Shadow chancellor says the concept of an unconditional payment to all could prepare country for robotisation of the workforce

Labour is considering backing the idea of a universal basic income – a radical transformation of the welfare state that would ditch means-tested benefits in favour of a flat-rate payment.

John McDonnell, the shadow chancellor, who is keen to find policies to match his slogan of a “new economics,” will appear at the launch of a report on the proposal from the leftwing campaign group Compass in the House of Commons on Monday evening.

McDonnell said the research “makes an interesting case for a universal and unconditional payment to all, which could prepare our country for any revolution in jobs and technology to come – it is an idea Labour will be closely looking at over the next few years”.

A universal basic income (UBI) is regarded by some on the left as a response to the robotisation of the workforce, which it is feared could replace lower-skilled jobs and exacerbate inequality. It would be paid to everyone, whether or not they were in work.

Should we scrap benefits and pay everyone £100 a week? Read more

“Central to the case for a UBI is the way it would help prepare us for a world in which the new technological revolution, driven by artificial intelligence and robotics, will, over time, transform the nature of work and the type and number of jobs.

“A UBI offers a powerful way of protecting all citizens from the great winds of change to be ushered in by the fourth industrial age, and of sharing the potentially massive productivity gains that it will bring,” the Compass report says.

A full-blown UBI is also aimed at tackling the complexity of the current welfare system by replacing a range of different means-tested benefits with a simpler, universal payment for every adult.

The centrist Labour backbencher Jonathan Reynolds, who resigned from Jeremy Corbyn’s shadow cabinet in January, will also appear at Monday’s event, indicating that the idea is not just under consideration on the left of the party.

Reynolds said: “As our economy and the jobs in it have changed, the welfare state has struggled to keep up. If we want a system that makes work pay and does something to tackle the appalling levels of poverty in the UK, then we need to think radically. This is a welcome report into what could be the cornerstone of a modern welfare state.”

Recent changes in the state pension system – towards an across-the-board, flat-rate payment – are regarded as a shift in the direction of a similar approach.

George Osborne has run into a series of fierce battles, including with the former work and pensions secretary Iain Duncan Smith, by trying to slash £12bn from the total welfare bill, and was forced to delay deep cuts to tax credits, underlining the strength of public feeling about elements of the current system.

But Compass’s director, Neal Lawson, said today’s welfare state is based on out-of-date assumptions. “The collapse of a welfare system based on men working in a job for life, combined with the arrival of technology that could replace much of the work that is left, is forcing all politicians to examine basic income as the big policy idea of our time.”

Voters in Switzerland rejected adopting a version of UBI in a referendum on Sunday. The Swiss government and nearly all the country’s political parties had urged voters to reject the initiative.

A basic income was also mooted by the Green party in its general election manifesto last year, and is supported by the frontrunners for the party’s leadership, Caroline Lucas and Jonathan Bartley, who would like to see a UBI form one element of a “progressive alliance” between parties on the left that could work together.

But the Green leader, Natalie Bennett, faced tough questioning on the proposal, which would be very costly. The Compass research, which was supported by the Joseph Rowntree Foundation charity, finds that shifting immediately to a UBI would be prohibitively expensive and create too many losers among the poorest families.

However, the authors, economists Howard Reed and Stewart Lansley, argue that a transitional system could be created at an annual cost of £8bn, which would leave many means-tested benefits in place. The tax-free personal allowance, currently worth £11,000, would be abolished, and tax rates would rise; but every adult would receive a payment of £71 a week – or £51 for pensioners – and £59 for children. They say such a system would cut child poverty by 45%, and 60% of those in the bottom fifth of the income distribution would gain more than 20%.