beat Jeremy Corbyn at his own game. Liberals can remake the system too, and liberalism can provide a much more empowering and inspiring future than socialism ever can.
The first step we need to take to offering that future is supporting Universal Basic Income (UBI).
For those not aware, UBI is the idea that every citizen receives a set amount of money from the government every month. The money is not means-tested, every citizen receives the same amount, and people can spend it on whatever they like.
Nick Boles is, despite being a Tory, an intelligent and respectable thinker. When UBI is discussed in the media, his comments are often drawn upon. He posits that “mankind is hard-wired to work. We gain satisfaction from it. It gives us a sense of identity, purpose and belonging”.
I don’t disagree with Nick Boles. But the fact is that for too many people today, work does NOT give us a sense of identity, purpose and belonging. According to another YouGov poll, 37% of Brits describe their job as ‘meaningless’ (with a further 13% saying they did not know if their job was meaningful). That’s because too many people today are taking jobs to pay bills so that they can live for the weekend.
And that’s the future that is facing young people today. A meaningless job that allows you to pay the bills so you can have fun on the weekend. That doesn’t sound like a generation being provided with a sense of purpose, identity or belonging by their careers to me.
That’s why UBI is a liberal, empowering idea. By giving people the money to pay their bills (or at least make a large contribution to them), we suddenly become empowered to seek careers that are not so lucrative. To anyone reading this post, I ask you – would you be doing what you’re doing from Monday to Friday if you didn’t need the money? Is there something else you could be doing that would give you a greater sense of identity, purpose and belonging?
UBI is an idea whose time has come. We need a new story to tell the next generation, and it should be a story about individual empowerment and the freedom to explore your ideas to make your life and our world more meaningful. That’s the story the Liberal Democrats need to start telling.
* Adam Bennett is a former Liberal Democrat member & employee. He was Vice-Chairman of the Hertford and Stortford Liberal Democrats and worked as part of Sir Nick Clegg's communications team during his time as Deputy Prime Minister.
Follow @LibDemVoice on Twitter
Like us on Facebook
Subscribe to our feed
Sign-up for our daily email digest
My Parish may be small, but it is, apparently, mighty...
Latest PollBase is out, with all the British voting intention polls since 1943
Temporary traffic order - Menzieshill Road
The very lost tunnels of the Hereford and Gloucester Canal
Are some premature births caused by a average lower mitochondrial membrane potential in the baby?
John Hills
Tristan Ward
Peter Martin
113 Comments
UBI is certainly worth considering seriously and would contribute to a degree to tackling the glaring unfairness in the distribution of wealth. Alongside that we need look equally seriously at ways of bringing excessive pay at the top, which could have the beneficial effect of increasing the ‘pot’ available to fund UBI
Not convinced. An employer could say “you have UBI so national minimum wage is not required, we will pay you what we think you are worth”. Do you really believe the economy will suddenly create jobs that people will really want to do, if so where are they now except they are uneconomic.
Being BLUNT is what we have to be. No platitudes or meaningless comments about ideals and how good we are compared to everyone else. Blunt and down to earth. Only problem we have to get over is that most of our problems are the result of the coaltion and from those who embraced it even when coming disaster was obvious.
But Yes I agree being Blunt and not holding back is the way forward. We have nothing to lose.
It will be interesting to see the outcome of the various pilots happening around the world. My concern is that experience in the UK is that active labour market policies are needed to get people into work – people can get rather used to living on a reduced income and lose aspiration. In addition, there are very clear mental health benefits to work, and I am concerned that weakening work incentives would have undesirable mental health consequences given the increased isolation that would result for many people.
Adam
This is with the NewStatesman piece, very positive.
It is interesting you backed Tim so keenly for leader, I was more for Norman.
Tim made obvious mistakes, one was to overemphasise the not so exciting and later , rather absurdly, not so understandable issues. His advocacy for so much that is good and decent, was lost in a regular odd mixture of passionate and overemotional, overblown, naive. Refugees, Brexit, Syria, gay relationships, he often got too much .
Your link to that time, makes me think, had we gone for Norman, Labour for another leader, we might have made a better impact, in partnership with Labour perhaps.
The cult or support of or for Corbyn, is one we must address, as is where to for this party.
Renew has not generated one article. They are stealing outwardly and definitely, our clothes. They want to consider and back basic income.
We should, but.The but is not that which many raise. It is this party and the approach to immigration in this country.
We cannot be a magnet for migrants to even the degree now. How could we not be if offering such an income.
The UBI should be for all residents of ten years, citizen or spouse of citizen.
But are we or our loved ones the EU going to go for that…
You wouldn’t need a minimum wage with UBI: everyone would have a base level of income that would ensure a degree of security, which is something the minimum wage is trying (badly, and only for those in work) to do. People wouldn’t need to accept jobs purely to keep, say, a roof over their heads; they would be able to find / choose jobs they actually want, which is good for the economy because people are more productive as a result (hey, we’re supposed to be one of the most unproductive countries in Europe, aren’t we?).
Trials of UBI schemes have shown it leading to such things as: reductions in substance abuse, domestic violence, and other levels of crime; an increase in investment for education and job creation (people have been shown to invest the money rather than squander it); improvements in gender equality; and benefits to quality of life, such as physical and mental health (less stress trying to make ends meet, reduced need for escapism through substance abuse).
As to how you fund it, I’ve mentioned here before that it would be interesting to know if the Lib Dems ALTER group have any studies or information on whether a land value tax would be useful here?
“Millennials are the first generation set to earn less than our parents, so I think we can be forgiven for thinking that the system has not worked”
This of course is just so much rubbish.
The millennial unskilled with the minimum wage and higher tax allowances are considerably better off than their parents in similar occupations.
The millenial skilled trades and professions, whether hairdressers or aircraft engineers at Rolls Royce, once trained are likely to be on the same incomes as their older contemporaries.
The Millennial teachers, social workers etc, will be on the same money as their older colleagues once fully trained.
What we are really talking about here are Millennials who were sold a load of old flannel about the world being their oyster with a degree, and the current bunch are still believing it despite the mountains of evidence to tell them it is pie in the sky.
In reality a large proportion of graduates should have left school at 16 or 18, and entered training in marketable skills, rather than following the naive belief that a degree would open doors by the simple ownership of the certificate. These Millennials who unlike contempories who didn’t go to university, have a massive sense of entitlement and personal grievance, rather than getting a grip of their lives. They have been absent from the workforce for 5 to 8 years longer then their contempories, and on entering it find that they are principally without any marketable skills for the type of jobs they think they are entitled to have, and that the only jobs out there, are the sort of jobs they could probably have got at 16 with a few GCSE’s if they had bothered to apply.
I am in favor of trying UBI in a number of pilots & adopting it more widely if it seems to help but I disagree with Adams gloomy assesment of our prospects.
The Recovery in Local byelections is real & continuing & if we arent thrown off course by a New Tory Leader or (God help us) another General Election then we should make significant gains in May.
The National Polls usually recover much later than our Local performance, I am expecting movement in the first half of the Year.
Hello Peter-
Thanks for your comment. Respectfully, the economy is not a machine- it’s made up of human beings. If we empower those people to spending their working lives on projects that speak more to their most authentic selves, then that frankly is where the jobs will come from. Imagine the ideas that could flourish if we lifted so many people out of poverty and gave them the means to follow their passions.
I’d encourage you to check out what’s happened in the places where UBI has been trialled- as John pointed out in his comment, the effects have been somewhat unpredictable but overwhelmingly positive. Economic problems haven’t surfaced at all.
I guess I would sum it up by saying that yes, UBI is expensive- but not as expensive as poverty.
Doing a job you can’t stand doesn’t do much for your mental health either. In the early 1980s I only worked for the weekend, so to speak, so it’s not a new phenomenon. It’s also pretty much my definition of being working-class – having a job that you wouldn’t be doing if you didn’t need the money – as traditionally the ‘working-class’ are described as ‘oppressed’.
I am certain that the low productivity in the UK is due to people carrying out work which is tedious, unfulfilling and basically bad for them.
UBI would also recognise that you don’t have to be in paid employment to make a positive contribution to society (think volunteers, carers, creative artists), just as not everybody in paid employment makes one either.
Barnaby,
Thanks (I think) for your comment. I think it’s pretty understandable that your belief millennials should have sought training in ‘marketable skills’ is not a particularly inspiring vision for the future of our country, or indeed a vote-winning articulation of the values we hold as a party.
To quote Ruter Bregman- I believe in a future where the value of your work is decided not by the size of your paycheck but by the amount of meaning you can provide. I want the Liberal Democrats to provide an inspiring vision for the future, not a resigned acceptance of the present.
Excellent article. UBI is a response not just to the meaningless of work, but to the increased inequality in incomes. High tech economies of the future will amply reward those with the right skills but others will be left with the crumbs. UBI, funded by tax from higher earners will be redistributive and will also take many of those currently on means tested benefits out of the system. It’s a win, win and win policy ! Only those with severe Protestant work ethic, who go into shock at the prospect of anyone getting something they didn’t suffer for, could object.
A UBI is a neoliberal construct. Unlike the other fallacies neoliberals spread, like the supposed need any Government has (even though that hardly ever happens) to balance its budget, it isn’t going to get much popular support or traction. Paying out money “universally” to everyone -regardless of their need or level of deservedness is never going to be a vote winner.
In practice it will mean depriving a legitimate worker, like a nurse, of a tax free allowance on their income tax. Whatever savings are made will then theoretically be divided up amongst everyone, including those who don’t pay any taxes because they work the black or criminal economies, have private means or are the partners of wealthy individuals and so don’t need to work. Drug dealers will end up better off. Our nurse will end up worse off.
Now if we offer everyone who is looking for a job some paid work that might be more popular. It will certainly be fairer.
http://elliswinningham.net/index.php/2016/05/22/a-few-words-on-ubi-and-the-job-guarantee/
The problem with UBI, at least in the UK, is that it doesn’t address the problem of housing benefit, which still has to be paid in addition, and often constitutes a major proportion of many benefit recipients income The other day in the Guardian Polly Toynbee set out a detailed argument why its introduction would be fraught with difficulties, both practical and political.
https://www.theguardian.com/commentisfree/2018/feb/26/welfare-system-beveridge-75-years
UBI linked to a budget surplus (having got rid of welfare, pensions, tax allowance etc), a sort of dividend paid to everyone who has been resident for more than five years (with a half payment for kids and double payment for pensioners) would be an interesting concept that would force the government to run things efficiently and stop them from indulging in fantasy economics.
The disgraceful housing situation in this country (nothing new, though, it was almost as bad thirty years ago) does force people into pointless work unless they have the game to use the money they make to set up on their own, which incidentally has never been easier – you just need the right good idea. The one problem Labour has it is trying to do too much too quickly so perhaps if the LibDems decided to concentrate on innovative housing solutions to the exclusion of everything else they might regain some traction with the voters. Just a thought.
Peter Martin ‘ In practice it will mean depriving a legitimate worker, like a nurse, of a tax free allowance on their income tax. ‘
Of course it won’t. They will have UBI instead of their tax allowance. UBI applies to everyone, whether in work or not. It would, I assume be tax free or that any difference between income tax allowances and UBI would continue.
At the moment people who work get a larger tax free allowance than ever before, but people out of work get so similar concessions. If everyone has a basic income then a major part of the cost of UBI will be met by no longer having a huge raft of means-tested benefits, saving both the cost of the benefits AND the cost of means-testing them.
