Universal Basic Services or Universal Basic Income?

Every day, the stories mount up of the impending disaster that is Universal Credit: Iain Duncan-Smith’s Frankenstein offspring of tax credits. Simultaneously, persistent low pay, job insecurity, millions of households dipping in and out of poverty and a cycle of insecure work and insecure lives is now a constant. Even without considering potential impacts of automation, robots, and AI, it is clear that the social contract between citizen, state and market is failing.

So new ideas are at a premium. The one idea that has captured the imagination of advocates and critics alike is Universal Basic Income. At its simplest, UBI is a regular, unconditional payment made on an individual basis to each citizen. The strongest case in favour is that it provides a bedrock of security on which people can develop their lives and those of their families. It is an investment in human potential.

Utopian dreamers have imagined UBI at a level that would usher in a post-work future, a machine world with little need for human labour. This is more a diversion in Blade Runner-esque sci-fi than serious public policy. The more compelling case for UBI is that it enables people to better navigate their working lives - investing in themselves, trying new ideas, and fulfilling other important responsibilities, such as caring, as they go. The aim is for enhanced working lives, not for an impossible and undesirable post-work world.

There has never been a greater need for innovative thinking about creating a more creative and secure future. The most significant risks from technological developments are not from mass structural unemployment. They are from distributional consequences; a person’s skills, locale, gender and adaptability to change will all influence whether they end up on the winning or losing side of economic and technological change. The challenge is to design a new social contract that enables adaptation.

A new and welcome voice in the debate came from UCL’s Institute for Global Prosperity last week. As an alternative approach to UBI, their proposal is for universal basic services including access to mobile and internet, housing, food, and transport at a cost of 2% or so of GDP per annum. Would this be a better way to go than the politically challenging route of UBI?

On the face of it, it is attractive. The politics of giving people services rather than cash seems easier. The NHS is founded in just this way. The report finds that the maximum value of this approach is £126 per week. The same money distributed as a UBI would deliver just £12.47 a week. Slam dunk right? Not so fast. 

On closer reading, it turns out that ‘universal’ basic services are no such thing. The maximum value would accrue to 1.5 million households - those who benefit from the free housing component. For the other tens of millions, the value is quickly reduced to £39 a week. And if you don’t or can’t use public transport, for example if you live outside of cities, then the value is a mere £18 per week. And if you don’t wish to take up the food support? Then the value to you is £5 of free broadband and mobile – the only ‘universal’ element.

It turns out therefore that ‘universal’ basic services is actually ‘targeted living cost support’. And this is why the politics would likely backfire, with a whole host of unintended consequences lurking in the shadows such as stigmatisation of food support claimants as is entrenched in the US. ‘Universal’ basic services feels very much like an expansion of welfare – along with the political barriers of that approach - rather than a different approach to supporting all.

There is an opportunity cost too. The £42bn a year cost is a sum that would unlocks UBI. It may be only worth £12.47 per week but it’s rather like broadband services: it’s the investment that connects the final mile to actually put in place a decent UBI. By turning personal tax allowances into a cash payment, merging in much of the welfare state (with the exception of disability, housing and childcare) plus this extra investment, we would have a full UBI and the greater freedom and security that goes with it.

The authors of the report are right to highlight that other things matter and not just cash support. Our housing needs are at emergency levels. Transport and digital infrastructure matter in support of economic opportunity. Food insecurity in a country as wealthy as the UK is shameful. A series of responses are needed; UBI is just one element of a possible new social contract.

In the early years of New Labour, too often it resorted to easy politics such as free TV licenses and winter fuel payments for the elderly (albeit alongside the important intervention of the Pension Credit). These are expenditures that have been difficult to reform. Later it concentrated on more fundamental interventions such as increasing the Basic State Pension. It could have started earlier on that journey but went for smaller, tactical interventions.

Targeted living cost support ultimately feels like that type of tactical intervention rather than transformational policy. It also has the faint aroma of the state doing things for people that, given security and resource, they are perfectly able to do for themselves in a way that meets their particular ambitions and needs. The debate about how we develop a sense of security amidst change is an entirely healthy one and is very important. Yet let’s not lose sight of the transformational potential of UBI in favour of more tactical responses.

Find out more about the RSA's work on Universal Basic Income

Read our report: Creative Citizen, Creative State (online)

This article first appeared in The Times (16/10/17)