Could the basic income actually save us money?

basic income seriesWhen I wrote on the basic income a little while back, one of the criticisms levelled at it was that we can’t possibly afford it. I think this is misunderstanding the suggested principle and also what the knock on effects of it would be.

Another criticism is that people would abuse it – they’d just sit at home and do nothing. I think this misunderstands what motivates people to actually do things, *and* also what things are of value. Researching the cost of means tested benefits, I came across this article about why means testing benefits isn’t a fair process. A quote that leapt out at me: “One of the great strengths of universal benefits is that they create a sense of solidarity and shared understanding. Means tested benefits create the opposite, divisions and misunderstanding.”

We could do with a bit more of that. It’s easy to see how a variety of benefits are used at the moment to promote division in society by sections of the media and politicians. Scroungers, shirkers, people with their curtains closed in the morning (the track is broken on the living room set, sorry, so they’re closed right now) and there is this constant rhetoric against something for nothing.

Basic income goes completely against that. The idea is that everyone gets the same something, unconditionally. Say £10k for each adult in the country.

That would cost vast amounts of money. Maybe around £500 billion. (I’m rounding up to deal with easier numbers.) That gives you pause for thought.

But it’s not on top of the current welfare situation. It replaces income support, state pension, job seekers allowance. (I’m not sure about child benefit. Would we still need it? Possibly.) So that’s a budget of 144.1 + 112.5 to get us started. (I’m going to assume that this would replace PIP as the £10k is higher than the maximum you can get on PIP, the new disability benefit. Obviously I’m not going to be able to go into a huge amount of detail here.)

So, we’ve found £256bn to get us started. Half way there.

Anything else we can chuck into the mix? Personally, I’d scrap Trident – there’s another £20bn. And if we closed down tax evasion, we could probably raise enough to get us to £300bn.

And then there’s the clawback. From people with higher incomes, the £10k would be clawed back in tax. The basic income isn’t intended to mean everyone has x amount more than they have now, but rather that everyone starts with the same floor. I don’t know exactly what rates you’d have to set where to achieve this, but I’m sure there’s an accountant or economist out there that could figure it out.

All of this discounts that there would be a higher take in terms of VAT and so on – the people at the bottom end of the income scale tend to spend rather than save. You could do away with quite a bit of legislation around minimum wage – you wouldn’t have to enforce it. If people had the basics covered, they would be able to choose what they did workwise for top ups, and what rate they’d accept for it. Would you need all the worker’s rights legislation? I don’t know. It strikes me that people who had the basics covered would come at employment from a much stronger position. One to watch.

The various trials on basic income suggest that there would be lower costs for policing, and health. Difficult to budget those in at the beginning, but interesting to keep an eye on as the introduction took place.

There are of course, different schemes suggested around basic income. There was an interesting article in the Boston Globe this week about it, which references all kinds of different suggestions from across the political spectrum. Certainly it’s an idea which is coming more and more into the mainstream, and I’d love to hear other people’s ideas on how it could work, and why we should consider it.

About Jax Blunt

I'm the original user, Jax Blunt I've been blogging for ten years, give or take, and if you want to know me, read me :)

Comments

  1. Interesting stuff – I have to admit I’d no idea what the basic income talk was all about. You’ve given me some stuff to ponder :)

  2. I agree with most of what I’ve seen but if it’s clawed back from higher incomes in tax does that not make it means tested?

    • I was pondering this as I chopped the veg tonight. I read something about it being delivered through a negative taxation system which would indeed make it means tested but in a similar way to how taxation works generally, which would make it easier to deliver in that most people are subject to the tax system already. There are other suggestions though, and I’m going to look into them further.

  3. You’ve presented an interesting analysis which is effective in busting the myth that UBI would be “unaffordable”.

    I’d suggest you think about Land Value Tax instead of a income tax (which after all is a tax on labour). Taxes on unearned income such as property (above a certain threshold), financial transactions (especially rapid and high volume transactions) and inherited wealth (again, above a certain threshold) could raise vast revenues, allowing virtually everyone that works to keep their income.

    Land Value Tax:
    http://en.wikipedia.org/wiki/Land_value_tax

    Financial Transaction Tax:
    http://en.wikipedia.org/wiki/Financial_transaction_tax

    Keep up the good work in informing people about this important subject.

