Debate: Should we support a Universal Basic Income?
Yet UBI ‘divides the crowd’, often triggering strong and visceral reactions. For many, government funding to stimulate entrepreneurship in good times or guard against starvation in bad ones, seems like an obviously humane measure. Others consider such payments abhorrent, both wasteful with taxpayers’ money and likely to disincentivise work.
In today’s debate blog, we weigh up the pros and cons. Is UBI a good idea in principle, and could it really work in practice?
Ben Ramanauskas, Policy Analyst at the Taxpayers’ Alliance, is sympathetic to UBI – though not wholly sold on the idea. He sets out the positive case here:
Anyone can find themselves unemployed – often through no fault of their own. Given the high cost of living in the UK, many will not manage to put enough money aside to support themselves for lengthy periods if they find themselves unexpectedly out of work. As such, they have to apply for benefits. It often takes a long time for the money to trickle through, leaving individuals and their families in a precarious state. A Universal Basic Income (UBI) would provide a true safety net in such situations.
UBI could simplify our complex welfare state. Universal credit has helped in this regard, but there are many improvements still to be made. It takes time to apply for benefits, and claimants have to commit to regular meetings at job centres as they fill out endless forms and receive patronising advice from the staff. Such a system is inefficient and infantilising. A UBI, in contrast, would allow people to focus on finding work while potentially reducing the size of the State. Simplifying the functions of the DWP could mean significant savings for taxpayers and release DWP staff to the private sector where they could undertake more meaningful work and help to plug the skills gap.
A UBI could lead to a more highly trained and productive workforce. Due to our current welfare system, many people are stuck in jobs they do not enjoy, and which offer little opportunity for advancement. A UBI would give them the opportunity to retrain and learn new skills, which they would then use to advance their careers and be more productive at work.
It could also allow people to care for sick and elderly friends and relatives. The vast majority of people cannot afford to give up work in order to take care of their relatives, and so are dependent upon a heavily-burdened social care system. A UBI would give people the freedom to work fewer hours in order to undertake caring activities, while also reducing the pressure on the social care sector. For similar reasons, UBI could also increase the number of people undertaking voluntary work.
Finally, UBI could make the country more entrepreneurial. Having a guaranteed income would encourage more people to risk starting their own business. New enterprises challenge established players, increasing competition and improving standards and lowering prices for consumers. They also create new jobs and have the added benefit of bringing in revenue for HM Treasury.
There are obvious questions about the viability of funding UBI. However, there is no reason why it could not be delivered in a way that is affordable – or even revenue-neutral – if the money was clawed back through taxation based on the earnings of recipients.
The other potential objection would be that it would remove the incentive to work. However, there is scant evidence for this. Although one trial of a negative income tax did lead to a decrease in maternal labour participation, other studies have shown that where direct cash transfers have been made, people are more likely to work longer hours.
Dr Stephen Davies, Head of Education at the Institute of Economic Affairs, argues against UBI
A Universal Basic Income is an idea that periodically enjoys attention (it was first presented in a worked-out form over two hundred years ago by Thomas Paine) and is having quite a revival at the moment.
Interestingly it has supporters and critics on left and right, it divides both socialists and advocates of free markets. It is easy to understand how, confronted with the disastrous workings of the present British welfare state, and the much-feared challenge of widespread automation, the idea of replacing all existing income transfers and benefits with a single unconditional payment to all adults would be attractive. It is indeed a seductive notion and I confess to having succumbed myself many years ago when I wrote a pamphlet in its favour, for the CPS.
However, as the the seductee may experience subsequent regrets and second thoughts, so I have come to have doubts about my previous position. These do not centre so much on the practical difficulties, which I think are exaggerated, but rather on the fundamental idea and the way it would almost certainly work in practice.
There are three big objections.
The first is the politics. Almost certainly the level of a basic income would become a big political issue and parties would compete to offer higher basic rates or more generous add-ons for specific groups. Once these had been given it be impossible to pull them back so the long run tendency would be for the UBI to rise to an unsustainably high level.
The second is the psychological effect for many people of receiving a guaranteed income with nothing expected in return. This a common objection to both doles (unconditional payments with no time limits given to those not working) and unearned income from assets or inheritance. Quite simply such incomes erode the incentive or reason to have any kind of purpose or goal in life. For this reason, some people advocate combining a UBI with a work requirement. This, however, raises serious civil liberties issues and also undermines one of the main advantages of UBI for its advocates, which is precisely that it breaks the link between productive work and income and so frees up people to follow their fancy.
The third is that we would reasonably expect a UBI at the margin to undermine the incentive to do any kind of work. The higher it was set, the greater this effect. If it was set so low that the effect was negligible then most recipients would still be poor, which defeats the object. For most people structured and cooperative work is not only a way of getting an income but a psychological necessity, which gives meaning and structure to life.
For that reason, many would continue to work even with a UBI and the high taxes on additional income that would entail. However, for many, the incentive to do this and have a purpose and meaning in everyday life would be significantly weakened. This would have very serious social and psychological effects. A UBI is worth thinking about, even if as an exercise, but doing so makes us confront some difficult and challenging issues.