Voters think the priority should be making work payby Robert Colvile / November 23, 2018 / Leave a comment
Some policies—most policies—have committed supporters and opponents. It’s a rare few that inspire genuine zealotry. But the Universal Basic Income has become the political equivalent of bitcoin: a policy whose supporters believe so fervently that it will usher in a new golden age that they have become quite impervious to doubt. As a New York Times column put it when Finland abandoned its much-publicised trial of the policy: “Universal Basic Income Didn’t Fail in Finland. Finland Failed It.”
Yet the truth is that Universal Basic Income is one of those policies that works beautifully on paper—but falls apart on contact with anything resembling reality.
One of the reasons that UBI has caught on is the diversity of the coalition behind it. It appeals simultaneously to socialists, libertarians and utopians.
Socialists like the fact that giving everyone a staple amount to live off will necessarily involve massive redistribution from rich to poor, as well as generating universal dependence on the state. Libertarians like the idea of people being free to do what they want with the money they receive via UBI (or its free-market cousin, the negative income tax), and the dramatic withering of the apparatus of the welfare state that would result from a simple cash transfer replacing today’s monstrously complicated benefits regime. And the uptopians like to talk semi-mystically about providing financial security in an age of automation and freeing people to create rather than face the drudgery of work.
The practical objections to this are well-rehearsed. Even at a relatively low level, a universal basic income would involve huge amounts of extra taxation. When the Resolution Foundation modelled a UBI scheme that matches payments under Universal Credit, and throws in universal child tax credit (rather than means-tested), they found that you would have to raise taxes by approximately £120bn to make the numbers add up—the approximate equivalent of the entire NHS budget in England.
Try to set the UBI at a level which gives people the freedom not to work—which always, in its advocates’ imagination, seems to involve us all sitting around writing uplifting poetry rather than just slumping on the sofa watching Netflix—and you need, to put it in technical terms, All The Money.
Plus you soon run into all sorts of little wrinkles—shouldn’t there be more help for the disabled? Or those in areas with expensive housing? And why would hedge fund managers be eligible for a handout? Yet adding extra conditions rapidly starts to make the system look pretty much like the welfare state it has theoretically replaced.
In the British context, pitching UBI as a solution to automation is also more than a little weird. Our economy is as close to full employment as it can realistically get. Our big challenge is not that we’ve got too many robots throwing people out of work—it’s that we aren’t using enough robots, and hence have deep productivity problems which are (among other things) depressing growth and wages.
But it’s actually the philosophical objections to UBI that are the most powerful.
Recently, we at the Centre for Policy Studies published a major new policy report called “Make Work Pay.” Its argument was that we need to reconfigure the tax system around maximising the incentives to work—ensuring that it always pays people to work, particularly as they move off benefits and into permanent employment.
As part of this, we suggested raising the National Insurance threshold, which has lagged behind the personal income tax allowance, to ensure that people receive a Universal Working Income: that they get to keep the first £1,000 they earn every month, completely free of tax. (And then keep at least 50p in every £1 they earn from that point, whatever their circumstances.)
We then did something that does not seem to have occurred to many of the supporters of UBI: we took our ideas to the people. Polling by YouGov showed landslide support for the Universal Working Income, by 76 per cent to 9 per cent. The pattern held true among voters of all parties, regions and classes. The backing for our tax guarantee was almost as strong.
But we also gave people the choice between UBI and our Universal Working Income—between giving everyone a set amount tax-free or protecting a certain portion of their earnings. Three times as many of them preferred the latter to the former.
To dig deeper, we carried out focus groups among the “just about managings.” And what we found was a cast-iron belief in the power and moral value of work. Universal Basic Income was viewed as deeply suspect because it broke the link between effort and reward. The unanimous view was that if you could work, you should—and you should be rewarded and incentivised for it.
The interviewer even probed more deeply, explaining about the threat of automation and the need for a security blanket as the robots rose. It was, he reported, as though he was talking about colonies on Mars—interesting in theory, but utterly irrelevant to people’s actual lived experience.
I’m sorry to burst the bubble of the UBI believers. But there’s a far stronger case for rebalancing the tax system to free people’s earnings from tax (the focus groups suggested that matching the threshold to the minimum wage should be the ultimate target) than there is to embark on such a costly, unpopular and impractical experiment.
If the robots were throwing thousands out of work, the economic gains were being concentrated exclusively in the hands of those who own them, and the rest of us were sitting around wondering how we eat, UBI could be a policy that had strong merits. But this isn’t that time, and it won’t be for the foreseeable future.
Time to let the dream die, and deal with the world as it really is.
Robert Colvile is Director of the Centre for Policy Studies. “Make Work Pay” is available at cps.org.uk