Once you get away from the concept that full time work is the only way to contribute in our society then people would be free to choose work they want to do and whether to do it full or part time.
But, I can hear the doubters splutter work is what counts not feckless idleness. Time for fresh thought on the whole role of work in our society?
oops No similar concession NOT so similar concession
Who will do the work that is tedious, unfulfilling and basically bad for them ? This is the problem with these wonderful schemes. Reality can be rather dull so we look for ways around it and they might work for a while but then the bills start coming in.
I remain unconvinced.
A universal basic income is an interesting idea and one I feel worth exploring – though I don’t think its clear that ‘it’s time has come’ at all. It doesn’t feel to be any further developed that when it was actually party policy decades ago.
This article – like most that advocate a ubi – is good at setting the scene as to the problems it aims to fix, but is scant on detail on actually how it would effectively do so.
@ Adam Bennett
Adam,
I suppose it all revolves around the idea that we are living in some sort of special enlightened times, where we control of the world and the future, and can look to more cerebral pursuits to stretch ourselves and benefit the greater good, when the reality is we are living lives no different on a day to day basis than our ancestors, and I’m afraid that also includes Liberal Democrats.
All we are doing is what every generation has done since the first humans decided that there had to be a better way of earning a living, than chasing down dangerous animals and grubbing for roots, and that is surviving the best way we can.
Putting it into perspective, in the current weather conditions, there is a real possibility that we could run out of gas and have power cuts. In the blink of an eye we could be transported back to the stone age, when all that matters is survival, no electricity, means no heating, no lighting, no communications, all that is required is the skill to acquire the next meal, and provide heat to keep warm
Tedious and unfulfilling for whom? I’m sure there are lots of people who would absolutely hate my job, and likewise there are many jobs I really wouldn’t want to do. We’re all different, and what’s unfulfilling for one person isn’t for another. Amazingly, the jobs will get done – nothing in trials of UBI has indicated otherwise.
Also, none of the trials have indicated people will just sponge off the income and do nothing, or blow the cash on booze and ciggies, indeed quite the opposite seems to be the case.
@Barnaby
I’m afraid we may never be able to agree- I think the 21st century way of life is quite demonstrably different from that of our ancestors. The fact I am sitting in Hong Kong and typing this comment to you on the other side of the world is proof of that.
I am sure, also, that things can continue to improve in the future. UBI is, in my opinion, a way of improving that future.
To anyone reading this post, I ask you – would you be doing what you’re doing from Monday to Friday if you didn’t need the money? Is there something else you could be doing that would give you a greater sense of identity, purpose and belonging?
And I ask you: why do you think you are so special that the government should subsidise you to do your hobby?
Great question Dav, and the truth is we will never know what makes millions of people special if we never provide the means to lift them out of poverty.
I would certainly leave the Liberal Democrats if we adopted UBI as a policy. There have been some awful things adopted by the LDs post-coalition, but I can just about grin and bear them. UBI is insane though.
“I ask you – would you be doing what you’re doing from Monday to Friday if you didn’t need the money?”
Let’s look at this ‘preferred’ work choice, in a bit more detail.
Lib Dems suggest we need EU migrants, such as east European millennials to come here and do the low paying menial jobs in areas such as care homes, hospitals and agriculture that our British millennials just won’t do.
But why are those same liberals happy to discriminate, by a policy of ‘pampering’ British millennials with free UBI money, but expect east European millennials to come here and do that menial work ‘on the cheap’, like slave migrant labour.? Are British millennials a special case, that doesn’t warrant them, having to endure ‘dirt under the fingernails’ work?
Maybe it’s what’s not said in the article, which tells us what we really need to know. Is there not a subliminal middle class message embedded here, which says that from a liberal middle class perspective, it is perfectly justified (albeit double standards!), to expect a working class, or EU migrant millennial, to ‘knuckle down’ [Monday to Friday] to soul destroying menial low paid work simply to pay their bills, but middle class liberal millennials who made bad University and career choices, are different, and need to be rescued from such ‘intolerable drudge’, and pampered with free UBI money from the state, so they don’t have to face the indignity of work they would rather not do? Middle class liberal angst at its finest.
I fear this article and its barmy UBI solution, tells us that [some!] millennials have not only made bad Uni choices, but are wholly unprepared for the consequential brick wall of reality.
A low level UBI:
1 – Increases work incentive by reducing the horrific withdrawal rates of those on benefits
2 – Ensures that those most in need (who are often the least forceful or skilled with administrative processes) do not fall through the gaps
3 – Improves positive liberty by empowering people in the most flexible way possible and providing a safety net below which none can ever fall
4 – Reduces the well-known issue that those in or on the edge of serious deprivation have their decision-making impaired as if by huge, constant, and draining stress – by providing them with that guaranteed and automatic safety net
5 – Significantly reduces poverty and especially child poverty, even with such limited versions as Working-Age UBI at just £2,200 per year (as per the University of Bath study)
6 – Encourages (as per the existing limited studies) entrepreneurship and education.
There are people who have an instinctive dislike of it as it gives money to “The Undeserving Poor” as per the old Victorian term and dislike giving up a perceived lever to control people. However, if we’re fine with Universal Healthcare, Universal Primary Education, Universal Secondary Education, Universal Law Enforcement, Universal Defence – why not Universal Basic Income as well?
UBI – or something similar may well be needed when the predicted loss of millions of jobs through AI comes to pass – in the not too distant future. However, I agree that people do need to work at something they find rewarding – if they are to feel their lives worthwhile.
For the young, in particular, jobs that are concerned with limiting or coping with the impact of Climate Change – which now seems likely to be quite significant because of the prolonged use of fossil fuels – are likely to meet this need.
Since returning to the Party – I have been surprised at the lack of attention this important issue is given.
People have been saying automation will lead to mass unemployment since the industrial revolution. I don’t see the rise of AI and new forms of automation being any different, only the types of jobs will change – as they always have.
Reading the comments here, I wonder how many people understand what UBI is, and what it is not, and what the trials conducted so far have shown. I must admit, I scoffed at the idea when I first heard about it, but after going through the trials undertaken around the world and reading up more on the ideas behind it, I’ve been converted.
It’s not free money to let you lead a life of leisure, it’s unconditional money that people can spend how they wish but is generally only sufficient to provide a modest safety net. The studies are all there on how the process has helped lift people out of poverty; how it has lead to improved quality of life; how people have used it to create jobs or improve their or their family’s education, because they can concentrate on more than how to keep a roof over the heads or put food on the table.
More importantly, it has been shown to be more socially and economically effective than a lot of other state schemes. It’s helped reduce the burden on communities and public services in deprived areas, devolved spending to the local community/individual, and doesn’t have the stigma of other forms of welfare assistance.
Adam.
the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) has done extensive work on this. Their latest report published last month looks at the feasibility of a scheme where citizens could apply for up to £5,000 annually from the fund for up to two years to help with learning or training costs, social care, or for new business, in exchange for losing some benefits such as jobseeker’s allowance and tax credits.
Finland has run a trial paying 2,000 unemployed people aged 25 to 58 a monthly €560 (£497), while the Scottish government has four councils testing the idea and the Labour party is also looking into it.
Providing a £5,000 annual payment for two years could cost about £14.5bn per year over a decade should there be full take-up, according to the RSA. While the cost could be as much as £462bn, removing some benefits and tax reliefs from the people who claim money from the fund would save about £273bn.
Last month, the RSA warned almost half of people in the UK have less than £1,000 saved and that almost a third are at risk of a financial shock, such as from automation – showing the need for changes to the tax regime as a catalyst for more state funding.
The thinktank said financing a sovereign wealth fund with taxes on capital wealth of individuals or global companies would cut the state’s reliance on income tax and national insurance. It said the model would complement welfare policies such as housing and disability benefits by supporting living costs.
As well as being used to pay dividends to citizens, the wealth fund could be used in a similar way to Norway or New Zealand’s, investing around the world or supporting UK infrastructure projects.
Anthony Painter, director of the RSA’s action and research centre, said: “Without a real change in our thinking, neither tweaks to the welfare state nor getting people into work alone – when the link between hard work and fair pay has broken – will help working people meet the challenges ahead.”
John Chandler,
“As to how you fund it, I’ve mentioned here before that it would be interesting to know if the Lib Dems ALTER group have any studies or information on whether a land value tax would be useful here?”
ALTER proposes a tax shift away from productive activity that utilises labour and physical capital to taxes on economic rents that drain value from the productive economy. Economic rents arise in a number of ways that includes not only rental payments in respect of land (as opposed to rental costs for physical capital like buildings), but interest costs arising on mortgage lending against Land and royalties on Intellectual property.
The RSA study above reference the digital giants – Amazon, Google and Facebook. Google paid £36.4 million in tax on revenues of around £1 billion last year, according to its annual reports. The company returned a pre-tax profit of £148 million for the year ending 30 June 2016, suggesting it paid a corporation tax rate of around 24 per cent.
Google and other such companies that pay low levels of tax in the UK, transfer much of their earnings outside of the country in the form of royalties on patents and other intellectual profit rights. These are economic rents arising in the UK in the same way that land rents and mortgage interest payments are and would be subject to recapture by restricting allowable deductions for such payments against corporation tax to actual costs incurred.
If UBI is funded via tax on productive activity, ALTER believes the benefit will be recapture by rent-seekers in the form of higher land prices and higher charges for intellectual profit rights. We believe it is essential to fund UBI from taxes on economic rents if it is to be effective in its aims.
I dispair at the touting of UBI based on theory and crude outcome. It’s as if nothing has been learned from Marxism and Socialism’s disastrous experiments of the 20th century. Whilst I am not equating UBI with Marxism or Socialism, I am comparing it as something that can superficially appeal in theory and may deliver immediate/short term crude outcomes (the Soviet Union did improve crude outcomes in the first and second generation), but that when applied at scale and over generations is highly unlikely to work or continue to deliver as it did in its inception. UBI is so highly an unnatural thing to most humans (as Marxism is), that it will over time suffer the same fate of such unnatural things (as Marxism). Most humans just aren’t like Liberal Democrat members and their peer-group.
Notwithstanding the fact that it is highly anti-liberal to;
-so crudely make people dependant on and wedded to the state
-remove all concepts of individuality, as if one size fits all payment is suitable for everyone (it really really isn’t)
Again, I dispair that this is taken seriously by people.
@John Chandler – “People have been saying automation will lead to mass unemployment since the industrial revolution. I don’t see the rise of AI and new forms of automation being any different, only the types of jobs will change – as they always have.”
I hope you are right John – but the number of jobs that will eventually be lost to self drive vehicles, alone, is massive. Whereas new jobs will emerge – they are likely to be highly specialist – and not engage most of those who were once described as the ‘working class”.
Do you have any thoughts on what these jobs might be?
James Pugh 1st Mar ’18 – 7:47pm
“I dispair at the touting of UBI based on theory and crude outcome.”
Or to put it another way, based on logic and evidence? Whereas your objection is based on vague analogy to something completely different, a bizarre reference to being “unnatural to humans” and two slightly more specific objections that do at least attempt to attack the idea itself, albeit in the person of two rather unconvincing straw men.
Have you any answer to the arguments made by Andy Cooke above at 6.34? Or principled objection that might override those points? I don’t think “it’s unnatural” counts for much, when we’re talking about ways of distributing the means of consumption and exchange in a modern industrial economy.
