On Friday, we published a discussion paper, Pathways to Universal Basic Income, which proposed a new fund to support up to two years of a Basic Income-style payment for those aged 55 and below. This ‘Basic Opportunity Dividend’ would be available for up to two years and a maximum amount of £10,000 per person.
To say that the idea captured interest would be an under-statement. My co-authors and I spent the whole day engaged in a lively and exciting discussion about the possibilities that these dividends could offer – across the UK media and beyond. This is exactly what you want to see from a new policy idea. Clearly the British public are hungry for big, new ideas, for it was the public reaction that drove the interest on Friday.
We are now more convinced than ever that people feel a desperate need for a helping hand as they adapt to changes around them. There is a pent up sense that the opportunity to develop, take risks and manage caring responsibilities effectively are unevenly distributed across society. Economic insecurity is real and widespread, and people are too often stuck. That is why the Basic Opportunity Dividend, as a prelude to a full Universal Basic Income in time, seems to have resonated.
Of course, there were criticisms. But more commonly, there was interest and engagement. There was one particular criticism, however, that warrants a specific response – the concern that the scheme, as it was limited to those under 55, was exclusionary.
The RSA has been a leading voice in advocating engagement and exploration of Universal Basic Income as an essential component of economic security. We were an early voice in the latest ‘wave’ of interest in UBI. That remains the case and we will continue to work towards expanding the conversation further and seeing UBI experiments put in place in the UK and beyond.
There are unique features to the scheme outlined on Friday. Firstly, it is deliberately framed as an ‘opportunity fund’ because we want to see UBI established as a support for good work. When we looked at how our idea could be implemented, we identified that there was a potential that those over 55 might use the payments to essentially access their Basic State Pension early. There are good arguments on both sides in support of and against the current Basic State Pension age (which is scheduled to increase). That is another debate. However, the risk of effectively moving forward that age for many is something we were mindful of – and not in the spirit of an opportunity fund. And as the Basic Opportunity Fund is a ten-year fund initially, there was some sense in reserving it for those aged 55 and below. Such a cliff-edge effect is unique to those within a decade of the Basic State Pension age.
During the course of the discussion on Friday, a number of good arguments were put to us which are worth reflecting on. The obvious one is that there are abundant opportunities that those in the 55-65 year-old age group might wish to explore and some may not be able to do so without the Basic Opportunity Dividend. In essence, the demand was for more not less coverage of people with the dividend. Another fair point was that as a universal payment, it is inevitable that some would not use it towards activities for which it is intended and that doesn’t just apply to those approaching the Basic State Pension age.
And so, it’s important to think about how the Basic Opportunity Dividend could apply to all those below the Basic State Pension age. There would of course be a cost and, by our calculations, around 10 per cent of the population is in the 55-65 cohort (these figures are available in the report). Therefore, the additional net cost to the scheme would be £2billion per year. This would increase the borrowing requirement for the Fund by £20billion over the course of the fund’s lifecycle. These costs aren’t enormous in the context of a £2trillion UK economy.
And, actually, by giving the dividend to those aged 55 to 65 years-old, it could open out a new conversation about the transition to full retirement (and retirement, in the truest sense of the word, is something occurs way beyond the Basic State Pension age and those aged 65 and above increasingly blend caring, learning, volunteering, and elements of fulfilling economic activity). The advice and support that is built into our model could be re-purposed to help explore what a new model of ‘retirement’ could be: using the funds to support transitions into new forms of meaning and contribution. Framed in this way, in addition to supporting opportunities to re-skill or try new business opportunities for the over 55s, the Dividend could make an enormous difference to lives and contributions of the group, critical to a flourishing society.
We are very open to this discussion – it’s the reason we labelled our intervention a ‘discussion paper’. We actively hoped that new areas of public discussion might open in ways that could be exciting. So the Basic Opportunity Fund could be widened to include all those younger than the Basic State Pension age. It would cost, but could also open an important exploration of what the ‘third age’ truly means. Let the discussion continue.
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I understand why you have proposed the Basic Opportunity Dividend. It's an ingenious way of fitting something that approximates UBI into our financial/fiscal system, but I wonder if it's the right path to choose if a true, liveable UBI is your goal.
In fact, I think that UBI being the goal is a problem because it diverts attention away from the underlying dysfunction within our economy.
Most of the things that UBI seeks to resolve can be attributed to a lack of money getting to places where the proponents of UBI think it should be, which suggests that our financial/fiscal system is faulty, which suggests that we should look at it first before we jump to UBI as a solution.
We should do this even if we're in love with UBI because, as your dividend idea implicitly admits, proper UBI (full, liveable, sustainable) is well-nigh impossible within the current financial/fiscal model.
Economics is limited by physics, not finance.
Our collective security and comfort depend on people using their brain and muscle power to do useful stuff. Money is merely the tool that we use to activate each others' brains and muscles and to share the useful stuff that we produce.
It follows that, for an economy to flourish money must be universally available and constantly mobile.
Our current financial/fiscal system is designed in such a way that money is hard to come by for most of the population and, because of its scarcity, we're all obsessed with holding onto as much of it as possible: the very opposite of the requirements for a flourishing economy.
The reform that we need is bigger and broader than UBI alone. We need to redesign the way that money works so that it's available and mobile, helping all of us to to contribute to and benefit from the physics of the economy.
I believe that full UBI is an essential component of the financial machinery that we need. UBI is an excellent way to distribute a significant chunk of the money supply through the entire economy on a regular basis. It will go a long way to meeting the "universally available" bit of our requirements for a flourishing economy.
But the primary component is a mechanism that keeps money moving, preventing it from stagnating, encouraging us to use it, making it widely available for investing in productive activity. A pump, if you like, that is constantly circulating money through the economy at whatever rate is required to keep everyone busy and everyone looked after.
There are various ways of powering this pump but my favourite (so far) is negative interest. This article is a little out of date but it gives a flavour of how negative interest could be the primary pump for our money as well as providing a sustainable funding source for your primary goal of a true UBI:
https://malcolmhenry.com/2013/11/18/the-positives-of-negative-an-idea-to-change-the-world/
Some will say that such financial/fiscal reform is far too ambitious, fanciful, even, and we should keep tinkering away with what we've got, trying to make things work within the limits of what we think is possible. This view fails to recognise the genius of money or how stupidly we currently use it. It's like insisting that we build yet another precarious raft from driftwood and bits of string when we have the technology to build a proper boat. We can and must do better.