How do we achieve adequate minimum incomes for all? This is a question that is at the heart of the the European Minimum Income Network (EMIN) project. All across Europe campaigners, researchers and policy makers are debating what combination of policies is needed to ensure that minimum income schemes actually lift people out of poverty. As part of the EMIN project the Poverty Alliance has organised three round table discussions to consider how we may secure adequate incomes for all. The first discussion took place at the end of April 2018 and considered the pros and cons of a Universal Basic Income. In this blog Adam Corlett of the Resolution Foundation looks at some alternatives to UBI.
Universal Basic Income (UBI) is the policy idea du jour, especially among Labour, Lib Dem, SNP and Green members. But those three words by themselves are not a policy. The concept draws support for a range of different – and sometimes contradictory – reasons, and a UBI could be designed in countless ways with vastly different results. In addition, the debate often fails to engage with the real-life benefits system we already have. To help clarify which aspects of a UBI really matter to you, and which aspects may not be so appealing, here’s a set of thought experiments: what a UBI manifesto for incrementalists might look like (not all of them necessarily welcome). It shows that there are good ideas to be taken from the concept and the motivations behind it, but that UBI may not be the only or best way to achieve particular goals.
- Are you happy to have higher taxes to make benefits universal? Then restore child benefit to high earners
The UK did have a UBI for children until just a few years ago, but now child benefit is withdrawn from those earning more than £60,000 and partially withdrawn above £50,000. Yet few people have called for a return to a universal benefit, and its generosity is being rapidly eroded too. If you want a UBI then a return to a universal child benefit seems like an obvious place to start, coupled with finding £3 billion in tax increases – presumably from higher earners – to fund it. If you can’t work out a revenue-neutral but popular way to do that, then what hope is there for a working-age UBI?
- Do you care about how generous a UBI is or who is eligible for it? Then look closely at the state pension and other pensioner benefits
Alongside children, pensioners essentially get a UBI already. But, as debates about the pension triple lock have shown, that doesn’t answer the question of how generous that income should be or how any increases can be funded. The state pension also gives one example of how eligibility can be determined (in this case through years of taxpaying or non-work credits). Devoted fans of UBI could consider broadening those eligibility rules for the state pension to some simpler residence-based system. In addition, similar to the means-testing of child benefit, it was fashionable for a while to propose means-testing Winter Fuel Payments for the richest pensioners – as in the 2015 Labour and 2017 Lib Dem manifestos. But it would be inconsistent to support this kind of spending cut while also seeking a UBI.
- Are you willing to raise taxes to give poorer families more cash and better work incentives? Then increase benefits, beginning by stopping and reversing recent cuts
Is your intention to reduce poverty, or to soften the tapering away of means-tested income when poorer people move into work or progress in work? If so, the urgent priority should be preventing the £14 billion of working-age welfare cuts currently being rolled out. And even if that were done, there’s a lot more that’s needed, including boosting work incentives for second earners in Universal Credit, lowering its taper rate and increasing our skeleton-thin out-of-work support. Child benefit too could be increased, rather than being allowed to fall to new historic lows relative to earnings. You don’t need a complete overhaul of the tax and benefit system to do any of that (and a full UBI would take many years to implement anyway, with change needed much more immediately). But boosting income growth and work incentives for low to middle income families in these ways inevitably requires – through tax increases – reducing income growth and work incentives higher up the income distribution. Is that a cause you’re prepared to support?
- Do you want to reduce jobseeking requirements and sanctions? Then do so, and experiment with their abolition
For some, the most important part of UBI is not about the generosity or means-testing of benefits. Instead, it’s about ending conditionality. It’s certainly easy to criticise the bureaucracy and imposition involved in jobseeker’s allowance and disability benefits, and especially the added sanctions of recent years. But this shouldn’t be a binary choice between the status quo and having zero requirements: there is a whole continuum of conditionality. As Beveridge intended, requiring jobseekers to seek jobs can help everyone if done reasonably, and has played a role in the UK’s impressive employment performance since the 1990s. It also helps maintain public support for out-of-work benefits. But this is an area where we can easily experiment. The government could, for example, simply tell a random selection of Universal Credit claimants that their payments are now unconditional (but still means-tested) and see how their outcomes compare to other claimants in terms of eventual employment, pay, education and well-being. Surely the results would be of interest to everyone?
