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Basic income is the latest bad political idea that refuses to die

The worst thing about the basic income is that it is a tragic misdirection of a compassionate and libertarian impulse: to do something about our counter-productive benefits system

John Rentoul
Monday 02 January 2017 15:26 GMT
One proposal for a universal basic income in Britain would see every citizen awarded £8,320 regardless of their circumstances or employment status
One proposal for a universal basic income in Britain would see every citizen awarded £8,320 regardless of their circumstances or employment status (Getty)

The zombie policy of the universal basic income is the first to rise from the grave of well-intentioned impractical ideas in 2017. Labour-controlled Glasgow city council is the latest to announce that it intends to investigate a pilot scheme.

There is a reason why the basic income is the eternal news story. Someone, somewhere, is always saying what a marvellous idea it is. Some local government, or much less often a national government, is saying that it is going to look at it, or going to bring in a pilot scheme or even, every now and again, actually bring in a pilot scheme, which usually involves something which is nothing like a basic income.

Last year Elon Musk, John McDonnell and the Scottish National Party said what a marvellous idea it is. Fife council in Scotland is also looking at it. Two Canadian provinces are said to be interested, Ontario and Prince Edward Island, the second of which is normally useful only for pub quizzes.

But the big one is Finland, an entire country, which is going to do a pilot, selecting 2,000 unemployed people at random and giving them a monthly income of about £500, which is what they get in unemployment benefit but they will be allowed to keep it if they get a job. After two years, we will find out whether the scheme has encouraged people to work, given that the participants will be able to keep every euro cent that they earn (after tax).

Elon Musk believes Universal Basic Income will follow more automation

The idea behind the basic income is lovely. It is that, if the state gives every citizen enough to live on as a right of citizenship, they will accept irregular, part-time or precarious work because they won’t lose welfare benefits if they do so. It is particularly appealing to people who think that the world of work in the future is going to be irregular, part-time and precarious, with people taking portfolios of jobs and being encouraged to become entrepreneurial risk-takers by the safety net of the basic income.

The practice, however, is very expensive. One rudimentary scheme worked out for the UK by Malcolm Torry – and remember that he is an advocate of the basic income – proposed an income of £8,320 a year, to replace all benefits except housing and council-tax benefit. That is hardly a generous annual stipend, and yet if it is to be funded through the income tax system it would require the rates of income tax to go up from 20, 40 and 45 per cent to 48, 68 and 73 per cent. That means anyone on today’s average full-time earnings of about £27,000 a year would lose out, because although the £8,320 a year would make up for losing the income-tax personal allowance, every pound of earnings would be taxed, and more heavily.

And that proposed scheme doesn’t even abolish housing benefit. One of the reasons it cannot is that housing is so much more expensive in London that to set the basic income high enough for the capital would make the scheme unaffordable at any tax rates.

The alert and sceptical reader will have noted that the Finnish scheme isn’t even remotely a basic income, because it is limited to unemployed people. It is therefore merely an experiment in the incentive effects of paying higher unemployment benefit.

The problems of the basic income have been explained again and again, by people who have actually worked on social security policy making and implementation. But journalists and politicians naturally seize on ideas that seem to offer neat and plausible solutions to difficult problems. Elon Musk says robots mean we will have to have a basic income, because traditional salaried jobs will disappear. That doesn’t follow, and besides, most workers in rich countries still work in traditional salaried jobs and will go on doing so for the foreseeable future. John McDonnell, the Shadow Chancellor, says “we can win the argument” on a basic income. And yet he hasn’t even begun to try.

Swiss voters 'reject basic income grant for all'

None of which would matter very much, except that it would be good for the democratic health of this country to have an opposition that came up with practical policies rather than pie in the sky. The worst thing about the basic income is that it is a tragic misdirection of a compassionate, egalitarian and libertarian impulse: to do something about the often counter-productive interaction of the benefits system with the world of employment.

If only the advocates of the basic income in Britain would devote their attention to the cuts in tax credits that are still pencilled in for remainder of this parliament (Philip Hammond refused to do anything more than soften them slightly at the edges in his Autumn Statement). If it’s grand, universal reform of the benefits system you want, study the everlasting disaster of the Universal Credit system and devise a practical way to make that work, instead of diverting your energies into campaigning for the schemes of impractical dreamers.

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