The case for a universal basic income is stronger than ever

It's been derided by critics as unrealistic. But Covid-19 has breathed new life into an age-old idea

April 16, 2020
Bamberg, Germany March 28, 2020: Symbolic images - Coronavirus - 28.03.2020 Corona / Coronvirus / Virus / Finance / Bankruptcy / Credit / Pay credit / Capital loan / Saving / Short-time work / Personal bankruptcy / World / Economy / Banks / Debt / Redempt
Bamberg, Germany March 28, 2020: Symbolic images - Coronavirus - 28.03.2020 Corona / Coronvirus / Virus / Finance / Bankruptcy / Credit / Pay credit / Capital loan / Saving / Short-time work / Personal bankruptcy / World / Economy / Banks / Debt / Redempt

One side effect of the Covid-19 crisis has been a remarkable upsurge in interest in the idea of a Universal Basic Income (UBI). In the UK, over 170 MPs and Lords across parties have called for an "Emergency UBI," while 84 per cent of the public now back its introduction. Spain, especially heavily hit by the epidemic, is now looking seriously at the introduction of such a scheme.

A UBI is a guaranteed, unconditional payment made to all eligible residents. A key reason for this jump in interest is the potential of such a system to mitigate, at speed, the economic fallout of the epidemic on incomes and livelihoods. If a universal basic income scheme had been in place before coronavirus, it would have provided an automatic mechanism for delivering essential income top-ups. It would also constitute a vital instrument for boosting demand to help offset an unprecedented collapse in economic activity and inevitable rise in joblessness. While there have been moves to support some incomes through wage subsidies and benefit changes, a UBI would have provided a much less complex and more comprehensive and immediate mechanism for delivering support. Despite the government’s moves, millions suffering a collapse in their incomes will miss out.

The idea of a guaranteed income for all is one of the oldest in the multi-century story of social policy. The post-war Beveridge plan was built around the idea of a universal floor through national insurance, family allowances and full employment. But the plan was never fully implemented, and the principle of universalism has been greatly weakened over time by excessive reliance on means-testing. The number of new claims for universal credit has already soared by 1.4m in recent weeks, putting even greater strain on a system already blighted by problems.  Means-tested benefits require complex and often intrusive administration and impose a cap on individual progress. They carry a very different message from universalism: not of entitlement, but of dependency.

Britain has never come close to creating a robust income floor, and millions fall through what is an imperfect, mean and patchy system. Work-related conditionality requirements, enforced through a punitive system of sanctions, have been greatly tightened. With poverty rates now at near-record levels, the system also fails the key test of a robust defence against poverty.

Contemporary proposals for a basic income come with varying degrees of radicalism. Some favour a full, “big-bang” approach that would tear up the existing system and replace it with a generous system of payments. This approach has been pushed most fully by advocates of a utopian “post-capitalist,” “post-work” world. Others have called for a more modest scheme grafted onto the current benefits system. This would create an income floor that would sit as a lower tier beneath it.

A study by the progressive thank-tank Compass has shown that a “big-bag scheme” would be ruled out by its cost, by the number of losers, and by the effect on work incentives. A more modest scheme however, would be feasible and affordable. As an illustration, starting rates of £60 for adults—those under 65—and £40 for children would pay a significant, no questions asked, £10,400 a year for a family of four, while these levels could be raised over time. This scheme would, for the first time, create an unconditional income floor, boost the incomes of the poorest families, cut poverty levels, reduce inequality, strengthen universalism and cut means-testing.

Such a basic income floor would build an automatic anti-poverty force into the existing system and boost security in an increasingly fragile world. It would mean, for the first time, a modest income for carers and volunteers, who are mostly women. As the coronavirus pandemic has revealed, their unpaid and largely unrecognised contribution is—along with a parallel army of the low-paid, from cleaners to supermarket and social care workers—crucial to the functioning of society. By providing all citizens with much more choice over work, education, training, leisure and caring, it would also lay the foundation for greater personal empowerment and freedom, a springboard for more stable and fulfilling lives.

Such a guaranteed set of payments would need a series of tax adjustments to raise most of the additional income needed to pay for the floor, while making the tax system more progressive. These include the conversion of the current personal income tax allowance into a cash payment and a maximum rise of 3p in existing tax rates. Though other forms of funding could be used, these tax changes would ensure that the benefit of the UBI payments would be clawed back from the better off.

Despite its strengths a UBI remains controversial. One widely made objection is that an unconditional payment would undermine our work ethic. The disincentive argument is a red herring. A recent study has concluded that, far from helping jobless people into work, punitive sanctions are more likely to push them into poverty or ill-health. The disincentive argument might have some force in full-blooded schemes which paid a generous weekly rate—though we should not confuse idleness with unpaid work and leisure—but would not apply to a scheme with modest payments, where on balance work incentives would be boosted.

The crisis has sparked new life into an ancient idea. Underpinned by a cross-party parliamentary working group, the idea of a recovery UBI now has legs. A modest income floor offers a new vision for social protection and a new social contract fit for a turbulent 21st century.