- Do you favour recurring cash benefits over other forms of support? Then replace free bus passes, home-buying subsidies and more
Is the cash nature of UBI important to you? If so, maybe there are some programs of non-cash support that could be redirected. Free TV licences for the elderly could be replaced by cash, as could free school meals for the young. And housing programs like the Help to Buy ISA could give annual cash to all young people instead of a one-off subsidy for some. Or perhaps policy should go in the other direction. The TV licence could be made free for all. As could bus travel or internet access. Free school meals could be extended to all pupils. Ultimately there is a trade-off between cash support and the potential provision of free public services, so which should be the priority?
- Do you want benefits to be based on individuals rather than families? Then increase support for couples and ensure each partner separately receives some cash
A key feature of UBI is that it is done per individual. This means couples would get twice what singles do, whereas at present couples get less than double to reflect economies of scale and so better target money based on need. A simple way to get closer to UBI would therefore be to increase benefits for couples while cutting them for singles, until couples get twice as much. Would that be a good thing? Also important is who actually receives the money, and another option would be to split Universal Credit payments equally between partners by default (rather than a single payment) to ensure that each person has at least some personal income.
- Should benefits go to families with private savings too? Then reduce asset-based means-testing
Benefits can be means-tested based on wealth as well as income. In Universal Credit, any savings above £6,000 will lead to reduced entitlement with nothing for those with more than £16,000 in savings. These limits rarely get discussed. The argument in favour is that people should draw down their savings first before receiving help from the state, but this does inevitably reduce the incentive to save. Is this one area where those on the left and right could agree to greater universality and less conditionality? And how would such a change be funded?
- Should benefits take less account of housing need? Then cut housing benefit in expensive parts of the country and redistribute to homeowners
The thing about a pure UBI is that it should be equal across the country and – as above – be blind to wealth. Housing benefit has already been uncoupled from local rents, but can we take that much further? That could mean big cuts in housing benefit in more expensive local authorities, and a redirecting of that money to low income homeowners (or at least mortgagors), who don’t receive any housing benefit at present. Or would a UBI instead be introduced on top of housing benefit (and disability benefits) rather than as an alternative? In which case, is it really a simplification at all?
- Do you want a simpler tax and benefit system? Then merge more benefits into Universal Credit and the state pension, and merge National Insurance into Income Tax
One argument made for UBI is that it would be simpler. The experience of Universal Credit should show that simplification is not necessarily quick or easy to implement, but fans of UBI should support its goal of integrating six benefits into one (particularly because this will hopefully boost take-up). Once that is achieved, it might be possible to go further, integrating other benefits like Council Tax Support, contribution-based benefits and carer’s allowance. A range of pensioner benefits could be merged into the state pension too. And the tax system could of course be simplified – not least by merging Income Tax and National Insurance. But are such simplifications worth the potential disruption and political cost?
- Should we remake or restate the case for welfare spending?
If the 9 steps above were made, the UK’s benefit system would be significantly closer to a UBI, for better or worse. But how voters view that spending is another timeless question, and in part depends on how it is portrayed by those in politics and the media. We could all do more to frame benefits as more than just charity, and to avoid stigma – not least to encourage everyone to claim what they’re entitled to. Benefits are personal insurance and redistribution within people’s own lifetimes: from when they are in work to when they are retired, parents, ill or unemployed. But they also need to be seen as a partner to the tax system, offsetting the distributional impacts of consumption taxes and sin taxes, and as a way of sharing some of the inherited natural, institutional and technological wealth of the UK. Quite aside from the technical trade-offs above about how to design the tax and benefit system, UBI advocates do have a point that how we communicate and justify that system matters too, even if a UBI may not be necessary to change that.
Adam Corlett is Senior Economic Analyst at the Resolution Foundation. This blog was originally published by the Resolution Foundation