Last month’s report on a Universal Basic Opportunity Fund (UBOF) is proposed as a test case for establishing a Universal Basic Income (UBI) in the UK. While the intention is to establish a case for UBI, the report also highlights many issues that the idea of a UBI faces in practice. The RSA has done a lot of work around the idea of a basic income in recent years; however, the idea is not without controversy, and it is healthy for the Fellowship to consider both the pros and the cons. I hope that this article can start more of a debate within the RSA about whether a UBI is the right priority for reform.
The UBOF, and by extrapolation a UBI, is an expensive program that faces strong competition for tax revenues from basic public services. Those services, like the NHS, are generally accepted as pre-existing to a UBI and as necessary to maintain the fabric that underpins our society and our economic security. So the first question has to be whether there is any money left to fund a UBI after we have properly funded our basic services. The OBR and IFS forecast that pensions, social care, and healthcare will require another 8% of GDP, at a minimum, in the next 20 years just to keep up with our ageing population. Those costs alone will take the UK to tax rates never seen before.
Ultimately, the function of government is to allocate available social resources to the maximum benefit of society, working from a list of priorities derived from an understanding of the requirements necessary to enable human communities to thrive. The provision and maintenance of these public goods, which are primarily services, is the priority role of government. Most UBI supporters accept this description of the role of government, and envisage UBI providing a layer of emancipating personal freedom on top of this set of universal basic services.
The Institute of Global Prosperity at UCL recently modelled a dramatic expansion of free public services to see what they would cost, and this provides a useful comparison in weighing the value of a UBI. (Full disclosure: I am part of the team at the IGP along with Henrietta Moore, Jonathan Portes, and Howard Reed.) The IGP report assessed the cost of Universal Basic Services (UBS) at £42.2 billion a year, providing 1.5 million new social housing units, 2.7 million Council Tax and utility grants, feeding the food insecure population with 1.8 billion meals a year, giving everyone free local transport services, and free basic cell phone and Internet access, as well as covering the cost of the TV license fee. That’s an awful lot of services, and they would dramatically reduce the cost of living, by 80%, for those on the lowest incomes that used the services. The existence of those services would increase economic security for the whole population, just by the very fact of their accessibility in the event of need – like the NHS.
Weighed against a total program cost for UBOF of £46 billion a year, let alone a full UBI at £95 billion, it’s arguable that the UBS proposal would increase the economic security of more people with less conditionality than the UBOF. The advertised £14 billion a year UBOF cost is after taxes have been increased and benefits withdrawn. And this is the problem that UBI proposals come up against: there are usually better and more effective uses of the public’s taxes than universal cash distribution. European-style supporters of UBI, unlike their American friends, do not think that public services should be reduced to fund UBI programs, and therein lies the rub: if public services are funded as a priority, there is little money left for cash distribution on top of that.
The UBOF report proposes the creation of a ‘sovereign wealth fund’, which would be invested to cover the remainder of cost. While the creation of new public debt to seed a wealth fund is dubious, the primary issue with this and other new monetary ideas is that they conceptualise a society as the child of its economy when the reality is exactly the opposite. Ultimately a government must be a structure for human society that is independent of the vagaries of the market and will provide solidity even when markets collapse or fail. Just because a sovereign can print money, doesn’t mean that doing so doesn’t have consequences; and if money can be printed for one thing, then why not another, and why not more?
Turning to implementation, the UBOF report highlights many of the complications inherent in trying to introduce unconditional cash distribution into a welfare system that already does a lot of conditional redistribution. The central UBI tenets of unconditionality and non-withdrawal are early casualties of attempts to develop real world, rather than theoretical, proposals for UBI. Taxes and benefits are adjusted partly to keep the costs down and partly to keep the effects fair. The net result is a conditional program layered on top of conditional benefits and negates the primary advantages advertised for UBI of reduced administration and the elimination of conditionality.
UBI has not had a trouble-free birth in its modern incarnations, and the UBOF report offers us some insight into the difficulties and complications. If UBI cannot compete successfully against basic public services for a large share of the fiscal pie, and if the fiscal pie cannot be grown much above where it is today through either adventurous monetarism or new taxes, then UBI proposals will always be smaller than would be necessary to achieve their transformational ideals.
The goals of reducing fear and increasing economic security are undoubtedly key to liberating the full potential of our societies, and as we work to develop new solutions for the 21st century, a vigorous debate about the best options for reform will be invaluable to everyone.
Join the discussion
Comments
Please login to post a comment or reply
Don't have an account? Click here to register.
Could I recommend this: 26th April Fadhel Kaboub,, Associate Professor of Economics at Denison University (Ohio) and President of the Binzagr Institute for Sustainable Prosperity, will be making the case for a Job Guarantee in a presentation at City University of London. It's a free event and there are some seats left so if you would like to attend please follow the link and register.
https://www.city.ac.uk/events/2018/april/the-case-for-a-job-guarantee-in-the-uk-the-economics-of-care,-dignity,-and-prosperity
An interesting paper by Paper by MMT economists Paulina Tcherneva and L. Randall Wray from 2008: "Can Basic Income and Job Guarantees Deliver on Their Promises"
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1009629
ok I get it, there has to be debate but please include loads of those whom are directly suffering under the current regime don't make it a theoretical exercise. For me I would go with a true-cost figure of UBI all the time and why, because of the institutional and state violence committed against it's citizens+ a denial of their human rights.When any one can give me a great plan that addresses this immediately then maybe I would listen and I reckon that would go double for the sufferers of this regime
I would really interested to hear from other fellows about how you feel about UBI and other options. Do chime in here.
Economically speaking UBI has several flaws. First, it is not adding value to the economy. It will add money to the economy, but if there are not a matching supply of resources and services for it to purchase then it could be inflationary. Second, it will not eradicate poverty since it will be factored into wage levels in the same way Working Tax Credits were. Before WTCs were introduced in 2003(?) only about 0.5% of people in work were on or below the minimum wage. In 2016 there were six times that number, because employers were taking advantage of the WTC being there to make up the difference, and people were similarly willing to take those lower paid jobs. Third, It’s not difficult to understand then how UBI will not facilitate a minimum wage floor, and certainly not a living wage. Fourth, it can limit a government’s fiscal space in times of inflation. UBI will be paid to all regardless of the level of aggregate employment. It will not be possible to reduce the UBI payments to counter inflation. Fifth, unless it is paid at a reasonable level that equates to a living wage it will be WTC v2, or Universal Credit v2. No government should do that when it gets nothing in return, and it will only support the neoliberal status quo. Socially, recipients of the UBI who choose not to work will still be as poor and underprivileged, and still demonised, as those on UC today. The alternative to UBI is a Job Guarantee scheme. It is entirely voluntary; anyone who finds themselves unemployed can join and they are paid a living wage. In return they are offered a choice of employment to carry out work useful to society. This could be anything - not just lowest common denominator jobs, litter picking, but anything that they are suited to that is on offer, and they want to do. Or they come up with their own idea for a Job is another possibility. JG sets a minimum living wage which employers have to raise above, and it does not subsidise employers the way a UBI would. It is also not inflationary. The JG scheme will increase in times of recession, acting as an automatic stabiliser, and it is exchanged for services of value, the JG payment is not ‘money for nothing’. People having to give up work to care for relatives would qualify for JG. What about those who are disabled unable to participate in the JG? Well, that is where the UBI would be a useful safety net in some form.