The Green Push for a Basic Income

Lessons from the Green Party’s Basic Income plans for the UK.

Image by Johannes Plenio from Pixabay

Over in the US, it is presidential candidate Andrew Yang who is getting people excited about his ‘Freedom Dividend’ — his version of Basic Income. Yang’s proposals are for a very ‘ambitious’ per person amount (for adults) and would involve pretty big changes to the US tax regime.

Here in the UK, it’s the Green Party that has been most explicit and forthright in their support for Basic Income. Basic Income is official Green Party policy and has been for some time.

And their specific, costed Basic Income proposals are worth a closer look, even for people outside the UK, because they sit very much at the more realistic, modest and affordable end of the spectrum, as far as Basic Income proposals go. In the ongoing debate over whether some form of Basic Income is financially ‘affordable’ or ‘realistic,’ these are the sort of proposals that most clearly demonstrates that it can be.

When writing about Basic Income, I generally write for an international audience. Thus, I mainly write about the general principles of the idea, rather than the particulars of specific proposals in a specific country.

I say Basic Income is easily affordable — both in terms of the economics of real resources and in terms of government finances. And it is. But some people aren’t likely to be convinced until they see actual figures from specific, costed proposals. And the Green Party have provided just the sort of specific, costed proposals such people demand.

The Green Party’s Basic Income proposals were set out at the 2015 election. They proposed a Basic Income of:

£80 per week for working-age adults

£50 per week for children, and

£155 per week for pensioners

(Naturally, their up-to-date figures, when they fully reveal them, will be a little higher, to account for inflation.)

The total cost of these Basic Income payments was estimated at £331 billion per year.

The scheme would be paid for mainly by

discontinuing many existing welfare schemes (saving £164b)

discontinuing or reducing various tax allowances (saving £130b)

the reduced need for bureaucracy (saving £8b), and

‘other’ savings (of £3b)

Total savings so far: £305 billion

This would then leave only £26 billion — a significant but relatively small amount — to be found from other changes to the tax system.

The Greens propose raising this amount by scrapping the upper thresholds for National Insurance contributions — essentially resulting in richer people paying more tax on their incomes.

‘Wow!’ you may be saying. ‘It seems so simple and so affordable. How can this be?’

Well, one reason is that the Basic Income being proposed is modest. The Greens now propose a Basic Income of £89 per week. That works out at about £387 per month. And at the current rate of exchange, that’s about US$500 per month. This is obviously far less than Yang’s $1000 per month Freedom Dividend.

Unlike with Yang’s proposals, however, children are included. Their parents will receive a Basic Income, on their behalf, of about £242 ($312) per month per child. However, even a couple with three children would still be receiving less than they would receive under Yang’s proposals.

The disparity isn’t quite as big as it seems, however, because the Greens intend to retain our ‘housing benefit’ scheme, to help towards housing costs.

The second reason the proposals seem so affordable is that the UK has substantial and quite expensive (though often unfair) welfare schemes in place — so there are large savings to be made when many of these schemes are discontinued.

And the third reason is that the UK has quite generous tax allowances. For example, individuals currently pay no income tax on the first £12,500 of their annual income. Thus, the Treasury should receive a very substantial revenue boost when these tax allowances are replaced by Basic Income.

The overall picture is quite simple: The bulk of the financial cost of Basic Income can be met simply by discontinuing the welfare schemes, pension schemes and tax allowances that Basic Income is intended to replace.

Other (non tax-allowance-related) tax changes will be required, but these account for less than 8% of the total money required for the Basic Income scheme.

“the introduction of a Basic Income system need not require anything like the financial earthquake some people imagine would be required.”

These figures expose the myth that Basic Income can only ever be funded through massive increases in tax rates.

Of course, not all countries are in the same situation as the UK, so some will require bigger changes to tax rates than are required in the UK. At least in the UK, however, I think it is fair to say that the tax increases required to pay for Basic Income are ‘modest’ — and nothing like what some internet scaremongers like to claim will be required.

And if the UK can afford a Basic Income, the US, as an even richer country, ought to be able to afford one too.

There are problems with the Green Party’s proposals. For example, they include plans for a single parent supplement that risks incentivising couples to split up.

Furthermore, the plan to retain Housing Benefit would mean the retention of means-testing for a substantial minority. Arguably, however, this is only intended as a temporary measure, to ease the transition to a Basic Income system. Later on, once Basic Income has become an accepted part of our tax and benefit system, Housing Benefit could be replaced by an increase in Basic Income, alongside some sort of accommodation guarantee scheme.

But what these proposals and costings do reasonably demonstrate is that the introduction of a Basic Income system need not require anything like the financial earthquake some people imagine would be required.

On the day after Basic Income is introduced, the economic life of the nation will continue pretty much just as before. Most tax rates can remain as they are. But we can have less bureaucracy, more freedom, improved financial security, greater peace of mind and a much brighter future to look forward to.