“Very unlikely” current welfare system will survive the Covid-19 pandemic, says new IEA briefing



Professor Philip Booth quoted in The Times

In the Media

Dr Stephen Davies writes for CapX

Coronavirus will bring to a head discontent with the welfare system and strengthen support for a Universal Basic Income, says Dr Stephen Davies in a new briefing paper

  • Major crises have often triggered radical reconstruction of the welfare system;

  • It is very likely that the Covid-19 pandemic will amplify discontent that has been growing for some time;

  • The sharp rise in unemployment and fall in income for many will lay bare its weaknesses, particularly over Universal Credit;

  • It will likely strengthen support for moving to a Guaranteed Minimum Income – a variant of which is a Universal Basic Income (UBI);

  • A consensus could form around UBI because it has supporters across the ideological spectrum;

  • But moving to a UBI raises questions not just of cost but about the way we live: the place of the home and household, the importance of work, and the role of civil society;

  • Further, for the moment, any universal payment will fall at the first fence because the government does not have a list of all legal residents in the country;

  • The current pandemic was a crisis foretold, with many warnings over the last decade that something like this was bound to happen eventually. We cannot – and should not – think of this as a once in a century event;

  • It is very unlikely that the status quo will survive the experience of the pandemic.

Radical changes to the welfare system are historically associated with major crises and events such as wars, civil unrest, famines or epidemics. There is no reason that it will this time be any different, says a new paper from Dr Stephen Davies, Head of Education at the Institute of Economic Affairs.

Redefining the State of Welfare argues it is very probable that Coronavirus will bring to a head discontent with the existing system that has been growing for some time and will lay bare its weaknesses, particularly that of its central element: Universal Credit.

As such, a major public debate or conversation over our welfare state is imminent and inevitable. One idea bound to garner support – and which has a “head start” – is a Guaranteed Minimum Income (GMI) and, in particular, one version of that: a Universal Basic Income (UBI).

Advocates have seen this crisis as an opportunity to push the idea, while those previously sceptical on practical or cost grounds are now entertaining it. Many see the furlough scheme, though designed to preserve the supply side of the economy, as an illustration of the state’s responsibility to support incomes in a universal way.

Indeed, Coronavirus has opened the way for thinking about a radical change. While some simply argue for an extraordinary and temporary response to this emergency, it is very unlikely that once the crisis has passed things will go back to where they were.

If something can be implemented in a crisis, then that demonstrates its feasibility. Critics of a UBI, the paper says, will need to have a different alternative in mind to the regime that is currently being subjected to a severe stress test. The current pandemic was a crisis foretold: we cannot – and should not – think of this as a once in a century event.

That said, UBI also attracts widespread opposition and introducing a universal payment as an emergency measure is challenging because the UK government doesn’t currently have a list of all legal residents in the country.

Redefining the State of Welfare outlines two possible partial measures that could be introduced, that would be followed by a “recovery basic income” in which more substantive reforms would be made as part of a process of recovering from the pandemic and which would start the process of moving the system towards a GMI.

The main alternative, as outlined in the briefing, is that of Universal Basic Services: the state owns productive assets and uses them to provide a range of essential services either free of charge to the end user or for a flat rate and nominal fee (designed to regulate demand rather than fund the service). Many free-market liberals sceptical of a UBI are even more alarmed by the idea of UBS, on civil liberties grounds.

Moving to a UBI is not simply a matter of practicalities such as cost. It also raises fundamental questions about the way we live, how we as a society see ourselves, our institutions, and the relations between us – which again cut across conventional ideological divides.

The Coronavirus crisis therefore will almost certainly trigger a debate that will have an uncertain outcome. What seems very unlikely is that the status quo will survive the experience of the pandemic.

Dr Stephen Davies, Head of Education at the Institute of Economic Affairs and author of Redefining the State of Welfare, says: 

“The Coronavirus epidemic will provoke a debate over the UK’s welfare system and how to change it in response to the way the pandemic has shown up many of its weaknesses. There will be several options proposed and classical liberals need to participate in this debate and to help it address fundamental questions such as the place of work and the best way to support individual autonomy.” 


Notes to editors

For media enquiries please contact Emily Carver, Media Manager: 07715 942731.

Redefining the State of Welfare will be published on Tuesday 26th May. A link to the embargoed report can be found here.

For further IEA reading on a Universal Basic Income:

Universal Basic Income: Is it a good idea?

The case against a Universal Basic Income (UBI)

Debate: Should we support a Universal Basic Income?

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.