10 May 2019

Good intentions are not enough to justify a Universal Basic Income


The principles of a Universal Basic Income (UBI), paid without conditions to every UK citizen, appear to offer something for everyone, just like the payment itself. However, it is hard to see how it can deliver the hoped-for benefits at a reasonable cost – as many pilot schemes in other countries have already demonstrated.

Some form of UBI has always appealed to those who believe that the state should do more to tackle poverty and inequality directly. Many supporters, such as Guy Standing and  Frances Coppola, also make moral arguments about insecurity, stress, freedom, social justice, solidarity and sharing common resources, and even responding to the challenges of automation and climate change.

Others have been attracted more by the idea of a simpler, and potentially cheaper, replacement for complex welfare systems and other state interventions that distort individual choices and prevent markets from working properly. That’s probably where I would start.

Unfortunately, it is proving very difficult to put these principles into practice. The seemingly inescapable conclusion is that if a universal payment is going to make a real difference to the lives of those who actually need it, the payment would have to be set at such a high level that it would be unaffordable. Indeed, there is a striking contrast here between the rhetoric of those supporting UBI and the reality of the numbers being talked about.

For example, Ed Miliband has argued that ‘if you give people opportunity they will do extraordinary things’. However, the amount of money being suggested by those who have actually looked into this in any detail, perhaps just £48 per week or around £2,500 per year, would not be enough to allow many people to start their own business or take time out to retrain for a new profession.

Others, more fantastically, have talked of figures as high as £10,000 per year. Even if this were paid only to adults of working age (around 40 million in the UK), this would cost £400 billion annually. It may well be possible to get most of this back in savings on other benefits, but the cost is still likely to exceed £100 billion. That’s an awful lot of magic money trees.

What’s more, it’s not always obvious what problem the UBI is supposed to be fixing. My favourite example from the recent Finnish trial is the man who took the opportunity to set up his own business making shaman drums. Nothing intrinsically wrong with that, of course. The UBI freed him from the burden of spending time on job search to qualify for ordinary state benefits. He might well have found it impossible to borrow money from a bank instead.

That’s potentially a market failure worthy of correcting. But now the business is up and running, and presumably profitable, wouldn’t the continued payment of a basic income just be subsidising the prices of shaman drums?

Some of the ethical thinking around the UBI is also rather woolly. No-one is advocating a return to the Victorian workhouse. But is it morally right to force the majority of the population to pay higher taxes to subsidise others who have no obligation to contribute anything to society in return? This seems more likely to create a sense of injustice than to promote social cohesion.

There are similar, but slightly different, objections to proposals for Universal Basic Services (UBS). This scheme would provide a range of essential goods and services, at no cost, to anyone who wants them. The scope could include local public transport, communications (basic phone and internet access and a TV license), social housing and even some regular free meals.

On the plus side, a UBS would probably be cheaper than a UBI. This is because in practice it would not be ‘universal’, as better-off people would be less likely to want the relatively basic goods and services on offer. However, it would mean that officials would be making more decisions about what people need, rather than giving them cash to spend as they choose. I wasn’t surprised to read that Aaron Bastani, author of ‘Fully Automated Luxury Communism’, is a fan of UBS, but there is an obvious danger that it increases dependency on the state and reduces competition.

In short, neither a UBI nor a UBS would be a silver bullet. There may be a case for small universal payments that provide a safety net where other interventions have failed, perhaps financed by reductions in personal tax allowances. But that is clearly far less ambitious than what is currently being proposed. Even if we did keep it small, with a limited trial, the inevitable political bidding war could soon make any such programme unaffordable, and possibly extend state intervention even further.

Sorry, but while the motives of those behind both proposals are impeccable, I’d need a lot more persuading to support them.

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Julian Jessop is an independent economist.