Barely a week has gone by recently without some mention of a Universal Basic Income as an idea worth exploring. The idea has been mentioned by Benoît Hamon who won the French Socialist Party primaries, and John McDonnell has announced a working group to look into it. Should this be a priority for Labour?
The idea is an unconditional flat-rate payment to all citizens, made regardless of other circumstances. It has advocates on both the left and the right. An argument made in favour of it, particularly in the context of the difficulties building support for large increases in public spending, is that it could reduce administrative costs and complexity by replacing the existing system of means-tested benefits.
There is certainly a good argument for increasing the role of universal benefits in Britain’s social security system. Universal payments reduce stigma of claiming benefits, tend to have higher take-up than means-tested benefits, and promote social cohesion. This is one reason that Child Benefit and disability benefits can be so effective. Nordic countries tend to have greater use of universal benefits which helps maintain stronger public backing for social security spending. The growing use of means-testing in social security in Britain since the 1980s could well have contributed to the ‘us and them’ myth behind the prevalent scroungers rhetoric.
The problem, though, is that means-testing benefits is the most effective way to reduce poverty. If there is limited money to spend, then directing the greatest amount of spending at the poorest is a powerful way to redistribute incomes and lift people out of poverty. The mess of benefits and tax credits we have in the UK, for all its faults and for all that the system has been undermined since 2010, performs an almost heroic role in reigning in income inequality and mitigating the poverty caused by low skills, low-paid work, high housing costs, caring responsibilities, poor health and disability.
What sets off alarm bells for me is the suggestion that a Universal Basic Income could replace the existing complex mix of payments. Social security is complex for a very good reason – it needs to meet highly varying and contingent needs as fairly and efficiently as possible. Attempts to simplify social security are elusive as they tend to either reduce its ability to meet needs, or fail to really simplify it at all. Universal Credit threatens to do both. ‘Simplifying’ can often look a lot like cutting, which perhaps explains the appeal of Universal Basic Income to some on the right.
Take the example of a disabled single mother. Her means-tested Employment and Support Allowance (sickness benefit) might come to £186.90 a week, over £100 more than the basic rate of Jobseeker’s Allowance or Income Support. She will also be getting Child Tax Credit for her children, disability benefits, Housing Benefit to cover her rent, and Council Tax Reduction. A Universal Basic Income that replaces the current system can only offer her a drastic reduction in income. To avoid this, there would need to be a separate payment for housing costs dependent on rent and income level, and additional payments for those with disabilities and carers. The complexity has returned, with the Universal Basic Income just one part of a larger system that it looks a lot like our current benefits. Indeed, where a Universal Basic Income has been trialled, it tends to be only a partial version.
One advantage of the Universal Basic Income is that it could remove the inhumane system of labour market conditionality and sanctions at the heart of Jobseeker’s Allowance and increasingly also Employment and Support Allowance. These have limited effect, but cause significant hardship. But the problem is the sanctions themselves, not the benefits they are applied to. They could be easily reformed or removed within the current system.
There could certainly be advantages to adding a new, universal payment into the benefits system. To have the greatest impact, this could be clawed back through the tax system but ignored as income in the assessment of means-tested benefits. This would be not unlike Child Benefit – in fact simply increasing the value of Child Benefit, as Labour did from 1997 onwards, would not be a bad start. However, a Universal Basic Income would be low down my list of priorities for tackling the severe benefit cuts, and resulting increase in poverty and inequality, that seven years and counting of Tory-led governments have brought.
I would start by making a stronger case for the essential need for a robust system of minimum income guarantee means-tested benefits. And unless we want even deeper poverty for those who depend on social security, we should immediately abandon the idea that it could ever replace or simplify the existing system.