Ministers should consider implementing universal basic income, says free market think-tank

New report from the Adam Smith Institute calls on governments to experiment with the radical idea

The Adam Smith Institute (ASI) claims there is rising evidence for basic income (PA)

Ministers should consider implementing the radical policy of a universal basic income, according to a new report by a free market think-tank.

The Adam Smith Institute (ASI) claims there is rising evidence for basic income and calls on governments across the globe to experiment with the idea.

The concept involves radically overhauling the welfare state and ditching means-tested benefits in favour of an unconditional flat-rate of payments to all citizens.

The right-wing think-tank claims that current welfare systems are “ill-suited” to adapt to challenges presented by “automation and globalisation”, adding that a basic income is both politically feasible and financially sustainable.

In a report ahead of the World Economic Forum meeting in Davos next week the organisation calls on Governments across the globe to look at the policy as they “seek to address the risks posed by large-scale changes to the labour market while retaining the benefits of trade and technological progress”.

John McDonnell, the Shadow Chancellor, has been a leading advocate of the welfare overhaul within the Labour Party. He told The Independent last year that the party had set up a “working group” - spearheaded by his economic adviser Guy Standing - to investigate the radical idea and is expected to report on its findings before the party’s next manifesto is released.

In summer 2016 Mr McDonnell, one of Jeremy Corbyn’s closest allies in Westminster, suggested he could “win the argument” on universal income but added there was a “long way to go” to in developing the concept.

In the new paper, authored by Otto Lehto, the Institute explores the rationale and current basic income experiments around the world adding that new trials in countries such as Canada, Finland, Uganda and Kenya highlight the growing interest in the idea.

“The analysis suggest that the UBI is politically feasible, socially desirable and financially sustainable,” the report says. “The biggest problems relate to its implementation and administration. It requires inspirational political leadership to reform entrenched institutions and practices.

“Even if it gets implemented, UBI won’t solve all our problems. Its parameters, scope and size will have to be fiddled with for a long time to come. But no one can deny that it’s a feasible reform that can nudge our society forward.”

Mr Lehto said: “The theoretical case for unconditional cash transfers over command and control solutions has been strong ever since the birth of welfare economics. Now we have increasing empirical evidence from global field studies to corroborate the desirability of granting a modest, universal income floor.

“A UBI streamlines the provision of welfare services and improves the autonomy and incentives of individuals. Allowing poor people to spend their money as they see fit stimulates a bottom-up market solutions and cuts down on the bureaucratic red tape. All this pulls resources away from wasteful rent-seeking into wealth creation”.

Sam Dumitriu, the head of research at the Adam Smith Institute, said new developments from driverless cars to artificial intelligence will “change the way we live, work, and play for the better” but adds they “also risk disrupting traditional professions and careers paths”.

He continued: “To avoid a populist backlash, we need to design policies for those left-behind by creative destruction. Attempts to protect jobs through luddite regulation will backfire and mass retraining schemes have a shaky track record. Cash transfers are our best bet at ensuring the benefits from coming technological change are felt by everyone.

“We now need to experiment with different ways of doing it – should we tweak the tax credits system, should we introduce a ‘Negative Income Tax’, or is a Universal Basic Income the best approach?

"And, if we’ve decided on the best way of doing things, what should things like the withdrawal rate be? This paper is a welcome contribution to the debate around welfare reform in the UK and puts evidence at the front and centre of improving policy, just as it should be.”