    • Thanks Tom, I hadn’t considered land value as it’s not something I know anything about. Financial transactions interesting though, have seen lots of suggestions that they should be more used.

      It’s certainly a topic that needs more light shining on it, so I’ll keep plugging away.

  4. As I’ve said before, I’ve been a huge fan of this idea as a concept for many years, and it’s great to see so many people now teasing out how it might work in the real world x
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  5. Rob Carolan says:

    And don’t forget the huge savings in administration costs of abolishing the need for a complex welfare/pensions system

  6. You haven’t mentioned Housing Benefit. Do you see the £10,000 as replacing that, too, or will there still be a need to support some (probably single?) people’s housing costs? Or is £10,000 the absolute cut off for how much money the government will give you – no less, but no more?

    • £10k is a figure I’ve plucked out of the air to be honest, it seems like a good starting point for discussion.

      Housing is difficult. I think we should have more social housing available for low income families, and I don’t see why there’s a problem with living in social housing permanently if that’s what you prefer.

  7. If everyon ehad 10,000 then would any income earned, which would be above this threshold, be subject to income tax? I think that would be a nice touch, that everyone is contributing unless they do absolutely nothing.
    The housing issue wouldn’t change that much. A single parent, and anyone wanting to live in the more expensive areas, would still have to work, they’d just be 10,000 better off. There would have to be price caps though – on rents, basic foods, and utilities, so that it’s possible to survive on the 10.000 with a ratio of 1 adult to 1 child. If not it defies the whole philosophy behind it. Of course people can have more children, but they need to know that they will have to pay for them until age 18 – children are a choice not a meal ticket.
    If and when an old person needs to go into sheltered accommodation, their 10,000 goes to the care home and they are covered for all basics. Obviously there will be state care homes with govt. subsidies and maybe some charity fundraising, and private care homes that will charge a lot more (as they do today). If someone doesn’t want to sell their house to pay for their care, because they want to leave it to their children – they will have to choose the cheaper care. Or, maybe children will be encouraged to bring their parents to live with them (or vice versa). I like the idea that an extended family will be encouraged as the more adults in a house, the more money that comes in.
    A very interesting topic.

    • Yes, I think everything above that should be taxed, although I am exploring different types of taxation as Tom suggested.

      If people had that basic income it would mean perhaps that it would be easier to work less and care more? And we would have to explore what it meant to things like sheltered housing or care homes. I’m loathe to say people should have nothing if they’re in care, I don’t see that they should lose independence, right to choose clothes for example. Perhaps the costs of care homes could be capped at a percentage of basic income?

      There’s certainly a lot to look at and talk about, I think it’s a discussion we should be having though.

  8. Chrisotherwise says:

    Sorry, I’m not convinced. I earn a good salary that enables me to buy plenty of things. But that salary pales into insignificance compared to the value of *time*. I would give the whole lot up in an instant in return for a guaranteed, secure income that allowed me to live my life (even basically) without having to work, spending the time with my family doing things that we wanted to do. And if I did that, the government would lose a lot of tax. Don’t underestimate the number of people who would do the same thing.

    We’re already running at a deficit trying to pay out the welfare budget at it stands. If you doubled it and lots of high earners (who pay the lions share of tax at the moment) decided to take it easy then you’d be in really big trouble.

    • I’m not underestimating it Chris, I’m looking at the research. A few people did cut back their work hours, they were mainly teenagers who stayed in education longer and new mothers who took longer to be at home with their children. I suspect you’re also underestimating the number of people who might start up businesses or be able to do a few hours work who are currently effectively barred from doing that by the benefits trap.

      The basic income wouldn’t enable people to live in great style (don’t think it would fund foreign holidays for example) but it would free up people from grinding poverty and I think that’s worth looking at.

    • And I don’t think it’s the welfare budget that has caused the deficit. Anyone remember the banks?

      • chrisotherwise says:

        You seem to be confusing the deficit with the financial crisis. The deficit is the difference between what the government receives and what it spends. The financial crisis had multiple causes – including banks lending irresponsibly, people borrowing irresponsibly, financiers trading worthless products, and governments assuming that there would be no return to boom and bust (and it was *you* that told me this when I waded in moaning about “the bankers” several years ago :).

        At the moment the government spends more than it gets in taxes. I can’t see how the minimum income would make this better.

