The case for Universal Basic Income after Covid-19 - RSA

The case for Universal Basic Income after Covid-19

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  • Economics and Finance
  • Communities
  • Social justice

Basic Income has made strides from far-fetched idea to reality.

Over 100 MPs and Peers from Labour, the SNP, the Liberal Democrats, Plaid Cymru and the Greens signed a letter of support for a ‘Recovery Basic Income’. The great and good are now posed the question as a matter of course in media interviews and no longer sound perplexed or dismissive.

The First Minister of Scotland, Nicola Sturgeon, has become an out and out advocate. Mayor of London Sadiq Khan has expressed interest. There have been several spikes of interest in Basic Income on Google over the past five years but none greater than the past few weeks.

Does Basic Income have something different to offer us once the lockdown eases and the economy starts to move again?

The case for Basic Income remains the same: combatting powerlessness

Having long argued that we should consider Universal Basic Income – the back catalogue is still available - you’d expect a positive response to this question from me. I’d love to strike a virtuous John Maynard-Keynes style pose of the facts have changed and so I’ve changed my mind so you should believe me.

But the reality is that the facts haven’t changed. The core case for Basic Income is the same now as it has always been. That case is also why Basic Income is so relevant now. 

We live in a world of multiple vulnerabilities. None of us know how those vulnerabilities will impact us at any time and their impact on our ability to attain a decent level of economic security. These vulnerabilities come in the form of:

  • Financial stress - as we are experiencing now and have been experiencing since the financial crash. Many are in a perpetual state of insecurity.
  • Health risks – obviously the current pandemic risk, but also chronic physical and mental health problems. An absence of economic security engenders further health risks.
  • Economic change - shifting global comparative advantage such as the ‘China-shock’ to western manufacturing, automation making certain job tasks and occupations less in demand (note this is different to aggregate technological unemployment), and changing consumer preferences and demands.

In all these scenarios and many others, regardless of how secure we may feel one day, we are facing unseen risks and vulnerabilities. For many, they absolutely do feel the insecurity and this induces fear and anxiety, a sense of being helpless and stuck, exposed to forces beyond our control.

Most feel like this because this is exactly the situation they are in. It can be debilitating, taking its toll on individuals and families and, consequently, society as people don’t have time and space to grow, develop, and flourish.

That is the case for Basic Income. It is there, it is not conditional, you can rely on it and it helps alleviate the feeling of  powerlessness, creating chances for confidence and hope.

Critics say Basic Income is a solution in search of a problem. Nothing could be further from the truth. It is a significant response to a fundamental social and psychological challenge of our times - vulnerability and insecurity. This is only emphasised very clearly in the context of a pandemic.

Targeted benefits often miss the target

Why is Basic Income such a significant response to vulnerability? There are two critical reasons: universal coverage and distributive justice.

The current system is simply jammed with what Cass Sunstein refers to as ‘sludge’, excessive friction that stops support getting to where it is needed. To get access to Universal Credit you must go through a complex application process, five-week delays, complex rules, and hard conditionality that has led to millions of sanctions for individuals creating humiliation and hardship.

In theory, as a means-tested system where what you receive is inversely related to your household means (income and savings), Universal Credit should be the most efficient way to getting money where it is needed. But theory not only does not meet reality, it cannot.

Means-tested systems are complex by design and Governments cannot resist fiddling with processes and criteria. These complexities create barriers and errors and so diminish confidence in the system. Many turn away altogether not wishing to go through the process, and this loss of trust embeds unnecessary economic insecurity.

Targeted benefits have a common sense aspect to them. Of course you should target where it's most needed, right? The problem is that what you target doesn't describe what you hit.

I may well target a treble twenty on a dartboard but I rarely hit it. And Governments are not accomplished darts players. Better to throw many more darts and take the highest scores that you hit - that is how universal benefits work. 

The only way to get full coverage is a Universal Basic Income - throw many darts. The application load is light (some basic information such as age and address suffice). And because it is an attractive bargain - you provide some basic information and you get regular cash in return - almost everyone signs up.

When a crisis emerges and you need to get cash to people quickly such as the current time, the means are there. You can increase the payments.

