Back to the future: the revival of interest in a Universal Basic Income

In recent weeks, the idea of a universal basic or “citizens” income (UBI) has been enjoying a revival of interest and support. Different versions of the proposal that all citizens should be entitled, by virtue of their citizenship, to a minimum income payment have been long been canvassed across the political spectrum, from Tom Paine to Milton Freidman. But a UBI has never made it from the margins to the mainstream.  Experiments have been small scale or time limited, and never gained wider political traction.

Yet in the post-financial crisis era, interest in the idea appears to be taking off. The Finnish government has said it will soon test versions of the proposal, Swiss campaigners have brought a UBI forward to a referendum in 2016, and Dutch cities are reported to be experimenting with basic income plans. At the last UK general election, the Green Party proposed a citizens income, and in Ireland Fianna Fail is considering one for inclusion in the party’s manifesto. Academic interest in the idea is growing and it has been given careful thought by serious social policy research bodies such as the Joseph Rowntree Foundation. This week, commentators reacted enthusiastically to the news that the government in Finland was trialling the idea.

Why this renewed interest for a perennial hardy of social policy? For the “post-capitalist” left, a UBI has come to represent a key building block of human freedom in a technologically advanced, highly automated society. If the robots can do all the work, the argument goes, a citizens’ income would enable humans to enjoy a world of leisure and fulfilment freed from waged labour. It is the 21st century version of long-held humanist ambitions for emancipating workers from alienated labour, made possible by digital technology. The UBI prefigures the world to come.

For enthusiasts closer to the current political mainstream, a UBI appears ready made for a labour market with high levels of self-employment, and precarious or part-time work. For countries like Finland with relatively high unemployment, it offers the prospect of increasing incentives to work, as well as giving greater security to workers with fluctuating incomes. For high employment countries, by contrast, a UBI could enable a reduction in the steep withdrawal rates for in-work benefits and tax credits, incentivising extra hours of work and supporting dual earner households.

This is where technical problems with a UBI start to multiply, however. For a UBI to be revenue neutral at current safety net levels implies significantly higher tax rates on earned income. In the UK, Professor Donald Hirsch has estimated that it would require taking at least 40% of all earned income (i.e. assuming the abolition of existing allowances and national insurance thresholds).  In addition, in the UK support for low income families’ housing costs is met through Housing Benefit. Rolling this into a universal income payment would entail significant expenditure increases, with considerable variation in the welfare different families could enjoy from a single income payment in different parts of the country. Adding housing support to a citizens’ income would push the tax take on earned income required up above 50% (though it should be noted that a UBI could also be funded by wealth and consumption taxes).

Variations in household need, and the necessity of running extra benefits to meet additional costs of raising children, disability or housing, frustrate grand ambitions that a UBI would enable a significant reduction in welfare administration and the associated entanglement of citizens in state means-testing. Libertarians are attracted to a UBI because it would restrict state-citizen interactions to the bare minimum of single income transfers, and abolish the disciplinary architecture of welfare regimes at a stroke. Yet ending means testing in conditions of fiscal constraint is fanciful: the rough justice to households who would lose out would be too great to offset with higher universal payments. Even the administration challenges of a single universal income transfer are greater than commonly supposed. As Jurgen De Wispelaere and Lindsay Stirton have argued, a UBI requires the maintenance of a robust population register, effective administration of payment systems, and substantial regulatory oversight. All of these bring significant practical and potentially costly challenges.

These concerns point to incremental, evolutionary progress towards a UBI, building on existing forms of universalism in welfare systems and those reforms, such as the Universal Credit in the UK, that aim to integrate different benefits. But technocratic reforms do not guarantee popular support. The decline in public commitment to working age social security over the last thirty years is in part due to the sense that welfare benefits have ceased to embody reciprocity: that the principle of contribution, of paying in before taking out, and not free riding on others, has lapsed. An alternative path towards restoring popular support for the welfare state to a UBI might therefore be to strengthen the contributory principle in social security, and instead of creating universal income payments, to shift public expenditure towards services and institutions, like the NHS, children’s centres or social housing developments, that directly meet social needs.  This is where communitarian opponents of a UBI pick up the argument, seeing in the grand design for a state mandated and administered income transfer a further weakening of social bonds, civic institutions and popular control over the welfare state. They prefer to repatriate social security to civil society, in partnership with the state, rather than to create a new universal administrative apparatus.

Real philosophical choices are therefore at stake here, not simply technocratic ones. And here is the rub: is the new experimentation with UBIs evidence of the kind of practical social innovation that can incubate wider and deeper social and political transformation, as envisaged by radical theorists such as Roberto Unger, or just the grandest compensatory amelioration of the inequalities and injustices of contemporary capitalist societies yet conceived, leaving untouched their underlying structures of power? The answer to that question may yet decide the fate of the citizens’ income movement.

Professor Nick Pearce, Professor of Public Policy Research, Director of IPR