        • My thought about tax revenue deficit is that people with more time in their hands would use it to learn how to and then do their own diy, repairs, gardening, and cooking. They could also barter skills. And of course they’d need fewer babysitters, cleaners, etc… I think it might become an art-form to live as grandly as possible without spending any money. The service providers would suffer and there would be less tax revenue from this sector.

          • I think that there probably would be more make do and mend indeed, and yes, a lot of the low paid menial work would evaporate. That’s no bad thing. I’d certainly sign up quite happily to work out how grandly I could live on the money.

            I also think though that there would be more room for small entrepeneurs, and that we could see some real innovation, something sadly lacking at the moment.

  9. chrisotherwise says:

    So, some more thoughts on this. What do you do for the people who currently receive more than £10,000 per year? (excluding any disability benefits) . For example, a single parent with three children working 20 hours per week and earning £8,000 per year would be entitled to the following :

    Working tax credit: £10526
    Child tax credit; £8715
    Housing benefit £5700
    Child benefit £2449

    Total: £28,265. (or £23000-ish if you don’t include the housing benefit). (source: turn to us benefit calculator, a reliable source of information)

    Such a person would lose more than half their income.

    • I haven’t discussed child benefit, I said in the post that I wasn’t sure what would happen with it. I also didn’t give much justification for the £10k other than it’s commensurate with suggestions other people have made.

      I’m not claiming to have all the answers Chris, but I’m suggesting that the system we currently have isn’t fit for need for many of the people it is supposed to serve. I’m pleased that it’s been so thought provoking for you, and I’ll certainly take on board many of the points you’ve raised when I return to the topic.

  10. I think you’ve touched on a very important point: What motivates people? What do people value? I become very annoyed when people on benefits are stigmatised as this and that … I’m in support of a basic income for all, (I only discovered it when there was talk of unrolling it in Switzerland of recent) because it will ensure that people have enough. It will if anything encourage those who want more to get a job. It will close loopholes and make administration easier. And if some people want to live on the basic income the state provides, that will be their free choice. Also, I think it will stimulate entrepreneurship and enterprise because it would be more common place for people to take time out to pursue their ventures without the worry of no income and failure holding them back.

    Yes it will be costly to roll out, but not more expensive than the current nooky system, with all it’s loopholes.

  11. I just found the BBC article I was referring to: http://m.bbc.co.uk/news/business-25415501

    It raises an important point about why people work. Is it just to have money, (without which we cannot survive)? And is it not better for the economy and greater society if people do jobs they love and want to do? Our current system is so financially driven that the happiness index is still an illusion. We don’t prioritise happiness and fulfilment quite as much as paying the bills.

    • I think that the savings on health (which I believe Jax has briefly mentioned?) could be pretty phenomenal if people were able to explore the areas of employment they love rather than having to do things they hate just for the money. i am guessing that it will be assumed that there will be no one who is prepared to do the ‘dirty’ or ‘menial’ jobs if this were implemented, but I think that would not be so. Many people get a really sense of pleasure from such jobs – my husband has recently met several, formerly highly paid and valued professionals (teachers, lawyers etc) who became sick of the role and the system and took on manual work instead and were happier as a result! I think this idea is very much worth trying.

      • Oh absolutely. I believe in the trial areas crime dropped too. I suspect savings would be made across the board in terms of public services.

        We could explore a variety of different ideas about how unwanted jobs could be completed. Perhaps pay rates would have to go up to reflect the value to society. Or perhaps we would find people who were willing to undertake the roles anyway, particularly as they wouldn’t have to work the long hours to make ends meet.

  12. Sonya Cisco says:

    Fascinating idea! My gut instinct is to like it, will be looking for some further reading! Sorry I missed this for the round-up, and thanks for linking it up so I had an opportunity to read this and the other related post.

  13. this is an interesting discussion, I think it makes alot of sence to have a ubi and it would be hugely beneficial – there is certainly a need for change the benefit trap we have now just isn’t working.

  14. Well it is not just that – you also recover costs from less poverty-related crime, specifically detention, which is a lot. And you recover the costs of maintaining the whole repressive system, as you have ATOS and whatever clerks paid solely to apply pressure redundant.

    Generally face it, everyone who wants to live on benefits, does so already, right now – except of course people genuinely in trouble who haven’t optimised their lives to check the social service boxes. So yes i agree with the article, it’s an almost pure win scenario.

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