Basic Income means a fairer distribution than wage-based schemes

Basic Income doesn’t have to be the only support you receive. Additional elements can be added such as support for housing, childcare, learning, disabilities or even wage support in certain circumstances which are more circumstance specific. But there is baseline level of support and you have universal coverage.

Compare this with the Government scheme for the self-employed in the context of Covid-19 where 38% of those who are not employed on standard contracts have no support according to the IFS. That is why the RSA recommended a Basic Income for the self-employed rather than the approach the Government took.    

When we looked at a Basic Income scheme versus an income support scheme we found a stark distributional impact. The major benefit under Basic Income went to those on below the average UK income. The Government’s wage and income support schemes (including the furlough scheme) have the opposite impact – they are most likely to help people on higher incomes, up to the £2,500 a month ceiling.

Systems built on someone’s wages inevitably have a hidden distribution effect. They are both expensive and poorly targeted.

The schemes are of course crucial to the emergency response, but highly problematic as long term solutions. They are responses designed for the ‘salariat’ rather than what Professor Guy Standing terms the ‘precariat’.

Basic Income is a more just system in distributional terms. It benefits most but benefits those on low incomes the greatest.

Every viable model of Basic Income we have explored at the RSA and beyond has reduced poverty and inequality. Some models eliminate destitution altogether, as our Basic Income for Scotland work shows. 

Means-tested and conditional systems such as Universal Credit cannot do this because of administrative sludge, lack of coverage and sanctions.

Arguments against Basic Income

There are of course good arguments against a Universal Basic Income but far fewer than its opponents believe. Most of the arguments against tend to be, in the manner of climate change denial, evidence-light, glib and dismissive.

First, and easiest, is ‘why should Premier League footballers and the mega-rich receive a Basic Income?’ In any viable model of Basic Income, those with highest incomes and greater wealth are going to have to contribute more (as will heavy polluters) and so they will not be net beneficiaries. They will make a net contribution. It is like the NHS but for income security. From each according to their ability to pay, to each according to their basic needs. 

There are two other arguments that won’t go away and need to be seriously engage with: cost and possible work disincentives.

The cost is answered by the benefits. If they are significant, then the investment will seem cost effective. That is why the trials and experiments have proved to be so important: they have shown considerable health, educational, family, societal trust and economic benefits.

Would it be better to divert resources to ‘Universal Basic Services’ instead? There is little doubt that we are going to have to invest more in health and care and community resilience in the future. Covid-19 has exposed these weaknesses alongside our economic insecurity.

Such investments remain essential alongside a Basic Income. We are going to collectively have to contribute more if we want less vulnerability. But public services cannot meet all our needs; cash is important too.

As Autonomy has explained services simply can’t meet all the basic needs of modern life: choice of food, clothes, a frugal family holiday or weekend trip to visit family, a toy for a child or books. Such choices are essential to living a decent life in modern society.

The question of work incentives is also crucial. Few are comfortable with disincentivising work in general.

The good news is that the impacts of Basic Income have tended to be broadly neutral on work impacts, but the trials are relatively small scale. The interim results of the Finnish trial showed no negative impacts but positive benefits for health and societal trust.

When Basic Income is tested at scale, pockets of disincentive may emerge and the public policy landscape will need to be alert to responding. For example, through work and training support and through ensuring that work is fair and decent, raising the standards of work relentlessly.

Proponents of Basic Income also tend to be advocates of better work (rather than ‘post-work’ as some critics would have it). Far from seeing ‘Basic Income’ as a ‘silver bullet’, advocates also tend to be concerned about the impact of technology, civil society and community life, good, inclusive growth, community wealth building, climate change, and democracy. Debates and discussion about work must be an active conversation in designing systems of Basic Income.

Bridges to the Future

In the past few weeks, the RSA has been developing thinking around a series of ‘bridges to the future’.

As outlined by RSA colleagues over the past few weeks, change is possible where old systems are failing and the current social contract has been shown in the glare of a pandemic floodlight to be fragmented and frayed; a moth eaten and torn blanket.

We are seeing new ideas emerge such as the recovery Basic Income designed to aim economic recovery as a stimulus, the pathway to which has been ably explored by Stuart Lansley. A coalition for change is emerging across political parties, with local campaigns having emerged in Scotland and across the north of England, Wales, Northern Ireland, Birmingham and the East of England such as that linked by the UBI Lab network.

