A new study by the Taxpayers' Union has rubbished a Universal Basic Income (UBI), which the Labour Party is investigating.

A discussion paper from Labour raised the possibility of a UBI, where every adult New Zealander would receive $11,000 a year ($211 a week) in exchange for scrapping many current welfare payments.

The paper says a universal income would help to remove the insecurity associated with low wages or insufficient welfare benefits, which bred "personal shame, stress, [and] mental health problems".

CAMERON BURNELL/FAIRFAX NZ The Taxpayers Union's Jordan Williams said it was "startling" Labour was considering the policy.

The proposal is part of the party's Future of Work Commission, a project to look at the impact of new technologies on careers and the workforce.

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The Taxpayers' Union has come out swinging at the idea, saying its study shows the introduction of a UBI would mean record-high tax rates, and potentially result in another recession.

KEVIN STENT Economist Gareth Morgan has questioned whether Labour has "the balls" to implement a universal income policy.

Executive director Jordan Williams said it was "startling" that Labour was floating the idea as it would make the most vulnerable in society worse off because higher taxes would reduce incentives for work and economic growth.

"If you take Labour's assurances that no one will be left worse off under their UBI, the amount would need to be so high that Treasury's economic modelling suggests a flat income tax of between 50.6 per cent and 55.7 per cent would be needed to pay for it."

The study concluded it would likely push the New Zealand economy into recession due to a reduced labour supply from the windfall increase in incomes.

Labour's finance spokesman, Grant Robertson, said the party did not have a policy to introduce a UBI, but was "investigating a range of options" to ensure New Zealanders have income security.



"Commentators as diverse as Robert Reich, Dominick Stephens and Bernard Hickey have all said there is merit in investigating the idea.



"We are following the debate on UBI with interest, but we do not regard the Taxpayers' Union as either credible or independent commentators on this matter or many others," he said.

Claims that taxes would soar to more than 50 per cent were incorrect.



"In any event, I can totally rule out Labour having a policy of a tax rate of 50 per cent."

The study also addressed Gareth Morgan's theory of a UBI, which he proposed in his book The Big Kahuna.

The study said Morgan's idea would cost $10 billion more than the current welfare system.

Morgan, who had not seen the study, said claims it would cost that much were "ridiculous".

Introducing a UBI would have to be part of a larger overhaul of the tax system, he said.

"It is recognising the people who aren't in the paid workforce do contribute. Parents at home bringing up kids, people at home looking after their elderly, people doing voluntary community work all have a huge contribution to make.

"At the moment they are social lepers, because they are not in the paid workforce," he said.

Last week he questioned whether the Labour Party had "the balls" to introduce the policy.