Universal Basic Income in a Post-Virus Britain
A basic income floor would help define our society in the post-coronavirus era, writes economist Stewart Lansley
With livelihoods shattered and household incomes heading for unprecedented falls, attention needs to turn towards the vital question of post-crisis reconstruction. The Covid-19 crisis has already changed the terms of the debate about public policy and the way society should function. Within a matter of weeks our views on who are the most valuable workers have been turned upside down, while the serious gaps in our current social protection system have been brutally exposed. There is unlikely to be a better time to tackle head-on the largely ignored insecurities, divisions and large-scale poverty that have long disfigured society, and which are now set to worsen.
Crucial to building a better society must be a strengthening of our system of social security. The need to act has been recognized by the remarkable upsurge in interest in the idea of providing all with a guaranteed, no-questions-asked basic income (BI) as of right. While Parliament has largely ignored the idea of a BI (sometimes called a universal basic income) until now, 110 MPs and Peers, across parties, have called on the Chancellor to implement a recovery basic income.
A key reason for this surge in interest has been the exposure of the multiple flaws in the current system of benefits. These failings have been acknowledged by the Chancellor, Rishi Sunak, in the raft of measures to support falling incomes through wage subsidies and the easing of rules on universal credit. While these are welcome, millions will miss out, opening up a new divide between those well protected by government measures and those that are not.
Another reason is the power of such a system to mitigate, at speed, the stark economic fall-out of the epidemic. If a basic income scheme had been in place at the start of the epidemic, it would have provided an automatic mechanism for supporting incomes, and for injecting cash payments into the economy on a temporary basis.
A recovery BI would require a single record of all those eligible and a system for paying them, neither of which currently exists. While such a comprehensive list could be drawn up relatively quickly by Whitehall, there is one immediate step the Government could and should take. As called for by social scientists it should raise the level of child benefit – essentially a basic income for children – for a limited period. Paid to 12.7 million children in 7.3 million households, this move would be a cost-effective way and a fast way of getting cash to families.
When a more comprehensive list has been compiled, this emergency measure could be extended to adults. By way of illustration, giving adults say £500 a month and children £200 a month (through child benefit) would provide a family of four with £1400 a month. The benefit to higher-income groups could be clawed back through tax adjustments. The upfront cost of such a scheme would be in the order of £15 billion a month (financed by conventional borrowing or some kind of ‘helicopter money` that delivered cash directly to individuals), but much or all of this cost would be recovered by faster recovery. This commitment compares with an estimated £10bn a month for the Treasury’s ‘job retention scheme’ and the cuts to the benefit budget since 2010 of nearly £40bn.
But a recovery measure should also be used as a bridge towards a more permanent basic income, one with lower rates of payment, that would sit below the existing benefit system. This would for the first time create a guaranteed income floor below which no-one falls, one of the oldest ideas in the long multi-century story of social policy. The new social security system constructed by William Beveridge and Clement Attlee after the Second World set out to build one model of such an income floor. This was to be delivered by a more comprehensive system of collective national insurance, family allowances, the safety net of means-tested National Assistance, and full employment (for men).
Although this was light years ahead of the patchy and widely hated pre-war model of support, the new reforms were far from free of holes, while Britain has never come close to creating a robust income floor. Today, millions fall through what is an imperfect, mean and punitive system. Most benefit levels are, as a ratio of typical earnings, below those in other comparable rich nations. The main adult unemployment payment – at 15 percent of average earnings – is worth less than at any time since 1948.
A study by the thank-tank Compass has shown that a ‘modest permanent scheme` – placing a new holes-free net under the existing benefits system – would be feasible, affordable, and highly progressive. It would cut poverty and inequality, strengthen universalism and cut means-testing.
A new and powerful instrument for social protection, a solid income floor would build an automatic anti-poverty force into the existing system, bringing a real boost to security in an increasingly fragile world. It would bring a modest income for the small army of carers and volunteers, mostly women. As the epidemic has revealed, their contribution is crucial to the functioning of society. By providing all citizens with much more choice overwork, education, training, leisure and caring, it would also lay the foundation for greater personal empowerment and freedom. It is perfectly possible to devise a permanent scheme that is broadly revenue neutral.
The crisis has sparked new life into an ancient idea. Underpinned by a cross-party parliamentary working group, the idea of a basic income now has political legs. A modest income floor offers a new vision for social protection fit for a turbulent 21st century. It would also put down a marker for the kind of society we would like to emerge in a post-coronavirus world.