There are plenty of things wrong with our welfare state in Britain. It costs a fortune to run, it offers disincentives to work and sometimes it is the people most in need who claim the least. Whether you are on the right or the left of the political spectrum, it’s hard to argue that it’s a system that doesn’t need fixing.
But now a new solution is being offered as a way to fix the flaws in our failing social security system; the “basic income”.
It may come as a surprise to you – as it did me – but it turns out that the biggest problem with welfare in Britain is not that too many people are entitled to state handouts, but that too few are.
The answer to all our problems is, it seems, not to roll back the welfare state to more manageable levels and target scarce resources at those most in need. On the contrary, the solution is to offer big handouts to even more people: everyone, to be precise.
If you think this is all pie in the sky, think again.
The Finnish government is currently looking at a new system of welfare which will abolish all existing payments, including child benefit and help with rent, and replacing them with one flat rate sum – the basic income – paid to every adult in Finland. Under the proposal being considered, every adult would receive 800 euros a month, (£600) from the state. That’s a free handout of £7,200 a year as a basic income. The total cost would be euros 47billion a year, roughly what the country is currently spending on its total welfare bill.
Although the aim of the move would be to cut unemployment by removing all the disincentives to work that benefits currently create, the basic income would come with no obligation to do anything in return – not to work, not to help out at a charity, nothing.
Amazingly, the Finns are actually considering trialling this proposal which, according to one poll, has the support of seven out of 10 of the Finnish people. Even more amazingly, the idea is being proposed over here in Britain too.
Neil Lawson from the left wing campaign group Compass, appeared on Newsnight yesterday to trumpet a plan from the Citizen’s Income Trust for a flat rate basic “citizen’s income” of £75 a week to be paid by the state to all adults. That £3,900 a year would just be a starting point, as we would still keep housing benefit, child benefit and a number of other welfare payments for the time being.
There are, though, some fundamental problems with this deliciously warm and fuzzy idea.
While there is much to be said for a flat rate payment that could simplify and cut costs in a welfare system that currently costs billions to operate, thanks to form filling bureaucracy, means-testing and fraud. But you can’t hand out huge sums of money every month to almost 50 million adults without it costing many billions more in the long run, by creating a dependency and entitlement culture, all paid for by the hardest working taxpayers.
There is also another key flaw in the idea of the flat rate state income: it’s horribly unfair. Not only will it fail to distinguish between the deserving and the undeserving, it also takes no account of people’s different needs.
What is fair or just about giving the same sum of money to a family with children as a couple without? Or the same to a person living with disabilities as someone who is able bodied? And what about those who live in cities where housing costs are so much higher than elsewhere?
However, none of those drawbacks come close to the fundamental problem with the basic income idea: it ignores the basic facts about people.
Neil Lawson made a valiant attempt to paint a lovely picture of the innate goodness of man, saying: “Our social security system is built on believing the worst in people, while the citizen’s income believes the best in people. By giving them security, they can reach their full potential.” In Mr Lawson’s utopian dream world, no one will just sit back and take their free money and do nothing for it; instead they will work harder, or become entrepreneurs or do valuable charity work. And that is a lovely idea.
The only problem with it is that it’s wrong. All of the evidence for the entire history of mankind is that most people, as happy as they are to help other people when they can, are largely motivated by the desire to help themselves and their families and, where they don’t reap any benefit, many people won’t bother to work at all unless they are forced to.
This is the fundamental reason why socialism doesn’t work and capitalism does: the former is based on fantasy, the latter on reality.
So, by all means let the Finns try out their fanciful ideas, but let’s stick to the real world here in Britain.