Dani Garavelli: Universal basic income could be on its way

POLITICAL turmoil unleashed by acute economic uncertainty is converting sceptics to the case for a Universal Basic Income, writes Dani Garavelli

By The Newsroom Sunday, 8th January 2017, 11:48 am Updated Wednesday, 11th January 2017, 3:59 am

Picture: Ian Georgeson

When economist Guy Standing first advocated a universal basic income (UBI) – a regular unconditional sum paid to all adults regardless of employment status – he was considered quixotic (where quixotic is a synonym for “a crackpot”). When his book The Precariat – which identified an emerging class of people whose lives were diminished by short-term and zero hours contracts – was published in 2011, the mainstream cocked an ear, but, politically, UBI remained on the fringes. It took the Brexit campaign, with its rampant xenophobia, to bring the significance of Standing’s argument sharply into focus. In his preface, he had warned that this emerging class was susceptible to “the siren call of political extremism” and a potentially destabilising force. Who would argue with that now?

The past 12 months have seen politicians finally take notice of those communities abandoned as heavy industries died (communities that directed their frustration towards immigrants and the EU). There has been a growing recognition of the impact of automation and the “gig economy” on the lives of individuals and the way the UK’s Byzantine welfare system – and the use of punitive sanctions – fuels a global sense of insecurity.

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Within this context, support for UBI is gaining traction. Not only is it being seriously discussed as a potential way to tackle inequality and exploitation, increasingly it is being put into practice.

There have already been limited but successful UBI pilots in India, Uganda and parts of the US. In Canada, the mayors of both Calgary and Edmonton are behind the idea, and in Germany, the high-profile entrepreneur, Götz Werner, has been leading a campaign in favour of its introduction.

Finland and Holland are the first countries in Europe to test UBI out in newly launched experiments. In Utrecht, 250 citizens currently receiving government benefits are to be given a guaranteed income of €960 (£823) a month, while in Finland two million unemployed people are to receive €560 (£480), increasing to €800 (£576), a month. Both pilots will run for two years. Those in receipt of the payments will not have to account for the way they spend the money or tell anyone whether or not they are seeking employment. Thus researchers will be able to assess what effect removing conditionality has on the employment market. Some form of basic income system is also being considered in France, though the Swiss rejected the idea in a referendum last year.

In the UK, too, attitudes towards the concept of UBI are changing. Although the discourse here may still appear to be dominated by the “skivers and scroungers” debate, an EU-wide poll conducted by Germany’s Dalia Research last year found 62 per cent of people in the UK supported UBI (slightly lower than the EU average of 64 per cent).

Perhaps unsurprisingly, Scotland – where welfare reforms, such as the bedroom tax, have been particularly contentious – is seen as fertile ground by UBI advocates. Two Labour-led councils, Glasgow and Fife, are exploring the feasibility of setting up pilots and the Basic Income Earth Network (BIEN) – set up by Standing – recently added Scotland to its list of “places to watch”. The Citizen’s Basic Income Network Scotland, which is affiliated to BIEN, was launched in November.

In Glasgow, UBI is being seen as a potential solution to the deprivation and poor health that has blighted parts of the city for generations. Matt Kerr, who has been championing the idea, says he took some convincing but, as Labour’s anti-poverty lead on the council, it was an idea he kept coming back to.

In Fife, where 75,000 people live in poverty, a UBI pilot project was one of 40 recommendations made by the independent Fairer Fife Commission, set up to help identify and tackle the problems caused by inequality.

An interesting aspect of the groundswell of support for UBI is that it crosses ideological and party boundaries. While many on the left support it on social justice grounds, it also has an appeal for the libertarian right, who approve of the reduced role of the state and individuals being more given autonomy over their own decisions. Though UBI guarantees a basic standard of living, it does not stand in the way of personal betterment. As venture capitalist and president of start-up incubator Y Combinator, Sam Altman, once put it: “Basic income is not socialism. [It] provides a floor, and then people can get as rich as they want.”

In the US, UBI is backed by both Andrew Stern, the former president of the Service Employees International Union and Charles Murray of the American Enterprise Institute. Closer to home, a motion supporting the policy was passed at the SNP conference (although it has not yet found its way on to the party’s manifesto) while Shadow Chancellor John McDonnell has hinted it is likely to appear on next year’s Labour manifesto. Glasgow and Fife Councils also seem confident of garnering cross-party support, which is important given that the local elections in May could mean a change in administration.

Jamie Cooke, head of RSA Scotland, the think tank that has been carrying out research on UBI in the UK, points out that Standing, a left-wing economist, was asked to speak at last year’s Bilderberg Meeting and will be speaking at the forthcoming World Economic Forum at Davos. “It is interesting to see the kind of spaces in which it is starting to gain traction,” he says.