John Chandler 1st Mar ’18 – 7:09pm
“People have been saying automation will lead to mass unemployment since the industrial revolution.”
Indeed, the ability of the economy to keep producing new jobs when the old ones are automated out of existence is quite remarkable. But is it any good? Everywhere I go, where there used to be butchers, newsagents, greengrocers, I see nail bars, tanning salons, “vape lounges” in the name of all! I receive constant phone calls from sellers of dubious insurance, quack finance and compensation-chasers of every stripe, while on TV and online I see advertised essential products to puff up, smooth down, conceal, highlight, whiten, bronze, straighten or depilate whatever part of the poor old human body is currently considered insufficiently exploited by the insecurity racket. To say nothing of the apparent absolute need to fly off on exotic holidays two or three times a year, to own a newer, better, “safer” or s3xier car, to extend your house, “modernise” your kitchen, buy an ever more expensive gift for Mother’s Day, Father’s Day, Valentine’s Day, to say nothing of the great outpouring of plastic without which we can never appreciate the “True Meaning of Christmas” (TM).
You get the point – I’m not claiming it’s an original one. But what I’m saying is: we can always find – that is, invent – new, economically “productive” ways to occupy people and keep them slaving away. Does the evidence suggest that we are truly the better for it?
John,
on automation Anthony Haldane, the Bank of England’s chief economist, published quite a startling report on the impact on jobs in 2015 suggesting that 15m current jobs may become redundant in the not too distant future https://www.theguardian.com/business/2015/nov/12/robots-threaten-low-paid-jobs-says-bank-of-england-chief-economist.
Haldane said “Technology appears to be resulting in faster, wider and deeper degrees of hollowing-out than in the past. Why? Because 20th-century machines have substituted not just for manual human tasks, but cognitive ones too. The set of human skills machines could reproduce, at lower cost, has both widened and deepened.
With machines becoming ever smarter, Haldane said a wider array of jobs were at risk from automation than in the past. Low-paid jobs were most at risk, but the “hollowing out” would increasingly affect mid-skill jobs as well.”
Jobs for life are long gone. Now its looking like anything that can be automated will be gone too. We are going too have to retrain as aromatheraphy consultants and lifestyle coaches to make a useful contribution to society.
@ Mick Taylor
“Of course it won’t. They will have UBI instead of their tax allowance.”
Perhaps you made a typo there? I think we are in agreement that workers would lose their tax allowance but they would get a UBI to (partially?) compensate.
Can you put any numbers to this?
1) How many people would lose a tax allowance
2) How many people would gain a UBI
Is this proposed measure likely to be fiscally neutral?
@ James Pugh “It’s as if nothing has been learned from Marxism and Socialism’s disastrous experiments of the 20th century. ”
Do you include the NHS in your catalogue of Socialist disasters, or is this just a Daily Mail type knee jerk rant ??
A lot of the problems with a bad reaction from Leave type Voters could be avoided if we renamed UBI as Negative Income Tax, stressing the encouragement it would give us all to make small amounts of money out of our “Hobbies”, which in some cases would turn into New Businesses, employing other people.
A truly Liberal Society would see most of us having multiple Income Streams so that when Jobs are lost we dont then enter a cycle of deprivation. Ideally Government could encourage us to invest in Counter-Cyclical projects so that Economic Swings would be partly subdued.
JoeB 1st Mar ’18 – 8:20pm
“We are going to have to retrain as aromatheraphy consultants and lifestyle coaches to make a useful contribution to society.”
You make my point far more concisely than I did, thank you!
UBI is on the right track but is inherently not a good idea. A much better version of the policy is the Negative Income Tax which could replace pensions and some other benefits too as part of a simplification process. This essentially tops up incomes up to a certain point before breaking even and then you start paying tax. So say hypothetically the negative tax rate was 50%, the minimum everyone got was £10,000 and the cut-off was £20,000. This would mean that an unemployed person or pensioner with no other income would get £10,000 a year no questions asked, more than either would get at present. A person earning £10,000 a year from their job would get a top up of £5,000, giving them a total income of £15,000 a year. A person earning £20,000 would get no top up but also pay no income tax. Then above £20,000 you start paying the normal ‘positive’ income tax rate.
This has a number of advantages. Firstly it costs a lot less than UBI because you’re not giving money to people who don’t need it.
Secondly, it means you can give more money to those who do need it.
Thirdly, it removes the disincentive effects that moving from benefits to work has at present.
Fourthly, it has all the same benefits of UBI, namely that it will be a major help to the unemployed, to pensioners, to part-time people or people on low incomes and to students. It’ll also be a great boost for people looking for a job and needing to perhaps do some voluntary work or an internship to get experience, because they wouldn’t be earning, they’d get paid by the government.
In short, absolutely the party should support Basic Income but not UBI, support the more realistic and sensible version of NIT.
Peter Martin. As I understand it every adult would get UBI. Depending on what level it was set at there would probably be some reductions in tax free income tax allowances. Instead of paying no tax on the first £11500 or so of income ( tax not paid £2300) people would get UBI. I imagine this would be at a rate to ensure everyone had a basic standard of living. There gas not been much discussion on this thread about the level of UBI or the consequential tax changes. One thing is clear. It would be paid for in part by the abolition of a raft of means tested benefits that would no longer be needed and by doing away with the previous means tests.
As I said. The whole idea of UBI requires a wholesale change of view about work. Dav illustrates perfectly how fundamental that would be. Maybe we are not yet ready to change the way we run our society, but one things for sure. The greed and exploitation of the few will destroy the UK as we know it if we don’t change
“we can always find – that is, invent – new, economically “productive” ways to occupy people and keep them slaving away. Does the evidence suggest that we are truly the better for it?”
Not in the case of soul-destroying work and if/when there is essential work which still needs humans to do it but not enough have been trained appropriately
It’s so sad, but the reason the Liberal Democrats are not a party that speaks to modern Britain is because when modern Britain between 2010 and 2015 told the Lib Dems time and again that it was making a total mess of things, it’s leader refused to listen. And ever since, every senior Lib Dem figure (including its two subsequent leaders who had been so much part of it) was so much in denial that they denied the party its two chances to repudiate what it did and start again.
As a result, despite having a Conservative party at civil war with itself and an extremely left wing Labour party, taken over by Militant (Part 2), most people don’t even want to listen to us at a national level. Most people don’t trust us, and that is reinforced by the fact that we are so inconsequential so they don’t even listen when we have something to say about the issues that matter to them.
Until we get a leader with the integrity to say we messed up (polite version) we will continue to go downhill and in less than 13 months we will be out of the EU, when the only positive thing most people know about us will have disappeared.
The party has to wake up from its dreams of having saved the country and get real before it is really too late.
@Joe lm
So, you are proposing to tax anyone earning between between £10k and 20k at a 50% withdrawal rate? Add in NI at 12% and that is a total marginal rate of 62%, or almost as much as the nominal withdrawal rate on Universal Credit (65%). This is the trouble with these alternatives to UBI, they can create their own poverty traps where working extra hours hardly increases one’s take-home pay. With UBI, the marginal tax rate is the same as for existing basic rate taxpayers (20% income tax + 12% NI = 32%).
This Bath University paper on Basic Income from last year summarises the fiscal and (re)distributional effects of different schemes: http://www.bath.ac.uk/publications/the-fiscal-and-distributional-implications-of-alternative-universal-basic-income-schemes-in-the-uk/attachments/Basic_Income_Working_Paper.pdf It also illustrates that care is needed in designing the system to avoid creating small groups of heavy losers.
Joe Im
There is no difference between a basic income and a negative income tax. None. It’s just nomenclature – the principles are exactly the same.
The RSA proposals are a stepping stone towards UBI https://www.thersa.org/discover/publications-and-articles/reports/pathways-to-universal-basic-income-the-case-for-a-universal-basic-opportunity-fund
“In the UK, millions of people circle in and out of poverty; are exposed to insecure forms of work; and rely on a welfare system which can seem more intent on punishing than helping. New and practical thinking is desperately needed.
This report is the third in an RSA series aiming to highlight economic insecurity as a central problem of our time. It also builds on the RSA’s work on Universal Basic Income, mapping out practical steps of how we can move towards a full UBI whilst designing a system that promotes good work and pushes back on economic insecurity.
The central proposition is the creation of a Universal Basic Opportunity Fund (UBOF): an effort to reimagine how society supports people to live meaningful, contributory lives. Its premise is simple: fund every citizen under the age of 55 with a £5,000 opportunity dividend for up to two years, taken at a time of their choosing over the course of a decade. The fund would initially last for ten years, with dependent children also eligible for the payment in the year a parent, or both, were receiving it.
Our intention is to consider how, through capturing asset wealth, the UK can begin to move to a system of support for incomes that genuinely equips citizens to adapt to changes in their lives, whether driven by economic change or personal circumstances. It is intended to encourage a discussion; we do not claim that what is contained here is a blueprint. However, the design principles and funding mechanisms we lay out could allow citizens to make major changes to their lives which they would otherwise be constrained from doing.
Instead of citizens receiving support in a heavily targeted and conditional fashion underpinned by state paternalism, the Universal Basic Opportunity Fund begins the journey towards a system of universal support and trust in human freedom. At the core of the UBOF idea is a conviction that people seek purpose and – if given the opportunity, freedom, and support to do so – will usually make the best decisions about their own lives. We estimate the cost of the UBOF to be approximately £14.5bn per annum over 13 years, with the cost each year dependent on how many citizens elected to take the payment and at what point in the year.
As a practical means of advancing the UK towards a Universal Basic Income system, the UBOF represents a stepping stone – to be enacted now – towards a better way of enabling citizens to live meaningful and contributory lives.
Peter Martin,
that is a well argued article by Ellis Willingham on the relative merits of a Job guarantee (JG) and UBI. I think he comes to a politically pragmatic conclusion when he says
“As we must still address the poverty question and also, since the JG is voluntary, some may not wish to participate, or some might have been fired from JG work, this is where I feel that a basic income guarantee of some kind is favorable were it combined with a federal Job Guarantee. For these reasons, I support the initiation of a federal Job Guarantee combined with a small basic income guarantee. “
Laurence Cox,
that is good paper from Bath highlighting the three way trade-offs involved.
“… one of the core strengths of UBI proposals in relation to ‘traditional’ social security measures: UBI deals far more efficiently with frequent and complex changes of circumstances that would usually affect eligibility for benefit. Furthermore, being a household survey, the FRS omits individuals such as the homeless – who may be especially vulnerable but who might find it difficult to claim benefit. Yet, one of the strengths of UBI is that – to the extent that it is substantively and not just nominally universal – it extends to these most vulnerable populations. In both of these ways, a static microsimulation approach underestimates the ways in which UBI alleviates poverty and income insecurity.
…the labour market effects of UBI pull in different directions and are difficult to predict. It is a great strength of UBI that it should reduce the marginal effective tax rates of poor households, who as a result of means-testing are subject to poverty and unemployment traps. This is likely to increase labour market participation. On the other hand, many individuals will face higher marginal tax rates as a result of the reforms modelled here. If there is a significant contraction in labour market participation as a result of the implementation of UBI, then our findings lose validity.
…there is a clear relationship between the fiscal cost of full UBI schemes and their effectiveness at combating poverty and inequality. It is highly questionable whether any schemes offer good value for money if the primary aim is to reduce poverty; but of course, UBI also fulfils a number of other desirable functions.
Thinking carefully about policy design should enable policy makers to maximise positive distributional effects for a given level of expenditure.
