Universal basic income is a great idea, which is also why it won't happen

The idea of a universal basic income (UBI) unites a strange mix of people.

“We should explore ideas like universal basic income to give everyone a cushion to try new things,” Facebook boss Mark Zuckerberg said in a speech at Harvard University in May. “And yes, giving everyone the freedom to pursue purpose isn’t free. People like me should pay for it,” he added.

Facebook recently announced it paid a not-immense £5.1m (US£6.7m) in UK corporate tax in 2016 on revenues of £842.4m and profits of £58.4m, although this is a huge increase on the £4,327 it paid two years previously. Leaving that aside, UBI has also been supported by Tesla boss Elon Musk, who said in February it “is going to be necessary” as robots take many jobs.

He expressed doubts, however: “A lot of people derive their meaning from their employment. So if there’s no need for your labour, what’s your meaning? Do you feel useless? That’s a much harder problem to deal with.”

Joining the tech leaders are politicians, often of the left. The UK opposition Labour party’s shadow chancellor John McDonnell is a fan, although UBI was not in the party’s manifesto for this year’s general election. The Scottish Greens, who have supported it since setting up in 1990, last year helped the governing Scottish National Party pass its budget after the SNP lost its majority in the Scottish parliamentary election.

And that SNP-led government recently announced funding of local trials of “a citizen’s basic income, a radical form of social assistance,” in its programme for government for the coming year.

Alf Young, visiting professor at the University of Strathclyde’s International Public Policy Institute, has run the numbers. “The Greens had indicated that they were looking at anyone up to the age of 16 getting £50 a week, anyone of working age £100 and pensioners £150,” he says. “It’s not exactly a king’s ransom.” By way of comparison, the UK government’s jobseeker’s allowance is currently £73.10 a week for those aged 25 or over while the full state pension (for those who have paid national insurance taxes for 35 years) is £159.55.

Show me the money

Based on Scotland’s demographics, Young reckons that a £50/£100/£150 UBI would cost £28bn annually. “That’s almost the entire devolved budget,” he says, which the Scottish Government currently uses for NHS healthcare, education, policing, courts, housing, transport and quite a lot else. “I don’t know where they would find the money from, without significant increases in taxation.”

Pensions and benefits are largely handled by the UK government rather than Scotland’s, so what about tapping Westminster for a Scottish UBI? It still wouldn’t add up: the UK’s social protection (benefits and pensions) budget is £245bn, which makes Scotland’s per capita share £20.2bn, less than three-quarters of what would be needed. And unless slashing the income of disabled people was part of the plan, some retained targeted benefits would add to the cost.

It would also require big changes to government. “UBI is a great idea and for that reason the civil service will not allow it to happen,” says Tony Collins, a journalist who runs the public sector IT blog. “Central departments are set up, culturally and historically, to perpetuate the size of their bureaucratic empires.” Although many individual senior civil servants are open to reforms, he believes that Whitehall departments tend to resist changes that would reduce their scope.

Collins reckons that HM Revenue and Customs, which handles taxation, is more open to change than the Department for Work and Pensions, responsible for benefits and pensions. “The DWP would, I believe, come up with pages of arguments on why the UK could not, and should not, have UBI. If it were implemented successfully in other countries it could then be considered seriously here. Not until that happens, though,” he says.

Very few governments have introduced anything like a UBI. The state of Alaska’s permanent fund dividend of US$1,100 – just over $21 a week – was distributed to Alaskan residents on 5 October, and comes from the returns on its invested mineral rents and royalties rather than general taxation.

Bureaucratic nightmare

So given the cost and difficulties, why so much enthusiasm? One reason is that a UBI could remove the poverty trap caused when means-tested benefits are withdrawn as someone starts paid employment or gets a promotion, equivalent to a very high marginal tax rate. Reg reader Edward Martinson has described what it is like to be stuck on benefits, effectively unable to take on small pieces of work.

A UBI could also save money on administration. Malcolm Torry, director of the Citizen’s Basic Income Trust which promotes debate on the concept, says this depends on its size. “A low UBI would leave in place means-tested benefits, but it could take a lot of households off various means-tested benefits and because the administrative cost of UBI would be very small the net effect would be a reduction in administrative costs,” he argues. “The higher the UBI, the lower the total administrative costs for the system as a whole.”

Luke Martinelli, a research associate at University of Bath’s Institute for Policy Research, has his doubts. “We would still need a bureaucracy to construct and maintain a list of beneficiaries and make payments, for example. But perhaps more importantly, in a lot of – indeed, most – proposals, basic income would only replace some benefits, with the rest remaining in payment for low income households or to compensate for the extra costs of disability.”

The way forward?

What about the impact on taxes? In a recent paper, Torry proposed a relatively simple UBI for the UK, with child benefit increasing by £20 a week, young people aged 16-24 getting £50 unless they remained in education, those aged 25-64 getting £61 and those aged 65 and over receiving £40 on top of current pensions. This would require income tax to rise by 3 per cent, the abolition of tax-free allowances and those earning more than £45,000 see national insurance rates go from 2 per cent to 12 per cent. While it wouldn’t make a big difference to most working people, the well-off would pay significantly more.

Despite technologists’ enthusiasm for UBI in helping society cope with the rise of the machines, experts aren’t sure. “There is certainly some logic to the idea that UBI could help to redistribute income more effectively and shore up aggregate demand if an increasingly high proportion of gross domestic product accrues to capital rather than being paid in wages and salaries,” says Martinelli, but adds that such claims might be slightly overstated, and “in any case it is not clear that UBI is the only or indeed best means to address labour market dysfunction and growing inequality”.

All in all, Martinelli sees tech leaders’ enthusiasm for UBI as “slightly surprising”. He thinks they might be altruistic or based on more libertarian versions of UBI that do not include so much redistribution. “Another perspective is that they might view UBI as an essential way to ensure public consent for technological change and growing inequality,” he says.

Torry thinks technologists just have a clearer view. “Engineers look at systems that aren’t working and ask how they can be made to work,” he says. “Technologists can see more clearly than many that the employment market is going to change.” Whether that would convince the better-off to pay the extra taxes a UBI looks likely to require remains to be seen. ®