The practical response to our society’s widening inequality? A partial basic income

Following Natalie Bennett's argument for a universal basic income, Karen Buck MP and Declan Gaffney argue there is an easier, more practical option.

Universal basic income (UBI) risks being a divisive topic. 

Last week, Natalie Bennett wrote here that we need to discover a ‘sense of outrage’ about what the current benefits system is doing to people. She is right – but her view that UBI is the response to such outrage begs a lot of questions, not least because there are so many different expectations pinned to it.

For supporters, a Basic Income promises to address a host of problems at one fell swoop – poverty, the impact of technological change on jobs, income instability linked to precarious work, the complexity, harshness and unfairness of the benefit system, with such a heavy reliance on conditionality.

For sceptics it simply ignores obvious problems: the need to raise tax receipts to unprecedented levels, the continuing need for social security benefits, to address housing costs and the needs of long term sick and disabled people particularly, the effect on work incentives and the extent to which those most in need are the real beneficiaries.

But perhaps it doesn’t have to be so divisive. The idea of an unconditional, universal flat-rate payment potentially has wide appeal: after all, this is what child benefit was until the coalition government took it away from higher earners. And as the Fabian Society is always pointing out, the income tax personal allowance and the threshold for employee national insurance contributions are also similar to universal unconditional flat-rate payments for anybody earning enough to benefit from them in full.

So we have UBI-like elements in the tax and benefit system already.

The feasibility problem with most UBI proposals lies in the payment level they are pitched at and the ambition to replace existing social security. If we put on hold the idea that UBI can, on its own, provide enough for everyone to live on – something we are unlikely to agree on – then the idea of a partial basic income arguably has a role to play in creative reform of taxes and benefits.

Imagine, for example, the income tax personal allowance being replaced by a flat-rate payment of the same value (i.e. £11,850  times the 20% basic rate, a bit less than £50 a week) that goes to everyone, whatever their income level.’ The highest earners would continue to benefit, as now, but so would the lowest earners and those with no earnings at all. Then, if a chancellor decided to raise the personal allowance, they could say quite accurately that they were helping the poorest – as they tend to say, but inaccurately, today. Social security benefit rates would be adjusted to reflect the new payment.

A partial basic income of this type certainly wouldn’t solve all the problems UBI advocates say their proposal would. It is doubtful any single policy could do that.

But depending on how it was designed it could help in several ways:

  • getting more people off means-tested benefits. If partial basic income is taken into account in benefit entitlement, then the level of earnings at which people can be floated off means-testing could be reduced without lowering their living standards.

 

  • addressing the gender imbalance in the benefit system: the UK has a mainly individual-based tax system and a mainly household-based benefit system. A partial basic income would introduce an individual-based element which would particularly benefit the main carer in couple families – giving them an entitlement in their own right, and helping to address the punitive benefit withdrawal rates that can make work not worthwhile.

 

  • dampening income fluctuations: with more and more families experiencing earnings volatility from week to week, even from day to day, the benefits system is hitting the buffers in terms of its ability to respond in a timely manner.

So there is an idea worth exploring here, even if the initial benefit is, in itself pitched well below subsistence level.

Of course there would also be serious questions to answer: What would be the net additional cost to the Exchequer? What would be the technical and administrative challenges? Who would be the winners and losers? Are there better ways of addressing the problems mentioned above than a partial UBI? The kind of questions any tax and benefit reform proposal would have to answer.

Even for those who are irredeemably sceptical about the idea of a full-blown UBI, a partial UBI along these lines might be seen as meriting serious consideration.º

UBI advocates might see it as a step in the right direction, offering a foundation on which they could hope to build something more radical in the future. They might even be right.

But as there continues to be disagreement on ultimate aims and objectives, we need to move the debate on to practicalities. A partial basic income, working with rather than replacing the social security system, is a good place to start.

Declan Gaffney is an independent policy consultant writing in a personal capacity.

Karen Buck is the Labour MP for Westminster North.

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