…comparing our findings with those of Reed and Lansley (2016) and Torry (2016) it is clear that although retaining means-tested benefits alongside a basic income is more expensive than eliminating the former entirely, means-tested benefits are clearly ‘good value’: the revenue neutral schemes modelled in those papers imply significant drops in overall poverty levels and household level losses within acceptable boundaries. In contrast, the schemes modelled in this paper are based on more generous UBI payments and so require slightly larger tax rises, but still imply increases in poverty rates or only modest increases in overall poverty rates at considerable fiscal cost.”
Graham Evans,
you (and Polly Toynbee) raise the point that UBI doesn’t cover the need for housing benefit. This FT article https://www.ft.com/content/0f72b534-9ccb-11e4-971b-00144feabdc0asks the question “Imagine if Britain’s National Health Service had to be paid for and that its central principle — that it is free at the point of delivery — had been discarded. Such a scenario, which if enacted would cause a political earthquake, serves as an analogy for how the UK’s planning system jettisoned the cardinal principle upon which it was founded, with little discussion or debate.
The foundations of the modern planning system were laid during the second world war, when ideas for a new postwar Britain were outlined in a series of 1942 reports (which accompanied the famous William Beveridge report of that year). The key document was Mr Justice Uthwatt’s final report of the Expert Committee on Compensation and Betterment, which was realised in the Town and Country Planning Act of 1947. Shot through with the postwar language of the public interest and the need to protect the public good, the report lays out how the conundrum at the heart of any planning system is that the conferring of planning permission on a piece of land immediately ensures that land soars in value. The authors of the act proposed a system of dealing with these windfall gains through a development charge, with the money raised ploughed back into local communities to pay for housing, infrastructure and amenities. Among the benefits would be the reduction of speculation and a positive approach towards development in communities keen to see local benefits. The development charge was the centrepiece of the 1947 act, but the system was complex to administer and increasingly unpopular. The Conservatives abandoned it after coming into office in 1951, with the consequence that the planning system never operated as its wartime architects intended. Hugh Ellis, head of policy at the Town and Country Planning Association, describes what the UK has today as “half a system”. “People criticise our system for being very negative, but we don’t use the parts of the system designed to do the positive stuff — to create an income stream to fund the building of new communities. The price differential between agricultural land and land with planning permission is staggering but value accumulates to landowners and not the community that created it,” says Ellis. Since the 1950s repeated efforts have been made to capture rises in land value using a variety of mechanisms, including development charges that are paid by developers, or land tax that is a charge on landowners. In 1967 Labour introduced a “betterment levy”, which was dropped by the Tories in the early 1970s. Again, Labour brought in a development land tax in 1976, set at 80 per cent of the increase in land value, which was maintained by Margaret Thatcher’s government at 60 per cent. But in 1985 the Chancellor of the Exchequer, Nigel Lawson, scrapped it. The opaque and confusing system of “planning gain”, which is paid by developers, evolved in the vacuum under a clause in legislation known as Section 106, but it has produced nothing like the amount of housing needed, while speculation has soared.
Land Value Capture – therein lies the answer to the housing benefit conundrum.
The Problem with UBI is that it could rapidly turn into a way cutting wages and support for people with health issues. Plus as it is implemented the counter arguments would end up being things like “why are giving rich people a basic income,/funding the idle/ bad life style choices/ what really need is tax cuts”,. We had universal benefits such as child support and it became totemic to remove them from some income brackets even though they were more than off-set by taxation . The principle is very attractive and offers a positive path forward. But, sadly, I suspect any consensus would soon be subverted by the economic right.
Adam Bennett is correct Universal Basic Income is a liberal idea; it does empower people and it gives people freedom. And it should be party policy.
@ Gordon
Trying to not get sanctioned can cause people mental health harm. Forcing people to do things can cause mental health harm. Most people would still work with UBI and so still have that social contact. We need to recognise that a person is not just what they do for employment.
@ John Chandler
There are many ways to fund UBI and I have suggested some depending on what level you want UBI to be – https://www.libdemvoice.org/can-we-afford-a-universal-basic-income-56572.html.
@ Graham Evans
If the National Living Wage was 70% of average earnings and we had 1.5 million more homes than now I think the number of people needing housing benefit would be reduced.
@ Peter Martin
I would expect the amount of UBI to fully compensate for the loss of a person’s Income Tax Personal Allowance. UBI can be “fiscally neutral” to the Exchequer but those with higher incomes are likely to be net losers and those who have no income are big winners.
To anyone who thinks this empowers employers to pay less:
It does not. The reason we are in this mess in the first place is because employers have very little interest in paying people enough to pay the bills in the first place. It’s about bargaining power, not about what people need.
A UBI will actually see an INCREASE, not a decrease, in wages.
What is MORE important than what an employer might think about your bills being paid, is what you can leverage against your employer.
It’s less about the employer saying “we will pay you what we want because your bills are already paid” and more about the worker saying “you’ll pay me what I want or I just won’t work for you”.
UBI is a great idea as it sets workers free from the tyranny of requiring a job to pay the bills.
However we dress it up, the idea of a UBI means paying people for doing nothing. All this at the same time as we have a housing shortage and so need builders, we have problems in the NHS and so need doctors and nurses, we have oversized classes in schools and so need more teachers, etc etc. We only seem understand these arguments when immigration is the point of discussion.
Of course we need to guarantee the income of everyone in case they cannot find work or are too sick, or too old to work but that doesn’t mean it should be universal. If the domestic partner of a wealthy person chooses not to work that has to be their free choice. The taxpayer could still step in if they want some work, and and cannot find any, they are still a potential valuable resource, but that is as far as it should go.
The time for a UBI will be when I see robots in my local park mowing the grass and tending the flower beds, which are currently, incidentally, is a sorry state of neglect, and we can’t think of anything for anyone to do any longer! I don’t expect that to happen any time soon!
“However we dress it up, the idea of a UBI means paying people for doing nothing.”
So what? People are paid for doing completely useless or counterproductive things all the time.
And anyway, you’re wrong: it’s not “paying people for doing nothing” – that’s unemployment benefit (whatever its current name), which you lose as soon as you start working; it’s “paying people whether they are doing something or not” which is more likely to increase people’s willingness to work than the contrary. Yes, it would throw a bit of unnecessary money at the idle partners of the rich, as child benefit throws it at their children – if the rich are paying their fair share of the cost, so what?
David Evans: If only it was so simple. The coalition, like most things, was a mixed experience, some of it good, some of it bad. You apparently want the party to deny the good by repudiating everything that was done by the coalition. Sure, we have to learn from what we did wrong and convince people we won’t make the same mistakes again. But apologise for equal marriage, big increases in income tax allowances, the pupil premium, the Green Investment Bank, the industrial strategy? No way.
You just can’t be absolutist in all this. If we do as you suggest we will never enter a coalition again, whatever the circumstances, because we will be paralysed by the fear of making mistakes and having to apologise for them. I for one am a realist. If we are to enter government again (and surely we are nothing if that’s not our aim) then as likely as not it will first be as part of a coalition.
Student fees was a major blunder. We made an absolute (and very foolish) pledge and reneged on it. Nick Clegg did apologise for that and much good did it do us.
Most people have moved on and we have to too. People want us to offer a programme that they can identify with to change our society to treat all our citizens fairly, not allow a tiny, greedy minority to dictate to the rest of us and cream off all the money. Our problem is that we have not yet got such a programme.
Brexit will of course only make matters worse. UBI is an idea we must consider because it does offer a realistic way of sorting out poverty. And yes, the rich will have to pay a lot more, because frankly they don’t deserve the income and wealth they cream off the rest of us.
The tedious and soul destroying nature of some work is only a problem when it is endless but with UBI I would see people coming in and out of work as their inclination and need took them… very inconvenient to employers but hah! But it would only work properly if fixed costs were also taken down towards zero (energy, council tax etc) and there was a good supply of low cost property otherwise it would just be UBI plus the usual grind to survive. Whether you increase the number of houses/flats or decrease the overall population is a moot point.
it’s “paying people whether they are doing something or not” which is more likely to increase people’s willingness to work than the contrary
But fundamentally you still have to answer the question: why should the state subsidise people to spend all their time on their hobbies? Because some people will take UBI as a license to do that.
There is also the issue that this totally infantilises people with regards to the state: the government becomes the parent, giving out pocket money which they don’t have to do anything to earn but which they will come to rely on and about which, I am sure, we will never hear the end of the whining if it’s ever reduced or stopped.
William Fowler,
Churchill made this point a century ago:
“No matter where you look or what examples you select, you will see every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream for himself, and everywhere today the man or the public body that wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it to an inferior one, and in some cases to no use at all. All comes back to land value, and its owner is able to levy toll upon all other forms of wealth and every form of industry. A portion, in some cases the whole, of every benefit which is laboriously acquired by the community increases the land value and finds its way automatically into the landlord’s pocket. If there is a rise in wages, rents are able to move forward, because the workers can afford to pay a little more. If the opening of a new railway or new tramway, or the institution of improved services of a lowering of fares, or of a new invention, or any other public conven-ience affords a benefit to workers in any particular district, it be-comes easier for them to live, and therefore the ground landlord is able to charge them more for the privilege of living there.
Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public con-science, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted!
And a friend of mine was telling me the other day that, in the parish of Southwark, about 350 pounds a year was given away in doles of bread by charitable people in connection with one of the churches. As a consequence of this charity, the competition for small houses and single-room tenements is so great that rents are considerably higher in the parish!
All goes back to the land, and the land owner is able to absorb to himself a share of almost every public and every private benefit, however important or however pitiful those benefits may be.
I hope you will understand that, when I speak of the land monopolist, I am dealing more with the process than with the individual land owner who, in most cases, is a worthy person utterly unconscious of the character of the methods by which he is enriched. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally worse than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack; it is the system. It is not the man who is bad; it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy if it were not to endeavour to reform the law and correct the practice.
We do not want to punish the landlord.
We want to alter the law.”
@ Joe Bourke The rascally Winston made that speech in 1909 in support of his rascally pal Lloyd George. By 1920, when one of the pair was Prime Minister and the other in the Cabinet, the Land Taxes were quietly dropped after a vote of the whole House.
Between 1924-29 after rejoining the Tories, Winston was Chancellor….. not a whisper about land taxes – so I don’t find his 1909 rhetoric completely compelling.
Can you tell us why the land taxes were dropped in 1920 ?
@ Joe PS “in the parish of Southwark, about 350 pounds a year was given away in doles of bread by charitable people in connection with one of the churches. As a consequence of this charity, the competition for small houses and single-room tenements is so great that rents are considerably higher in the parish!”
Now that’s a nice one. Do you take that as a neo-liberal attack on Food Banks ? There’s a great Liberal slogan “Close the Foodbanks – They force up the cost of accommodation.”
Isn’t it time we gave the Daily Mail a rest ?
I prefer the term ‘citizen’s dividend’ as people leap to all kinds of false conclusions when you talk about ‘universal basic income.’
I believe a citizen’s dividend, paid to all, recognises the unique value that each citizen brings to society, and values them even when they spend their time unpaid as carers, students, community volunteers, artists and budding entrepreneurs. It is not ‘paying people to do nothing’ or making them dependent on the state, which is how people wrongly interpret it when you call it a basic income. Most people will still choose to work and pay taxes to achieve a better living standard, but the CD gives the security of an unconditional safety net for those times when their circumstances change.
