Will Green is a student at the University of Leeds.
In the light of the coronavirus crisis, voices on both sides of the Atlantic are calling for a trial of Universal Basic Income, or UBI, as the solution to a sudden reduction in employment. Under UBI, every citizen gets a set amount of money every week (a 2019 report suggested £48) – a move designed to improve the social security system, whilst simultaneously giving people more disposable income which they can then spend, growing the economy.
It’s a noble idea, and one worth looking at in depth. In the current unprecedented political climate, UBI makes a lot of sense, although the Treasury has already gone down the road of paying workers’ wages to ease the strain on families’ finances. In fact, I’d go so far as to say that even after the crisis, it could work – on a local level. In certain communities without deep class divides, UBI could be transformative, if fully supported by social services and without a cutback to other benefits. Where it fails to stand up is nationally.
For a start, UBI wouldn’t really improve equality. Labour have been strong proponents of UBI; in May last year, John McDonnell promised a trial of Universal Basic Income if Labour came to power, and the pledge found its way into the party’s election manifesto. Labour are a left-wing party, supposedly focused on the goals of communitarianism and a more coherent, selfless society. And, on the face of it, UBI looks like an egalitarian move – everyone gets the same amount of money. What’s wrong with that from an equality standpoint? Well, actually, quite a lot.
UBI doesn’t account for the fact that recipients will spend the extra cash in different ways. Some will invest the money, put it into savings accounts, or start businesses with it, where it will grow. In all likelihood, these people will be middle-class – they’ll have the financial security to be able to use this additional money outside of day-to-day spending.
Others – realistically the more vulnerable in society, often lacking financial education, or simply needing to spend everything they earn on basic amenities – will simply use it for rent or food. They won’t gain anything in real terms. They won’t invest it, and their money won’t grow, whilst others’ will. In this way, UBI would merely exacerbate the class divide, entrenching societal divisions to the tune of £48 a week, or just under £2,500 a year. This take is clearly a generalisation, but it seems inevitable that at least some of it would come to pass. The Labour Party should never encourage a policy that could even have a chance of increasing societal divisions.
Furthermore, one of UBI’s main selling points is its ability to be spent as disposable income – boosting the economy. That’s £48 a week extra going into the economy – but that’s £48 funded by taxes. Why bother taxing people and then handing out £48 a week in return? This is something of a redistributive measure, yes, but the vast majority of people pay more than £48 a week in tax. Effectively, for much of the population, UBI would merely take their money, then give it back to them. What’s the point?
Fortunately, there’s a far superior alternative to UBI – Universal Basic Services, or the irritatingly similarly named UBS. UBS essentially involve ‘free things’ – basic services that everyone has access to without having to pay, like the NHS.
I’d prefer to see money that could go on UBI go on UBS instead. Why don’t we provide free gas, water and electricity to homes, for example? Under a Labour government, these businesses would be publicly owned; citizens would be paying state-owned companies to provide energy and water. It’s fundamentally simpler for the state to supply energy and water to the homes of citizens, paid for by tax, thereby reducing bureaucracy. If the Government gave everyone in the UK just enough cash to pay for medical care when they needed it, some would end up unable to afford care, with other pressures upon money – food, rent, energy. That is why UBS are superior to UBI – they guarantee assistance for all in society, no matter their financial position.
Similar schemes could work with short-distance public transport, for example. Although completely free transport would make investment more difficult, the state could heavily subsidise it instead, incentivising public transport use, making it something of a UBS (even if not completely free), whilst continuing to gain ticket receipts for investment and improvement programmes.
And Universal Basic Services are ultimately more egalitarian. If everyone uses the same health service, the same transport, the same water supplier, we develop a more coherent and interlinked society where people can actually relate to each other, instead of having a rigid class system with different qualities of service at each rung of the ladder.
Thirdly, and finally, the positive impact of UBI would be negligible. An additional £48 a week would be useful for almost every family around the country, but a resulting reduction of the benefit system would not be an equal price to pay. The current benefit system would not be aided by such a radical overhaul when some components could be easily improved with small changes; if Labour implemented such powerful changes upon coming to power, the system could collapse. And UBI could prove to be a precursor to a watering-down of benefits – the concentration of the whole system into one payment would make it far easier for (probably Conservative) governments to reduce, destroying protection for the benefits system.
UBI is not, fundamentally, a bad idea, and in the current Coronavirus situation, it might even be a good one. But it’s misdirected. A far better use of money would be to fund UBS schemes – bringing society closer together via common ownership and usage. Ultimately, UBI might be just too radical, and unprotected, to succeed. If we build a society on shared institutions instead, life for the vast majority of people in the UK – across all walks of life – will become better.