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Proposed Universal Basic Income model could “cost less than welfare reforms”

Left-wing think tank Compass has outlined two ways an income for all could be introduced, leading to Universal Credit and the state pension being axed

A Universal Basic Income could cost less than the current welfare reforms, claims think tank Compass after modelling how it could be introduced to the UK and replace Universal Credit.

The left-wing economists’ report lays out two methods of doing this – a fast-track and slow-track route.

The quicker way would see the government pay every adult aged 18-64 £60 per week regardless of earnings with £40 per child up to the age of 17 and £175 to over-65s.

That would mean that child benefit and the state pension would be scrapped with means-tested benefit remaining.

As for the slower route – that would involve building up a citizens’ wealth fund over a longer period through long-term government borrowing, allocating revenue-generating public-sector assets and upping tax on the biggest corporations and richest individuals.

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The report’s authors, economists Stewart Lansley and Howard Reed, reckon that it would cost £28bn to bring in a basic income – a figure close to the money spent on welfare reforms since 2010 and less than the £35bn estimated spending by the mid-2020s.

And that is with a higher basic income than the one proposed by the New Economics Foundation (NEF), who recommended a payment of £48.08 for every adult earning under £125,000 annually last week.

The NEF estimate that their plans would lift 200,000 people out of poverty and attracted the support of Labour’s Shadow Chancellor John McDonnell and Green Party MP Caroline Lucas.

A Universal Basic Income is still unproven at a national level but has piqued interest across several countries.

Scotland is currently investigating whether to bring the model in and there is an ongoing debate in the US, while there is a trial underway in Utrecht in the Netherlands.

Finland is a step further on – their own two-year trial finished in December and preliminary results have so far indicated that there is little change in employment but reported a rise in well-being and happiness among those receiving the income. More findings are expected to be reported over the next 18 months.

While a Universal Basic Income is about lifting people out of poverty and levelling the playing field, both those out of work as well as allowing people in employment to top up their own earnings.

But the mental aspects are not to be downplayed, another argument in support is that removing the income floor alleviates some of the anxieties of poverty and sanctions, freeing up people to innovate and engage in entrepreneurship.

However, as the Compass report touches upon, these theories are still unproven at a national level and a pilot scheme is needed to see if these benefits will be seen in practice before widespread reform of the tax and welfare system is introduced.

As Lasley and Reed write in the report: “These reforms offer a significant modification of the existing system of social security – creating one more suited to the new risks of insecurity, precarity and work-based poverty of the 21stcentury but not wholesale ‘big-bang’ replacement’.

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