David Raw,
you have previously pointed me to the Liberal Democrat History Group article that gives a good account of this era and the Land Value Tax campaign. Ultimately, the political opposition by Landed Interests in the Edwardian era proved too much for the Liberal government of the day. For the same reasons National Insurance for pensions, accidents, ill health and unemployment was to paid by workers by a stamp deduction from their wages and not out of any taxes paid on unearned income.
Churchill before ,as he put it ‘ratted for the second time’, was a strong advocate of Land reform.
Food banks today are in large part a consequence of the extortionate cost of accommodation that impacts those subsisting on low incomes the most, just as tenement rents absorbed the greater part of workers incomes in Lloyd George’s and Churchill’s time.
The solution now is the same as the solution then. Alleviate housing and general poverty by collecting rents from the fixed supply of land that cannot be passed in the form of higher rents and prices to those least able to pay it.
Dav 2nd Mar ’18 – 11:05am
“But fundamentally you still have to answer the question: why should the state subsidise people to spend all their time on their hobbies? Because some people will take UBI as a license to do that.”
So what? Some people manage to do that with benefits anyway, though we force them to tell lies in order to do so. If UBI will achieve all sorts of good things (which I think it will) then “some people won’t do anything useful with it” is a pretty poor argument against. It’s like the objection to child benefit going to middle-class mummies who’ll spend it all on gin.
“There is also the issue that this totally infantilises people with regards to the state: the government becomes the parent, giving out pocket money which they don’t have to do anything to earn but which they will come to rely on”
– you could say the same about any universal service of course (and some right-wing types do): why should we provide health care, education, social services, free of charge to everyone? They’ll only come to rely on it…
“and about which, I am sure, we will never hear the end of the whining if it’s ever reduced or stopped.”
Oh no! Whining! It’s the end of the world!
Of course people will whine. It’s human nature, it seems. In case you haven’t noticed, there’s plenty of it already; I guess if UBI is ever introduced (I’m not holding my breath, I need it for all that whining I’m going to do) then it can be blamed for the whining, and while it lasts we can all pretend that if we only abolished the former, the latter would go away…
And it is this broken system that, to me, explains my generation’s disinterest in the Liberal Democrats and our collective adoration for Jeremy Corbyn.
Or maybe they just hate the Conservatives and see Labour as the strongest opponent to them, if they even remember the Liberal Democrats at all. In any event, there is no way the Liberal Democrats are going to be more convincingly socialist than Jeremy Corbyn’s Labour Party.
@Malcolm Todd
“There is no difference between a basic income and a negative income tax. None. It’s just nomenclature – the principles are exactly the same.”
If everyone were employed under PAYE, that statement would be true as their employer could simply add their negative income tax to their wages. However once you have people moving from employment to unemployment and vice versa, to say nothing of the self-employed, running an negative income tax system becomes much more complicated (see, for example, the implementation problems with Universal Credit) and it may be easier for the Government simply to give everyone a fixed sum (the Basic Income) and then recover its cost through taxation.
Even though both Basic Income and Negative Income Tax are designed to have the same effect in reducing poverty, it is still useful to distinguish between these approaches. Joe Bourke in his comments above makes a good case for the Basic Income approach in reaching particular groups of people who may otherwise ‘fall through the net’ of the Negative Income Tax approach.
Laurence Cox
You’re right, of course, about the mechanics of it. However, if you give people the right to receive their “basic income” as a credit against tax rather than a separate payment; or to receive a payable “tax credit” against their Income Tax equal to the maximum NIT receivable, then the differences melt away.
My point is just that the objection to basic income, that it gives money to everyone regardless of “need”, would be just as applicable to NIT because the financial effect is the same either way. Perhaps I should have said the rest is “technicalities”, rather than “nomenclature”.
So what? Some people manage to do that with benefits anyway, though we force them to tell lies in order to do so
True, but at least that doesn’t send the message that we approve of it. And it’s not what benefits are intended for and if people are found to be gaming the system they are stopped. Plus, as we keep being told, the actual level of fraud is very low, which means there aren’t that many people indulging their hobbies on the taxpayer: UBI would basically make it available to everybody in the country.
you could say the same about any universal service of course (and some right-wing types do): why should we provide health care, education, social services, free of charge to everyone?
Those, though, are only given to people who need them (health care, social services) or are provided for a purpose and people are expected to work for them (education, where pupils are expected to put in the effort to benefit; it’s not just a gift).
Just giving people cash that they can use to live on while they play in a rubbish band with their friends or make bad art is a totally different thing. That’s the state funding people to indulge their hobbies, and why should people get to do that?
Oh no! Whining! It’s the end of the world!
Perhaps I expressed myself badly. My point was that if UBI was introduced then pretty soon people would come to feel like they deserved it, even though they don’t
It’s basically the attitude of ‘the world owes me a living’ raised to the status of policy.
@Malcolm Todd,
You’re fond of the phrase “so what?”
I’ll tell you so what. We shouldn’t be paying people for doing nothing when we could be paying them to do something useful. Like helping support the elderly, or helping working people by working in nurseries etc.
It isn’t too long that I was reading about the closure of such nurseries, because supposedly we’d run out of money ! We hadn’t run out of people to work in the nurseries.
I think that a Universal Rental Income (URI)equivalent to the Local Housing Allowance could be a usefule corollary to a small UBI. Universal credit (which includes Income Support, Income Related Jobseeker’s Allowance, Income Related Employment Support Allowance.Housing Benefit, Working Tax Credit Child Tax Credit) could then be replaced with a UBI that excludes housing costs. The UBI would b equivalent to the combined rate of basic rate tax (20%) and employee NI (12%) on the personal tax allowance of £11,500 i.e. £71 per week.
URI would be paid directly to eligible private tenants via local authorities and applied as a credit against social housing tenants rents and provision of accommodation for the homeless.
Homeowners would not receive a cash payment, but rather a homestead allowance equivalent to the Local Housing Allowance for the area in which they reside to be set against an income tax assessment on the rental value of the land they hold title too.
Homestead allowances would only be available on principal private residences, not let property or second homes.
The costs of the UBI are largely defrayed by elimination of the current personal tax and national insurance thresholds and by combining income tax and national insurance into a single rate of tax on all taxable income, earned or unearned without an upper threshold, including pensions which are then topped up with a tax free payment of £71 per week. Pensioners receiving less than £11,500 will pay no tax. Pension income above this level will be taxed at 32% upto the higher rate limit. Once the higher rate limit is reached, I would cap the combined tax and NI rate at 50%, so that no one pays more than half of their income on any band.
The costs of the URI are met by assessing residental rental and investment property to business rates and by land value tax assessments at income tax rates on owner-occupied land. The burden of the tax will fall mostly on let property, second homes. investment properties left empty and higher rate taxpayers in high value properties. Homeowners in properties with rental values at or below the LHA will suffer no net tax cost and in median value properties onlymarginal tax costs.
The beneficiaries are tenants and homeowners in lower value properties. Any exemptions or deferrals thought necessary or desirable for asset rich, income poor homeowners could be incorporated in the system.
Mick Taylor 2nd Mar ’18 – 10:22am………….David Evans: If only it was so simple. The coalition, like most things, was a mixed experience, some of it good, some of it bad……….
Bishop: “I’m afraid you’ve got a bad egg, Mr Jones”;
Curate: “Oh, no, my Lord, I assure you that parts of it are excellent!”
Most of us would have sent the egg away…The electorate did just that, hence our 7% standing..
Still, never mind, let’s keep trying to convince them that they were wrong…
@ Glenn
It is much cheaper to administer a universal system and then change the tax system to recover it from the rich (as is done with Child Benefit) than administer a means tested system.
@ Dav
At the moment there are certain people who can choose not to work because of their wealth. If you were correct and giving people a UBI meant that more people would choose not to be in paid employment why as a liberal would this be a bad thing?
@ Peter Martin
We could pay them a UBI and to do the jobs you want done, they are not mutually exclusive. I know you are not in favour of forcing people to do jobs they don’t want to do, but you give the impression here that you want to use economic circumstances to force people to do the jobs you want done.
At the moment there are certain people who can choose not to work because of their wealth
And can we agree that it is a bad thing if those people choose to not do anything useful with their lives but instead indulge their hobbies? That anyone fortunate enough to be in that position ought to recognise that it puts on them an obligation to work even harder?
Therefore why would it be a good thing to put even more people in that situation?
@ Joe Bourke 12.48 “the political opposition by Landed Interests in the Edwardian era proved too much for the Liberal government of the day”.
Afraid not so simple, Joe. The land taxes were implemented by ‘the Liberal Government of the day’. They were scrapped in 1920 ten years after the Edwardian era – you’ve still not told us why they were scrapped. Could it be they produced very little revenue for the amount of effort and administration involved ?
You also say, “For the same reasons National Insurance for pensions, accidents, ill health and unemployment was to be paid by workers by a stamp deduction from their wages and not out of any taxes paid on unearned income”.
Again, not so, Joe. The National Insurance Act Part I provided for a National Insurance scheme with the provision of medical benefits. All workers who earned under £160 a year had to pay 4 pence a week to the scheme; the employer paid 3 pence, and general taxation paid 2 pence. Lloyd George called it the ‘nine pence for four pence’.
You say “Food banks today are in large part a consequence of the extortionate cost of accommodation that impacts those subsisting on low incomes the most”. As Chair of a Food Bank, I can tell you that’s an over simplification of a more complicated reality. I could tell you the recent growing demand at Food Banks is fuelled by an over complicated system of Universal Credit as introduced by the Lib Dems in Coalition.
The danger is that a Georgeist Land Tax system is likely to be much more complicated
and just as unpopular as Universal Credit and the Poll Tax.
As for Universal Income – why should Sir Philip Green, the Carillion other Philip Green, the privatised Water Board bosses on £ 2.5 million pa, the Duke of Westminster, and presumably H.M. & Phil get it ? Will the Royal Estate and the Duchy of Cornwall be free of the Land tax ? A proper Hornet’s Nest awaits but I suppose it’ll keep the House of Lords busy when we get the Lib Dem Commons majority required to implement it.
@ Dav
No we can’t agree. I don’t make a moral judgement that paid employment is good and not being in paid employment is bad. I don’t understand why paid employment is supposed to be good. Having a fulfilling life is good, not having a fulfilling life is bad. Being in paid employment should assist a person to have a fulfilling life, but it is not necessary, people can have a fulfilling life without being in paid employment.
I don’t make a moral judgement that paid employment is good and not being in paid employment is bad
You don’t think it’s bad if the heir to a fortune decides not to bother doing anything with their life, but just indulges their hobbies, plays in a band, writes bad poetry, etc? I think you’d be in a minority in that one.
As I understand it the difficulty wealthy parents face is best summed up by the phrase I once heard, ‘how to leave their children enough that they can do anything but not so much that they can do nothing’.
With a UBI (or citizen’s dividend, or whatever) the state becomes the parent giving its children enough that they can do nothing.
Michael BG
I agree, The reality is that a lot of jobs are blummin’ awful and rely on the fear of poverty to fill them.
Dav
What if they form a good band or write good poetry? What if their hobby is productive without paying anything? What if their job is essentially so pointless it means they’re spending most of the day pretending to do things whilst watching cat videos on Youtube? Also if the alternative to paid employment is a life devoid of purpose, then who’s going to tell pensioners?
@ MichaelBG,
“……you give the impression here that you want to use economic circumstances to force people to do the jobs you want done.”
