Is Basic Income a Good Idea? (Anna Coote, New Economics Foundation)

Campaigners for a Universal Basic Income or Citizen’s Basic Income are calling for the state to give everyone, including rich and poor, earners and non-earners, adults and children, a uniform sum of money each week.  It is a simple idea that has wide appeal, not least to those concerned about the impact of automation on jobs and the misery caused to people who must prove their incapacity to work to qualify for income support.

Like most ‘silver bullet’ solutions, its apparent simplicity belies its many contradictions and dangers.  Here are some reasons why it is not a good idea.If implemented, UBI would confer huge powers on national governments, which can give and take away. It greatly increases the dependence of people on the state.  It does not engage with the need to make governments more accountable or to increase people’s control over state institutions.  This is strangely at odds with the rising tide of public distrust for established bases of power.

  1. It lets employers off the hook, because it appears to offer an alternative to keeping people in jobs and raising hourly rates of pay. Why hesitate to lay people off, or why give workers a bigger share of profits if they are getting a stipend from the state?  As Francine Mestrum has argued, problems of changing labour relations and increasingly precarious employment can’t be solved with a basic income: ‘What the workers’ movement has done in the past is organize the struggle for decent wages and working conditions.’ UBI is more likely to dampen than to fuel active labour movements.
  2. It does not end the indignities associated with claiming benefits. Few protagonists pretend that it is possible to pay enough UBI to live on. According to the Joseph Rowntree Foundation’s 2016 minimum income standard (MIS) is £17,000 a year for a single person and £37,800 for a couple with two children.  Yet the most generous UBI scheme envisaged by the UK campaign group, Compass suggests a partial basic income of £3,692 for a single adult and £13,523 for a couple with two children. These figures amount, respectively, to less than a quarter and just under one third of the minimum standard and both are below the poverty line, estimated as  60% of median household income.  This means a range of additional benefits would need to be paid to people unable to work – wiping out the much-vaunted promise that UBI ‘simplifies’ the social security system and removes the stigma of claiming.  In fact, all it offers is a small hike in the floor above which conditional benefits are required.
  3. It carries staggering financial costs. Suppose everyone in the UK’s population of 61.4 million were paid only half the JRF minimum income for adults (£8,500 a year), the total cost would be in the region of £522 billion, or well over a quarter of the UK’s annual GDP.  Of course it is worth spending money to keep people out of poverty, but this does not address the causes and as a curative measure it barely scratches the surface.  To achieve even a small hike in the benefits floor, Compass suggests raising taxes to 25p in the £1 on the basic rate,  45p on the higher rate and a new 50p top rate, as well as abolishing personal tax allowances and extending national insurance contributions.  Is it worth it? Ian Gough points out that this ‘powerful new tax engine will pull along a tiny cart (a partial and inadequate basic income). Why bother? The underlying belief or dream is that basic income will provide a mobilising theme to bring about radical change. There is no evidence anywhere in the world for this.’  This year the Swiss held a referendum  to decide whether every adult should be paid a basic income of  2,500 Swiss francs a month (just over £21,000 a year) and this was resoundingly rejected, with 77% voting against and only 23% in favour.
  4. Most UBI supporters agree that a full basic income isn’t viable, but argue that a partial payment is a step in the right direction. But as David Piachaud’s forensic analysis demonstrates, the case for a full basic income is so thoroughly flawed that there is no justification for heading that way in the first place. It fails on philosophical, economic and political grounds. As Piachaud points out, it is merely a possible mechanism for income redistribution, not an end in itself: ‘Starting from or believing in a mechanism is misguided.  It is surely more productive to start from the goals of policy and then consider the best means of achieving them.  If the goal is to reduce, or still better eliminate, poverty then I conclude that pursuing the mechanism [of basic income] is heading in the wrong direction.’
  5. Protagonists appear take no account of the trade-offs, or what cannot be funded if money is poured into UBI. For Piachaud, ‘Priority should be given to social policies that improve education, health and housing, which are capital investments in people’s opportunities.’ And as the New Economics Foundation as argued, while it is certainly possible for governments to find substantial extra resources, these are needed not only to improve public services but also – and urgently – for measures required to cut emissions and avert environmental catastrophe: ‘Tax revenues are needed for investment in environmentally sustainable infrastructure (such as renewable energy generation and zero-carbon housing and transport systems) and in all possible measures to enable society and the economy to exist within planetary boundaries.’ It would be profoundly unsustainable to blow any additional resources on UBI.
  6. UBI is an individualistic, monetary intervention that does nothing to encourage social solidarity or address the underlying causes of poverty, unemployment and inequality. These are systemic problems that need to be addressed by people getting together and building shared control over local economic development, wage bargaining and decisions about national investment in industry and infrastructure. According to Cruddas and Kibasi, UBI ‘institutionalises the gap between the disproportionate and increasing rewards for the few and stagnant wages and poor prospects for the many… Issues of class, economic ownership and the productive capacity of the economy are collapsed into lazy utopian remedies.’
  7. Right-wing advocates see it as a route to dismantling welfare regimes and maintaining a docile population of shoppers. The idea sits comfortably with the neoliberal idea that services are better when markets provide and customers choose.  But collectively provided public services, available to all according to need, give better value for money than commercialised services; they are more likely to be inclusive and egalitarian.  They represent a very substantial ‘virtual’ income that is highly redistributive.  Oxfam has estimated that on average across OECD countries, public services are worth 76% of the post-tax income of the poorest groups, and just 14% of the richest: this social income reduces income inequality by 20%.  Many left-wing protagonists insist they also want to defend public services but pay no attention to how public services can be strengthened or improved, and ignore the very obvious danger of robbing Peter to pay Paul.  In today’s political climate, a basic income could threaten resources currently devoted to public services and serve as another nail in the coffin of the post-war welfare settlement.
  8. This apparently neat and simple silver bullet is nothing of the sort. It is a deceptively attractive decoy, drawing political energies away from the need to defend, transform and promote collectively provided services.  As Piachaud says. Its most frustrating feature is that ‘it represents a diversion from the task of promoting more feasible and sensible reforms.  There is a desperate need for more investment in human capital for the least advantaged and promoting more equal opportunities for all, there continue to be pressing issues of inheritance and social inequality and there continue to be employment and childcare problems for those who are neither lazy nor crazy.’
  9. Finally, there are viable alternatives that have far stronger claims – in philosophical, economic and political terms – to address the challenges of poverty and inequality. Just for starters, it is worth considering a minimum income guarantee combined with more generous child benefits and a system of credits for carers based on the principles of time banking, as well as a secure ‘social wage’ consisting of essential public services.  It is on these and other strategies that we should be focusing our campaigning energies and political resources.

Anna Coote is Principal Fellow of the New Economics Foundation