To those who back it, the advantages of UBI are clear and manifold. They believe it will simplify the welfare system, tackle poverty, give people enough security to hold out for more fulfilling work (as opposed to taking whatever exploitative zero hours contracts they are offered), stamp out fraud, give women more independence and provide some kind of reward for unpaid labour such as caring for the elderly.

According to the Citizen’s Basic Income Network Scotland, it would mean the end of expensive means-testing, humiliating Jobcentre interrogations and hated sanctions; most importantly it would remove the disincentive to work built into the existing system, where taking a job can leave you financially worse off. However, UBI is not universally supported; its critics argue it is too complicated, too expensive and that – far from encouraging people back to work – a regular, unconditional income will engender laziness.

So how realistic a proposition is a universal basic income? How much would it cost? How would it be funded? And why should those who are comfortably off continue to receive a state hand-out?

Though enthusiasm for UBI is currently at a high, the concept is far from new. Thomas More suggested it as a solution to petty thievery in Utopia in 1516 and Thomas Paine proposed a limited version of it in Rights of Man in 1791. Abraham Lincoln, Franklin D Roosevelt and Martin Luther King were also advocates.

But UBI as a concept is one thing; finding a model that works in practice is another. Last year, an RSA report suggested a system in which every qualifying adult in the UK, aged between 25 and 65 would receive £3,692 a year, every pensioner, £7,420, and every young person between five and 25, £2,925. They suggested the first child aged 0-4, should receive £4,290, and subsequent children aged 0-4, £3,387.

Under the RSA model, the UBI would replace everything except disability and housing benefits. Taking into account savings from means-testing and the benefits themselves, it estimated the additional cost at around 1 per cent of GDP – a sum it claims is in line with previous overhauls to the welfare system.

The RSA also suggested UBI could be linked to registration on the electoral roll (in an attempt to encourage democratic engagement) and mooted the idea of a “contribution contract” for under-25s to encourage them to continue their education or volunteer in the community.

“One of the criticisms from the left is about the universality: ‘Why would you give money to those who are wealthy’?” says Cooke. “But the universality is crucial in order to get the support for it. What you then have to do is to look at the wider taxation in terms of how do you use that progressively to balance out across the board.”

Though the RSA insists its proposals are merely a launching pad for further discussion, its report provides some insight into costs and logistics. But only actual working pilots can give any insight into the impact UBI would have on the employment market.

In theory, removing the desperation factor would free people up to make better and more fulfilling work choices: to look at long-term career paths as opposed to taking the first short-term contract they are offered, to increase their skills and maybe even take more risks. But what if the pessimists are right and human beings are pre-programmed to be lazy?

There is little evidence of this in the experiments that have already taken place. In two pilots carried out in Madhya Pradesh, India , the introduction of UBI led to a drop in illness and an increase in immunisation and school enrolments.

Contrary to critics’ fears, there was no decrease in employment. Indeed, those in receipt of the cash grants were twice as likely to have increased their production as those who were not and there was a relative switch from labouring to own-account farming. “The only group which worked less were children, which is a good thing,” says Cooke. The Indian government now looks set to endorse UBI as a way forward for the country.

A pilot in Uganda, which randomly awarded a fixed amount of money to 535 young applicants aged 15-35 is said to have increased business assets by 57 per cent, work hours by 17 per cent, and earnings by 38 per cent.

In the US, interest in UBI is being fuelled by fears that automation will lead to a drop in full-time employment. Because of that, some experiments are being funded by Silicon Valley companies. Last year, for example, Y Combinator announced it was setting up a five- year pilot based in Oakland, a socially and racially divided city in California. Residents of Alaska, however, have been receiving an annual dividend from an oil and gas fund since 1982. The policy is so popular it is known as the “third rail of Alaska politics”. The state is acknowledged as one of the most economically-equal in the US.

Not even those who support UBI want to see governments rush into anything. What they are pushing for is more and bigger pilots so policy-formers can get a better picture of what works and what doesn’t.

Here in Scotland, the government’s consultation on the devolution of welfare powers, which account for around £2.7bn or 15 per cent of the total Scottish benefits bill, provides the perfect context for a conversation on UBI. Of course, the post-referendum landscape being what it is, any such conversation could be hijacked for political purposes. Given that it seems unlikely pilots could be carried out without co-operation from Westminster, it could be used to push the argument for independence. Alternatively, a whole-hearted endorsement from one party could lead to it being spurned by the others.

Another challenge is that it’s almost impossible to fully pilot the concept of basic universal income. “For it to work, it has to be a permanent universal secure payment, so you are only ever getting a snapshot,” says Cooke. “Still, together, the experiments in Finland, Utrecht, America, Canada and Scotland would provide a variety of experience. We would be able to say: ‘Here’s some real evidence and examples of this in practice.’”

This is important given the pressing need to foster more secure, engaged and cohesive communities across the UK. “Guy [Standing] did identify a gap – a [group] that had been taken for granted, and the left and the centre-right weren’t ready, willing or able to respond to with a positive alternative,” says Cooke.