This is the way our system works. We have to recognise that, no matter what our political beliefs might be. If we want the sewers to remain unblocked, which I’m sure we all do, then someone has to get down there and do the necessary work. I’m sure we can all think of other unpleasant but necessary jobs too. I don’t begrudge those doing them whatever they are paid. I’m fortunate enough to never having had to do anything too distasteful, but nevertheless when the mortgage needed paying and the children needed new clothes etc I had to put in the extra hours at work to earn extra money when the opportunity arose.
Yes, I felt forced to do that by economic circumstances. I’d rather have gone fishing! But , on the other hand I was always reasonably well paid for what I did and I’ve never had to put up with zero hour contracts or having to be at the beck and call of my bosses.
I don’t believe the younger generation are any different. They don’t expect to get something for nothing.
David Raw,
we can go through this blow by blow qouting Hansard if need be but my comments would start getting even longer than they already are. The definitive work on this imo is Christopher Lee’s The Peoples Budget: An Edwardian Tradegy.
“Although the Edwardian period may in retrospect appear to have been a golden age, it was in reality a time of much turbulence in the political and social fields. There were long and often violent strikes in the docks and coalmines as well as in other less vital industries. Poverty was endemic, and it was the fear of the creation of a semi-criminal underclass as much as feelings of benevolence that led during this period to the beginnings of the welfare state.
Lloyd George, the Chancellor of the Exchequer, needed to increase taxation to meet the cost of the recently introduced old-age pensions and, in his 1909 budget, he proposed his famously controversial land tax. This was based on Henry George’s philosophy as expounded in his economic bestseller, Progress and Poverty, published in 1879. Gladstone had incorporated his ideas in the Liberal Party’s programme.
The House of Lords, set on defending the interests of its members, rejected the budget, thereby breaking an unwritten constitutional convention preventing it from opposing ‘money bills’. In return the Government sought an assurance from the King to create enough Liberal Peers to outvote the Conservative majority in the Lords. In the end the Peers backed down and the Parliament Act of 1911 established the supremacy of the elected chamber over the Lords.
The land tax, badly drafted and never fully implemented because of the start of the First World War, was abolished in the 1920s. This book concludes by looking at the attempts and failure of subsequent governments to devise acceptable methods of separating the public from the private revenue of land to recoup for the community what the community itself creates, the heart of Henry George’s argument.”
Lee wrote the first Chapter of ALTER’s The Case for a New People’s budget https://www.libdemvoice.org/new-book-the-case-for-a-new-peoples-budget-16173.html
David Raw,
this link gives a similar perspective http://ultimatehistoryproject.com/peoples-budget.html
“.. Lloyd-George’s ‘People’s Budget’ of 1909 marked an important moment in British constitutional, political and social history. The budget’s tax increases and levies on land were actually somewhat modest, but the proposal to introduce a land valuation that would form the basis of more significant and more scientifically appraised tax proposals in future budgets struck fear in the landed elites. This valuation would also potentially prevent landlords from charging speculative rents, especially in urban areas.
Unfortunately, the members of the upper house of Parliament—the House of Lords—were either members of the aristocracy or bishops in the Anglican Church. Both groups had very significant landed interests. More importantly, these landlords had powers of veto and amendment over legislative proposals that came from the House of Commons.
The Lords had traditionally deferred to the House of Commons on bills concerning finance; this made sense as the House of Commons was elected by the people. However, as the details of Lloyd-George’s tax proposals emerged, it seemed increasingly likely that the Lords’ would veto the 1909 Finance Bill (Budget).
This outcome would plunge the United Kingdom into a constitutional crisis. As it became increasingly apparent that the Lords were considering vetoing the Bill, Lloyd-George, as he had done so often in the past, appealed directly to the people.
In August 1909, at Limehouse in East London, he delivered one of his most famous speeches. In it, he denounced the aristocracy and the Anglican Church for demanding that those who could least afford it finance the government’s rising expenditures for defense and social reform.
He was careful to convey that he was against neither profit nor wealth but rather its monopoly by a tiny elite, and he emphasized both the stunted ambitions of the working classes and the capitalist venture and business class.
A few months later at Newcastle, Lloyd-George spoke of the coming election. “The question will be asked,” he said, “whether five hundred men chosen accidentally from among the unemployed, should override the judgement – the deliberate judgement – of millions of people who are engaged in the industry which makes the wealth of the country?” It was a deliberate slap at the members of the House of Lords.
Ultimately, the Lords vetoed the “People’s Budget” in November 1909. In January 1910, the Liberals called a general election and the undemocratic Lords’ veto was the campaign’s dominant issue. The Liberals won a narrow victory.
The Liberals’ tenuous hold on power was made possible only by a collation with the Irish Parliamentary Party, which was campaigning for Irish self-government within the United Kingdom. Because tensions between the unelected House of Lords and the democratically elected House of Commons continued, a second election was called for December.
Again, the Liberals, with help from the Irish Parliamentary Party and the Labour Party, won a majority of seats in the House of Commons.”
Asquith blinked and LVT was quietly put on the back0burner only to be killed-off when the Conservative Party returned to power.
@ Joe Bourke Joe, I’m afraid I don’t need a cut and paste from an Amazon publisher’s description of Lee’s book (which was financed by the Henry George Foundation) to convince me that you’ve answered any of the points I raised about the difficulties of a land tax.
Nor do I need a cut and paste from a website that LL.G’s land taxes were “killed-off when the Conservative Party returned to power” when it was clearly a Con/Lib Coalition a Liberal Prime Minister that finally killed them off..
Until you do deal with the difficulties, I think we’d better leave it at that – although I respect your dedication to Georgeist ideas..
@Dav,
I can think of at least one person who was on benefits and used her time to indulge her hobby of writing.
Joanne Rowling wrote an entire book and spent some of her benefits money on a couple of cups of coffee with cakes, and a laptop, and even on paper to print it out. And on posting it off time and time again, copy after copy.
She did have time between her child going to school and coming back again to work at something “we” would approve; we could have made her benefits even more conditional on living in an approved fashion. In doing what WE directed rather than what SHE chose to do.
Personally, I’m glad we didn’t have even more conditionality. And yes, a UBI would free up people to a small degree (we’re not talking about lavishing cash on people to let them lead a life of inert luxury, after all – we’re talking low-level benefits money). When trialed, it’s caused more people to become entrepreneurs. Teens to extend their time in education (actually, should we restrict basic education to directly useful stuff? Should we provide Arts, or English Literature? If so, why?).
Reduction in mental health conditions (the stress of being close to zero food, for example, is really damaging).
Any work that is not paid and is done by choice and preference is a hobby. That people will be able to work at things they enjoy and are good at is a good thing. Bad poets become good poets with practice. Bad writers become better writers. People can and do become productive in ways we don’t and can’t foresee, so I won’t turn my nose up at them for not doing activities I personally see as good or rewarding. After all, I’ve done mind-numbing and soul-destroying (and even ultimately pointless) things for money in paid employment.
We’re talking about comparatively small sums of money that are used in order to promote universality (and ensure people – especially the most vulnerable – don’t slip between the holes in the net), provide a backstop that’s both physically and psychologically extremely useful, improve the freedom of the individual to a small but very significant amount, reduce poverty and deprivation, and, yes, allow a small number of people to do nothing if they’re content to live off absolutely minimal subsistence. But as the withdrawal rate/marginal tax rate would be so much smaller than today, their next door neighbour who does as much as one hour more paid work than them will be better off.
David Raw,
I am not sure what it is you are asking. Old age pensioins whem introduced in 1908 were funded from general taxation rather than contributions,creating a need for tax increases at the same time as an arns race with Germany was underway.
After the poor showing in the general elections, the Liberal government could not afford to lose any more middle class voters to the Conservatives. The solution hit upon was national insurance contributions to move the majority of funding away from general taxation to earned income only in the form of employee and employer contributions. Flat rate contributions also removed the redistributive element of funding from general taxation and put the incidence of national insurance on workers wages. This was a purely political decision as was the watering down of the LVT proposals to purely nominal levies and deferral of Land valuations.
We face the same issues today. There is nothing particularly complex about an LVT system. The obstacles remain political not logistical.
As to wealthy individuals receiving benefits – they can be paid if administratively simpler e.g. winter fuel allowances; or withdrawn e.g as with Child benefit for families with an earner on an income over £50k, or personal allowance withdrawal on incomes over £100k.
There is always nervouseness around any radical proposals aimed at addressing poverty. But the issues remain the same and it is political will not an inability to devise an efficient welfare system that remains the obstacle.
Your work with food banks will no doubt give you greater insights on issues like Universal credit than I or many others. It should not , however, be beyond our collective wit to design and deliver welfare programs that obviate the widespread need for such voluntary support measures.
In an earlier post, it sounded like I’m against UBI . I actually think idea has a fair bit of merit.
@ Glenn
Great post. Yes who is going to tell the pensioners?
@ Andy Cooke
Well said regarding what happened when UBI was trialled.
@ Peter Martin
You seem to confuse a UBI with having enough money to take out a mortgage and buy a house or buy a brand new car. As I said the need to work is not abolished with a UBI. For some people it might be and from the trials these people stay in education or doing training courses or set up their own businesses. UBI also assists people with their work / life balance and in the trials some people just worked part time.
I think you oppose UBI because people don’t have to do anything for it, there is no test to receive it. Do you oppose Child Benefit then? And if not, why not? What is the difference?
@Micheal BG,
You rightly point out that Child benefit, as it was first introduced, was a UBI for children. It’s now not quite as ‘universal’ as it was. We could say the same about the aged pension. Although that does have a contributory factor, most of the money paid into the system has long been spent! That’s inevitable. The Govt can’t save its own £ IOUs.
So “what’s the difference”? Simply that we have decided, as a society, that children and the elderly shouldn’t have to work for a living. We can add in those who can’t work because they are genuinely unable to find a job, are sick, or there is some other medical reason. So there’s no argument from me against benefits per se. It’s the unconditional nature of them which is the problem.
We don’t all have to work 40+ hours per week for 48 weeks of the year. The rise of automation, and the robots, which is often used as a justification for paying out a UBI should instead be used to reduce the working week. A target of perhaps 30 hrs per week should be our immediate goal. Although, of course, if anyone wants to work less, that’s fine too. But they shouldn’t expect any financial support from society if they choose to not work at all.
As an aside and as the conversation has drifted into Land Value Tax – the fundamental positive of LVT actually comes over as quite facile when it’s said, but it’s true and absolutely key to why, uniquely, it (unlike income tax, wealth tax, profits tax, and the like) ISN’T distortionary in a negative sense: They’ve stopped making land. And it’s very difficult to move it abroad.
All taxes act as a disincentive to the activity being taxed – income taxes disincentivise work to a degree, profit taxes impact on economic growth badly, wealth taxes disincentivise leaving wealth in the jurisdiction. A tax on UNIMPROVED land (otherwise it disincentivises improvements) cannot be distortionary and is very difficult to dodge. (“Land? What land? I don’t have any… oh, THIS land. Ah”)
It actually incentivises improving the value of the land.
@ JoeB,
You’re still pushing your LVT idea even when the post was about a UBI I see 🙂
The subject of economics, like pretty much everything else, has moved on a lot since the 19th century so being a committed Georgist is rather like being a committed Marxist. I’m not saying either were necessarily wrong, or at least weren’t too far wrong, in what they wrote at the time but things really are different now. There’s no gold standard any longer and ALL currencies are just IOUs of issuing governments. We all need to bring ourselves up to date.