Are the conditions for change there? The barriers are considerable but so is the growing coalition for change.

We are collectively vulnerable. The current social contract does not support our individual and collective resilience. Basic Income provides universal coverage and fairness. It surely has to be considered very actively a part of the response to the moment: one of the bridges to a more secure future for all. 

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  • UBI is a sound idea the success of which, like anything else will depend very much on its implementation. But in itself it is unlikely to succeed unless it is matched with opportunities. People need purpose and generally people are more proud of what they put in rather than what they take out. Just giving money should address many of the aspects mentioned; reduxed economic stress leading to health benefits, more willingness to re-train etc. etc. but there must be purposeful light at the end of the tunnel. So as UBI is rolled out there must be education, job, training, volunteering .... opportunities rolled out at the same time so beneficiaries of the 'economic freedom' resulting form UBI can express that freedom in a meaningful way.

    So the UBI debate should move on for do we /don't we to what we put along side it.

  • From my point if view as a provider of microfinance to the poorest parts of society to enable them to start small businesses I can see that UBI could address two key problems which cause difficulties for my borrowers:

    1. The means testing and the fact that you aren't allowed to have savings whilst receiving benefits means that they cannot save up to start their busnesses; they cannot save up to have a fall back if they start a business and something goes wrong. This ensures that they will start their business with absolutely nothing behind them (a big reason why other funders won't help) and have no funds to help if there is a problem, which makes the businesses much more vulnerable to failure than they need to be

    2. Contrary to what the Government wants, the benefits system acts a major disincentive to any sort of work, but especially to self-employment and so stifles entrepreneurship. Most entrepreneurs need to be able to try and fail a few times - but the benefits system says they must have an income from their business sufficent to support them within 6 months - and takes weeks to re-establish if you fail and need to go back on them.. Universal Credit is reduced by 60p for every £1 earned - so there is no gain for self-employed people for years. UBI would solve both problems - there would be funds to live on whilst an entrepreneur tests his ideas and any earnings he makes would be additional.

    There is a tendency in officialdom to assume that everyone on benefits is a scrounger and lazy -and hence an objection to UBI on the grounds that it would encourage people to do nothing. This might be the case for a few but I am inundated with people who want a small loan to start a business in spite of all the difficulties I've outlined above. There will always be freeriders but I don't think this is a reason to throw the idea out.

  • I find it frustrating to see all arguments for UBI woven in with the idea that it's a possible replacement for or adjunct to the benefits system.

    I'd like to see someone offer the case for it along the lines of the idea that as everyone is entitled to a vote, everyone is entitled to a share of what can be regarded as common treasury.  

    It behooves a society which has organised itself entirely through money to make the effort to evaluate and convert into payment what each person's share of that common treasury is and honestly disburse it.  

    Once that principle is established the arguments can move on to what is and what is not common treasury.

    I think this would be massively useful as an approach, and help us to escape the patrician linguistics of "state aid".

    Call it not state aid, but the fair and honest disbursement by society of everyone's entitlement to a share of what is obviously given to all.

    Once that principle's in place, the arguments become more interesting.

    • I agree with Sam’s view. Stretching the original aim of UBI sharing the nation’s wealth is obscuring the ethical question and making implementation impossibly difficult.

      Replacing any social benefits with UBI means almost impossible arithmetic needs to be employed to ensure there are no losers. Furthermore, as more benefits are replaced UBI begins to look unaffordable.

      All the claims, arguments and discussion about the benefits noted in pilots seems to be futile and omit the original aim of sharing wealth. None of the many worldwide pilots have been implemented despite positive results. One aspect of UBI is that it is permanent, thus any pilot is subject to objections based upon its time limit. Additionally, pilots cannot test the benefits or negative effects of full national saturation.

      The Covid opportunity is seducing the proponents of UBI to support its introduction as an emergency measure. If this happens I despair for its future. UBI is not an emergency measure and its purity of purpose will be contaminated to fit the temporary need.

      I am a strong supporter of UBI and co-founded UBI Lab North East. I also support the introduction of post Covid emergency measures, but they are far from being the same thing.

      The above views are not those of UBI Lab movement but personal.

      Maurice Ward FRSA