In his column on this site today, Ryan Bourne says that Rishi Sunak’s latest package of measures “has Government mimicking a missing insurance market, with cash payments and low cost loans available such that “good firms” remain tied over through this year, with further unspecified support to ensure they maintain employment too”.
But he then adds “as the OBR’s Sir Charles Bean said yesterday, the longer this runs, the less likely loan, even on favourable terms, can plug firms’ budget shortfalls without endangering insolvency. So the Government would have to turn to taxpayer grants”.
Our columnist is concerned about the long-term effects of such measures on the economy, as are we, but recognises that it may be necessary for the Government to stand behind it in the last resort. Which is where ConservativeHome is.
Once the state begins to give grants to employees, rather than lend money to firms with which they can pay them, it enters the realm of Universal Basic Income. Especially since it would make no sense to make direct subsistence payments to those employed by others but not those who work for themselves.
Readers will recall that John McDonnell is a fan of Universal Basic Income, and that Labour’s manifesto committed itself to a pilot scheme. But he far from being the only supporter of the idea. Can you guess who wrote the following?
“The introduction of a Basic Income Scheme, or what some people call a Citizen’s Income, would help to achieve that. [Getting people back to work.] If all existing tax allowances and relief social security benefits, student grants and training allowances were scrapped and replaced by a single cash payment to each adult over 16, made without deduction of income tax and paid regardless of economic circumstances, the social security system would achieve three desirable objectives.”
These were listed as: economic efficiency (“enabling people to work rather than live off welfare”); freeing “millions of poor people from the humiliating inquisitorial activities of the State”, and “a Basic Income payment would be cheaper to administer”.
We will leave our readers in suspense no longer. The joint authors of that paragraph were Alan Duncan, only recently retired from the Commons, and Dominic Hobson. Neither is anyone’s idea of a card-carrying member of the Labour Party.
The authors were writing in their book Saturn’s Children: how the State devours liberty, prosperity and virtue. (The cover of one edition boasted the charming illustration by Goya of Saturn in action.) It is a splendid period piece from the end of the 1990s.
Duncan and Hobson go on to pray in aid not only Seebohm Rowntree and William Beveridge, but Sam Brittan, then one of the small band of economists who had originally come out fighting for Margaret Thatcher’s ideas, and Milton Friedman, who had “endorsed the idea, in the shape of a negative income tax”.
For clarity: this site is not a supporter of a Universal Basic Income or Basic Income or Citizens’ Income or whatever you want to call it. This is for the simple reason that the taxpayer would have to fund it, including of course the payment of it to the richest people in Britain.
The arguments are essentially the same as those for and against Child Benefit – or the Child Allowance as it should more properly be called. ConHome has traditionally supported what was this universal payment, but a fully-fledged Basic Income is another thing altogether.
One estimate claims that to fund it, income tax would be required to to go up from 20, 40 and 45 per cent to 48, 68 and 73 per cent. We can’t see the Treasury or the taxpayer putting up with anything like that for a moment. Voters simply wouldn’t understand why the proverbial Dustman was paying taxes to support the proverbial Duke. But perhaps we should be careful what we don’t wish for.
Once government takes up paying grants to people in an economic emergency, which Bourne suggests may have to happen and we believe will have to happen (indeed, it is already happening), it may find that what one begins in necessary haste is very hard to repent of at later leisure. This is one of the ways in which the Coronavirus shutdown, if it indeed lasts for anything like 18 months or longer, has the capacity to transform the Britain we know.
After all, Rishi Sunak said yesterday that he is ready “in the coming days…[to] work with trade unions and business groups to urgently develop new forms of employment support to help protect people’s jobs and incomes through this period”. He may well want to start by utilising Universal Credit, but could find himself moving inexorably to some rudimentary Universal Basic Income scheme – just for the duration of this emergency, you understand.
We call one last figure from the right of politics to give evidence for this article: Donald Trump. The President is currently mulling a scheme to give every American $1000 dollars. That would be a one-off payment, of course. But the precedent would have been set. And the United States’ experience of the virus, like everyone else’s, is only just beginning.