So you might like to tie up your thoughts of a LVT and a UBI in terms of a more 21st century debate. When I first came across MMT ideas about five years ago hardly anyone had heard of them. They are challenging the mainstream now. New Keynesians like Simon Wren-Lewis can’t ignore them any longer and are now actively engaging. Full credit to him for that. He does have a point when says that we shouldn’t be cultish and we should debate in a respectful way. I don’t think he’s right about intergenerational transfers though!
https://mainlymacro.blogspot.co.uk/2018/03/the-dangers-of-pluralism-in-economics.html#comment-form
Peter Martin,
LVT is not my idea it is in the Libdem manifesto and has been for many years.
Adam Bennett in his article above makes a good case for why we need a settled policy on this issue.
I would agree virtually word for word with Simon Wren-Lewis post on MMT that there is much merit in the approach. I also agree with his criticism when he argues “that a deficit generated by a tax cut could alter the intergenerational distribution of income.”
Similarly with UBI how it is funded is crucial. Income levels are a key driver of rent costs. As incomes grow so too do land rents. To ensure that UBI is not swallowed up in increased rents (and therefore housing benefits costs) and increased land value it needs to be funded in a way that will not inflate rent costs – this is LVT.
The fact that Winston Churchill was making this point a century ago does not change the fact that the same dynamics exist today.
Much of the arguments that are made about poverty and inequality today were being made 100 years ago.
After the first world war, trade unionist were railing against the high taxes being levied on workers incomes to meet interest payments on the war debt. The Geddes cut plunged the UK into the slump of the twenties and ideas like C. H Douglas’s Social Credit were developed. Douglas called attention to the excess of production capacity over consumer purchasing power, an observation that was also made by John Maynard Keynes.
The Social credit or social dividend was the precursor to the idea of a Universal Basic Income. A Social Dividend is more than than a universal basic income. It is the realization that the greater part of production is now being made by machines. Natural resources are a gift of Nature. Technology is passed down from one generation to the next; like Land it is a common good. The two must benefit every single citizen whether employed or not.
@ Peter Martin
“It’s the unconditional nature of them which is the problem.”
As I said you object to a UBI because it is unconditional.
Child Benefit is still universal and as Joe Bourke stated it is “withdrawn” via the taxation system as a person’s income increases above £50,000. If a UBI was set at the equivalent value as the Income Tax Personal Allowance it would be “withdrawn” as the Personal Allowance is as a person’s income increases over £100,000. Child Benefit is not paid because we decided children should not work, we decided that long before Child Benefit was introduced. Child Benefit was introduced to assist families with the cost of having children. It is paid to an adult. The government just decided that it was a good thing to do. A future government should decide that having a Universal Basic Income is a good thing to do, because of the benefits to individuals.
@ Joe Bourke
I know you really believe that LVT would not increase domestic rents, but you have not been able to demonstrate it. (Please don’t quote other people who believe as you do; please try demonstrating it with a simple example.) I agree with Andy Cooke LVT is a way to ensure that land which is not being used for what it has planning permission for is used for that purpose. It is also a better method to tax commercial land than business rates.
@Micheal BG
But maybe some individuals shouldn’t benefit?
What about new arrivals into the country? I appreciate that this is a potential problem for the JG too. I’d say the average voter wouldn’t wear this!
Michael BG,
LVT is not passed on in higher rents for the same reason that it makes no difference to the rent charged whether a Landlord has a mortgage on a property or owns the property outright. The rent is set by what the market demand is in any particuiar location not by what the costs associated with the property are.
A Landlord who has paid off his mortgage long ago will have low cosrts. A Landlord witha high loan to valie ratio will have high costs (quite often negative cash flow until the property is sold). It is not the costs that determine the rent charged, It is supply and demand in the property market.
For the same reason a Landlord who becomes a higher rate tax payer cannot charge 20% extra rent just because he is now paying 40% tax wheras before he was paying tax at the basic rate of tax of 20%. He can only charge what tenants can afford to pay based on their income. If there are no tenants that can afford to pay the rent asked the propetry will remain empty.
This blog disccusses the issues in further detail http://blog.lvrg.org.au/2011/08/why-land-tax-cant-be-shifted-onto.html
@ Peter Martin
I favour a Basic Citizens Income which is paid to all citizens of the UK. I also favour keeping means tested benefits. So new arrivals wouldn’t receive the Basic Citizens Income until they were citizens and wouldn’t be eligible to means tested benefits until they met the criteria for such benefits.
Joe
You have disappointed me. A LVT is not like having a mortgage or a person suddenly finding they are in a higher tax bracket. If all private homes being rented had a 1% tax placed on them most landlords would increase their rents by 1%. I suppose some owners at the margins might sell the home because they can’t get the 1% to continue to make renting the home out profitable and this would help to increase rents. UK rents have increased year on year for years and last year by 1.5%. Gavin Putland would only be correct it there was a large pool of houses not paying extra council tax for being empty which the owners couldn’t sell and which they were forced to rent when they didn’t want to rent them out.
Michael BG,
I am sorry to disappoint you, but we know what the effect of LVT is because it is already in place (more than 30 countries already have some form of LVT put into practice); several Australian states and towns and cities in the US as well as places like Singapore and forms like Land premiums in Hong Kong.
Landlords increase rent in line with what tenants are willing and able to pay based on their income. When you have a large number of people chasing a limited pool of available properties rents rise in line with the incomes of the highest bidders
It is widely accepted that higher interest rates = lower house prices. First time buyers are tenants and their rent is fixed. They will only buy a home if the monthly mortgage payments are roughly in line with the rent they are paying. So the amount of monthly mortgage payments are also fixed and the amount of money they are willing to borrow to buy a home is simply the inverse of the interest rate.
We know that rents don’t go up (or down) when interest rates go up (or down) because otherwise, the basic rule that house prices go up when interest rates go down would not hold!
LVT will just act like a higher interest rate. So rents will stay the same and house prices will go down
MIRAS was a modest tax subsidy for mortgages, it was intended to make it cheaper to buy a home, and was phased out in the 1990s. In the context of land, a subsidy is the opposite of a tax; withdrawing a subsidy is exactly the same as imposing a tax.
But did the subsidy really benefit purchasers with a mortgage (most purchasers) or vendors? If it benefitted purchasers, then the share of income which purchasers were prepared to spend on mortgage repayments would have been higher after MIRAS was phased out. If it benefitted vendors, then the share of income would remain constant and the net amount of interest collected by banks/vendors would stay the same.
So which was it? The latter of course, as the Council of Mortgage Lenders confirmed and as we see today with help to buy.
Universal basic income, as outlined by Adam Bennett in his article, can work to improve the welfare system; but only if the dynamics between increased income and increased land rents is understood and the distributional ipacts are addressed.
Joe,
Again no example. The UK has a housing shortage. Did any of these 30 countries have a housing shortage when LVT was introduced?
I don’t believe that average rents only increase at the same rate as average earnings. Please provide your evidence?
In August 1988 joint MIRAS was abolished. House prices continued to rise (please do a Google search for ‘UK house prices since 1952’ because the link I had posted in a previous thread for you doesn’t work). In April 2000 MIRAS was finally abolished and house prices hardly dropped the average house price being £77,698 in the first quarter and £81,628 in the fourth quarter of 2000. Therefore the abolition of MIRAS did not reduce house prices as you say it did.
You have no evidence that LVT would act like higher interest rates. It is only your belief!
Michael BG,
all of these countries have housing shortages. Rents are based on location (ask any estate agent) and are a function of demand and supply. As demand increase (more people trying to rent a limited or slowly growing supply) rents are pushed up to the limit of affordability. Landlords will charge the market price based on the location, which in an area of high demand is determined by the income level for the area.
Subsidies like Miras or help to buy support higher house prices just as lower interest rates do. Affordability is based on the % of income that is taken up by mortgage payments on rent. If these are subsidised, rents and house prices are higher than they otherwise would be without the subsidy. Taxes like stamp duty are the opposite of such subsidies. They reduce the selling price that can be achieved as there is a limit on the number of purchasers in the market that have the ability to meet the asking price and the associated costs including stamp duty.
None of this is rocket science, Michael. Anyone looking to buy or sell a house or rent an apartment will know this stuff already.
Peter Martin 2nd Mar ’18 – 2:35pm
“@Malcolm Todd,
You’re fond of the phrase ‘so what?’”
Yes, I am. It’s intended to point out the gap between ringing declarations of supposed principle and the implied conclusion arising. Was that not clear?
“I’ll tell you so what. We shouldn’t be paying people for doing nothing when we could be paying them to do something useful.”
There are several answers to that:
1) I’ve already pointed out that UBI isn’t “paying people for doing nothing” – why not address that rather than repeat the claim as if it hadn’t been countered already?
2) Why does a UBI prevent you from paying people to do a job you think necessary? (Hint: it doesn’t. Michael BG 2nd Mar ’18 – 3:48pm has explained this above.
3) If you don’t think anyone can be persuaded to do a sh!t job unless starvation is their only alternative you’ve really not thought this through.
To be honest, whilst opposition to UBI is almost as universal as the income should be, I’m particularly disappointed by your attitude to it precisely because I find your posts on money and finance to be so invigorating and insightful: I’ve learned a lot from following your reasoning and your links on how the modern monetary system works; which just makes me all the more perplexed that you apparently can’t see past some rather mundane, conventional thinking on incentives and economic morality (for want of a better description) when it comes to the relationship between work and income.
@ Mick Taylor: It really is that simple. The party have been stuck at 7% to 9% in the polls for years now. The anti Brexit Blip that won us Richmond, went with the General Election and we are going nowhere. Your comment “You apparently want the party to deny the good …” is pure fantasy. If you look at the posts people like you are saying we want to claim the good, but never admit to the bad. Just look at your list of good, but for bad the only thing you mention is Student fees. There has been no “we have to learn from what we did wrong and convince people we won’t make the same mistakes again,” because no one has asked voters what we did wrong. No list, just a typical “We must learn … “ when so many of us would apparently prefer to learn nothing than admit to all the mistakes we made.
Well I will give you a list of just three that to the voters trump your entire list and more – Austerity for the poor; Cheap money for the bankers; and Tuition fees. Punish the weak and innocent; Reward the guilty and powerful and break your promises.
Why don’t you admit it? You would rather the party continues to decline and we leave the EU than admit we messed up totally.
If you can come up with a new answer please let us know, but don’t pretend we can go on as we are and things will magically turn around.
@ Malcolm Todd,
Thanks for the compliments. I’m sorry we disagree on the UBI. I suppose my viewpoint has, to some extent, been shaped by the saying “from each according to their abilities, to each according to their needs”. So, in other words, there is a requirement that we should all make make our contribution to society in return for wanting the results of our contribution to be shared out in a relatively equitable way.
It just seems, to me, quite normal and human behaviour. If a group of people go off on a camping/cycling/mountaineering expedition, for example, there’s always jobs to do which are shared out by process of natural consensus. Being asked to make a contribution makes everyone feel part of the team.
My parents were part of the war generation. When they got together with their other friends of the same age the conversation very often would turn towards the war years. Naturally they remembered friends who didn’t make it through but underneath all that I couldn’t help but think they actually enjoyed a lot of it. It gave them a sense of purpose which they’d never had previously and probably didn’t have to the same extent afterwards.
That’s why, in our society, extended periods of unemployment can be so debilitating. Its not just the loss of income, its the loss of self worth that often goes with it. So, for that reason I would say the emphasis of any economic policy should be on jobs just as much as guaranteeing everyone an income.
Joe
I agree rents should be set according to demand and supply. At the moment we don’t have enough homes. The party wants to build 1.5 million more homes over the next five years, but this is not enough (but it might be all that can be build). It is estimated that there are about 25 million homes in the UK (http://news.bbc.co.uk/1/shared/spl/hi/guides/456900/456991/html/) and in 2017 27.2 million households (https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/bulletins/familiesandhouseholds/2017). That is a shortage of 2.2 million homes. At the rate of 300,000 new homes a year it would take 8 years before there would be no shortage and this assumes no new households are created over those 8 years.
It is not true that the price of a product is set at the highest level someone can afford. It should be set were demand and supply are in equilibrium. I don’t think the price of rent is set at the equilibrium level. Therefore an owner of a property could get more rent than they do and next year lots of them will. For the market to be at equilibrium you would be able to produce average earning figures declining from 2008 and rents declining along with them. I don’t think you can provide such figures.
Perhaps an example will help you understand why you are mistaken. Imagine two houses for rent both costing £100,000 to build but the land for one is worth £50,000 and the other £100,000. The rent for the first one is £15,000 a year (there are no private rented houses of this size cheaper than this) and the second £20,000. Each have costs of £15,000 a year. LVT is introduced on the land at 1%. The first owner now has an income of £15,000 and expenditure of £15,500 so he increases the rent by £500. His tenant can’t find anywhere cheaper to live than the new rate of £15,500 which is now the lowest market price and so they have to pay the new rent. The other owner has an income of £20,000 and expenditure of £16,000. He knows that the lowest rents have increased by £500, but he puts his rent up by £1,000 and his tenant moves out, but a new tenant negotiates a rent of £15,750 and the owner will try to increase the rent more than the average rent increase next year to try over time to get back to making his £5,000 a year.
Michael BG,
products are manufactured and the supply of manufactured goods or services can be increased to meet higher demand to bring prices to an equilibrium level at just above the cost of production (including cost of capital).
Land cannot be manufactured there is a fixed supply. The supply of land for Urban plots where most people want to live is restricted by planning regulations. Supply cannot be increased to meet the level of increased demand or even keep up with the creation of new households.
Buildings can be contructed to meet demand but not land. it is the lack of available land at an affordable price that is at the heart of the housing crisis. With a restricted supply of land it will go to the highest bidders for each location. Desirable locations to the wealthy, less desirable locations to those who cannot afford the more desirable locations.. In each location the rents (and house prices) are determined by income i.e. the proprtion of income that tenants or mortgage payers are willing to spend on housing costs. In the least desirable locations this wlll tend towards the maximum affordable while leaving enough income for their other basic needs. These rents can only be increased if they are subsidised or the income of the tenants is subsidised.
Rents and mortgage payments (interest and capital) are correlated with earnings. There is no production cost for Land. It is not Landlords costs that drive rents it is demand or what tenants will pay for the right to occupy land.
Joe
In 2017 the BBC reported that only 5.9% of UK land is built on. 56.7% is farmland and 34.9% is ‘natural’ (http://www.bbc.co.uk/news/uk-41901294 ). So there is plenty of land in the UK to build houses on. Of course we can build enough homes for every household to have one. To say otherwise is defeatist and not optimistic as liberals are meant to be.
You have failed to demonstrate that rents are determined by income rather than demand and supply as you said they were in your previous post. Perhaps the belief that rents are determined by income is a tenet of your belief in Georgism? According to the ONS the amount of income a person pays in rent varies across the UK from 49% in London to 23% in North East England (https://www.ons.gov.uk/peoplepopulationandcommunity/housing/articles/housingsummarymeasuresanalysis/2016). I think this demonstrates that rents are not set as a percentage of income.
This has been a most enjoyable and instructive thread to read! I am convinced again of the value both of Universal Basic Income and Land Value Capture! On the first, I was glad to see the value of hobbies perhaps being taken up by people given the basic security of UBI being defended. Great art and great music were produced in past centuries by men depending on patronage, which we would not consider so desirable these days even if it were available (though it’s good when wealthy people do contribute to showcasing the achievements). But I’ve also been struck by two comments: Michael BG’s wanting people to have a fulfilling life, and Peter Martin’s mention of our parents having appreciated the sense of purpose that fighting the war gave everyone. It’s surely true that purposeful activity contributes to a fulfilling life, perhaps nurturing a sense of self-worth and of something being given back to society. So you are both right – we should have UBI, but much more is needed for people’s well-being.
Sidestepping the economics of LVT, where I get a bit lost, could we hear more about the possibility of a Universal Rental Income, I think you called it, as an adjunct to UBI, please, Joe?
Michael BG,
rents are dictated by local average wages (after deducting PAYE), minus the basic cost of living (rents take the surplus), adjusted for commuting distance from where those wages can be earned, plus a bit if it’s a nice area minus a bit if it’s not so nice. The vary be region but the principle remains for any given location.
Incomes in the NE are much lower than London but costs of basics like food, fuel and clothing are similiar. Consequently, a higher % of income is absorbed by basic living costs leaving a lower % of income available to meet rent costs. This is Ricardo’s law of rent, a long established economic principle.
A landlord’s actual cash costs are more or less completely irrelevant. As long as the actual or potential landlord can collect more in rent that it costs to provide and maintain the building he will rent it out (if not, he will abandon it).
If the rent is more than the maintenance costs, the balance is the site premium (or the land value/location rent ), so the tenant pays rent sufficient to cover the cash costs and the site premium on top. If the government now decides to tax the site premium, that is between the government and the landlord, this does not change the rental value of the location; the amount of rent which the tenant will pay is the same and so the landlord bears the tax. His remaining rental income after tax is, by definition, still enough to cover the maintenance costs and so he stays in business.
Instead of the government taxing a % of the gross rental income in LVT, what happens if there is a divorce situation and the government awards half of one spouses’ rental income to the other spouse as maintenance? Does the newly divorced landlord go round to all of his tenants and tell them that there rent will be doubled to keep his net income constant? No of course not, he can’t.
Katherine,
the problem I see with a UBI paid from general taxation is the strong possibility that it will be absorbed by higher rents for those receiving a cash distrubtion. By setting UBI at the current rate of unemployment benefit most peoples disposable income (excluding housing costs ) won’t change much. Those receiving benefits and taxpayers earning above the personal allowance will be in much the same position. Those not receiving benefits or with earnings below the personal allowance will see their position improve. The costs of this coupled with a job guarantee program are not excessive.
As regards Housing benefit this could be replaced with a Universal Rental Income equivalent to the Local Housing Allowance and funded by LVT. As the name suggests all tenants would receive a housing benefit. The funding for this benefit comes from owners of land, Landlords and owner-occuipiers . Owner-occupiers would benefit from a homestead allowance such that any homeowner in a property with a land only rental value at or below the Local Housing Allowance would pay no LVT. Those in higher value homes would pay income tax on the land rental value above the Local Housing Allowance.
Joe
If you were correct then the percentage people spend of their income on rent in London and North East England would be the same, but they are not. Being as I said 49% and 23%. Those in the North East spend half as much of their income on rent as those in London.
I remember raising Ricardo’s Law of Rents with you in another thread and you wouldn’t discuss it.
You are wrong a landlord would not rent out a home if his costs were not covered, he would sell it and invest the money somewhere else. Assuming he was rational.
Where on earth do you get the idea that a landlord does not invest capital in the buildings as well as the land and wants a return on both? Site premium is not a term in economics according to Google.
You do not seem to understand the difference of what happens when something like a divorce affects one landlord and when something like LVT affects all landlords (please look again at my example above).
Ricardo stated “But if a land-tax be imposed on all cultivated land, however moderate that tax may be, it will be a tax on produce, and will therefore raise the price of produce.” In other words if the least productive land is taxed this will be passed on the consumer as in my example above where the land tax of £500 on the cheapest rented house is completely passed on to the renter. (Ricardo also states that Adam Smith is wrong when he wrote “all taxes on the land… (are) all invariably paid by the landlord”.)
Michael BG,
I have explained why the % of income that can be paid in rent is lower in the NE than in London. You fail to appreciate that reason rents start to fall as you move North from London and the SE to the North is that the amount of income is lower.
A gallon of petrol, a loaf of bread or a pint of milk costs much the same in the North as it does in the South. Building materials and plant needed to construct a house cost the same.
However, the exact same size of house built on the exact same plot of land has a far lower value in the NE than in the South. The reason is the value of land. Land values are capitalised rents. When rents are lower land values are lower. Rents are lower in the North because incomes are lower. Lower incomes means a lower % of that income can be taken for rent.
Housing benefit is much higher in London for this reason. This is why a uniform UBI will not work. Rent support has to be based on regional variations. Other non-rent benefits can be paid at the same rate across the UK as living costs are otherwise similar, but housing benefit cannot,
The author Fred Harrison has written about Ricardo’s law of rent over the years https://www.amazon.co.uk/Ricardos-Law-House-Prices-Clawback/dp/0856832413
Joe
You may think you have explained why people in the north east pay less of their income on rent than those in London but you haven’t. When I lived in the north beer was cheaper than in the south. I think beer might even be more expensive in London than in Basingstoke. Beer is still cheaper outside London https://www.standard.co.uk/lifestyle/foodanddrink/fancy-a-pint-this-map-shows-just-how-much-the-price-of-beer-costs-across-the-uk-and-londoners-won-t-a3093916.html Lots of things are cheaper to buy in the north east than in London.
There are many reasons why the price of land is more expensive in south east England than in north east England, and the price of land does affect rents. It affects rents much more than the average earnings of the region.
An Australian view on a UBI. Close to mine incidentally! 🙂
https://independentaustralia.net/politics/politics-display/is-a-universal-basic-income-the-answer-to-rising-inequality,11220
Joe
I think rents reflect desirability rather than income. People want to live in London because its a huge cultural centre and thus the more popular it gets the more people it attracts, which pushes the costs up because the market can charge what it likes as there are always people who will pay what you won’t. . Hence gentrification and the rapid movement of people to surrounding suburbs, which leads to ever higher property prices. The same thing is happening with Manchester, which I recall is in the North. Money attracts more money which in turn attracts power which attracts even more money. I suspect a land value tax would not alleviate the situation, unless it simply made the properties less desirable and lead to a sort of exodus to cheaper areas.
Glenn,
Desirability is not demand. No doubt there are many people that desire a sports car or luxury yacht but do not have the income to purchase it so demand is limited and supply is based on the numbers of people with sufficient dosposable income to buy such goods. . Everyone, however, has to live somewhere and there is a limited supply of housing in areas where peole want to live and work that cannot increase to meet demand, due to the restricted availability of land for housing. If supply of housing in the right places cannot kep up with demand then prices (rents) go up, as you say. However, as everyone has to live somewhere rents and house prices cannot go up further then what it is possible for most people in any given area to pay (unlike sports cars and luxury yachts). Hence rents are determined by income for any given location.
A key feature of land Value tax is the commercial incentive to make land available for development that is otherwise held back from the market, thus increaing supply.
Demand for properties to rent or purchase is unaffected by LVT. I think you are right that gentrification would continue, but occupiers of the highest value land would be paying the highest level of LVT and land prices should regain some stability making housing more affordable in the suburbs, as it once was.
Or you can be really radical and try UBI funded by perpetual deficit here