Stewart Lansley asks if it is finally time for a guaranteed income floor, a form of progressive basic income that would build social resilience, opportunity and choice in an increasingly fragile and divided world.
The Covid-19 crisis has inspired interest in the idea of universal basic income, a guaranteed, weekly, unconditional payment made to all eligible residents as of right. The idea has a long history.
It was first promoted in 1516 by the social philosopher, Thomas More, and then in 1797 by the British-born champion of democracy, Thomas Paine. Over the past century, a long list of leading economists, politicians and campaigners, of diverse political views, have backed some form of basic income. They include Bertrand Russell, James Meade, JK Galbraith, Martin Luther King Jr, Paul Samuelson, James Tobin and Milton Friedman, and more recently a host of Silicon Valley business magnates. It’s a list that includes six Nobel laureates.
The idea, long the elephant in the room of social policy, has moved well beyond the confines of a narrow group of academics and campaigners. With the multiple flaws in the existing mean and patchy benefit system exposed by the pandemic crisis, over 170 MPs and peers, across parties, have called for the introduction of at least a temporary basic income.
So is a basic income the route to a more robust income support system? Is it feasible? And just what impact would it have?
Contemporary proposals for a basic income come with varying degrees of radicalism. Some favour a full, big-bang approach that would tear up the existing social security system and replace it with a generous system of payments, enough to live on. This approach has been pushed most fully by advocates of a utopian post-capitalist, post-work world. Such a scheme would be disruptive, very expensive, involve many losers, and have a negative effect on the incentive to work. It is difficult to see how such a full-blooded scheme could be implemented.
“The benefit system has become increasingly dependent on complex and often intrusive means testing.”
An alternative way of looking at a basic income is the way it would create a guaranteed income floor that instead of replacing it could be grafted onto the existing benefit system. This floor would then sit as a lower tier beneath the existing social security system. Incomes would build from this base.
Drawing on earlier work, the intention of the post-war Beveridge plan was to construct just such a floor, if indirectly, through a mix of measures: national insurance, family allowances, full employment and national assistance. Under the plan, full employment and buoyant wages would deliver decent incomes for most people of working age; national insurance would cope with emergencies like unemployment; and family allowances would help with the extra costs of children.
National assistance would provide a safety net if these other sources of income proved inadequate. In the event, the plan as implemented contained a number of flaws. Many, including most women, were not covered by national insurance, while the rates were set at below subsistence levels. Means-tested national assistance, which Beveridge hoped would be phased out, became an increasingly dominant part of the new social security system, and a safety net which itself was full of holes.
The jobs market has since become increasingly fragile, low pay has soared, while the benefit system has become increasingly dependent on complex and often intrusive means testing. This shift to selectivity has meant a fundamental turn from the original Beveridge principles, and their greatest strengths, of universalism and collectivism. Britain has never come close to creating a robust income floor, and even before the pandemic, millions fell through what is one of the least generous and most punitive social security systems across rich nations, contributing to today’s near record post-war levels of poverty.
Work-related conditionality requirements, enforced through a harsh system of sanctions – suspended during lockdown but now reinstated – have also been greatly tightened over time. Since 2012, more than five million sanctions have been issued against benefit claimants, a key source of the surge in demand for food banks. At its peak in 2013, the Department of Work and Pensions was levying more fines than the mainstream justice system.
Constructing a modest income floor
Critics of an income floor have dismissed it as utopian and unworkable. A study for the progressive thank-tank Compass however, has shown that while a big-bang basic income scheme would bring a new set of problems, constructing a modest floor below the existing benefit system would be feasible and affordable, and highly progressive. Modest starting rates of £60 per week for working-age adults (under 65) and £40 for children, for example, would pay a significant, no questions asked, £10,400 a year for a family of four. All other sources of income through wages and benefits would come on top of this floor. These starter rates could then be raised gradually over time, enabling some parts of the benefit system, such as Jobseeker’s Allowance, to be abolished altogether.
“Despite these strengths the idea still divides opinion.”
The Compass scheme is designed to ensure that the main beneficiaries are those on low incomes, with the guaranteed income clawed back from the better off through accompanying tax changes. It would, for the first time, create an “Income Plimsoll Line”, finally realising the dreams of the early basic income pioneers. Boosting low incomes the most, it would cut poverty levels and reduce inequality. It would also strengthen universalism and cut means-testing. Implementing a scheme would need a series of tax adjustments to pay for the floor, while making the tax system more progressive. These adjustments would include the conversion of the personal tax allowance – which costs some £110bn a year – into a cash payment, a highly progressive step in its own right.
Such a reform would build an automatic anti-poverty force into the existing system and build social resilience in an increasingly fragile world. It would end the current sanctions regime, and strengthen the principle of entitlement. What is the case for punitive sanctions in what is set to be the weakest jobs market for decades, when evidence shows that new claimants are actively seeking work and when sanctions largely fail to help people back to work? Instead they have pushed the jobless into deeper poverty and ill-health.
It would mean, for the first time, a modest income for the small army of carers and volunteers, mostly women. As the coronavirus epidemic has revealed, their contribution – uncompensated and largely unrecognised, is, along with that of a parallel army of the low-paid, from cleaners to supermarket workers – crucial to the functioning of society. By providing all citizens with much more choice over work, education, training, leisure and caring, it would also lay the foundation for greater personal empowerment and freedom, a springboard for more stable and fulfilling lives. Such a scheme would also be a powerful new instrument for mitigating, at speed, the economic fallout from external shocks dealt by pandemics and recessions. If a basic income scheme had been in place at the start of this crisis, it would have provided an automatic mechanism for providing comprehensive income top-ups.
Despite these strengths the idea still divides opinion. There is nothing new about progressive ideas provoking controversy. Some of our most cherished institutions, from the National Health Service to the National Minimum Wage, were preceded by years of bitter dispute before they were finally implemented. No government would dare remove these universally popular ideas today.
The crisis has sparked new life into an ancient idea. The introduction of a basic income floor now has political legs. Could it be today’s equivalent of these earlier progressive reforms?
ν Stewart Lansley is a visiting fellow at the University of Bristol. He is the co-author (with Howard Reed) of Basic Income for All: From Desirability to Feasibility, Compass, 2019, and co-author of Breadline Britain, The Rise of Mass Poverty, Oneworld 2015. His book, The Richer, The Poorer – a history of poverty, wealth and inequality since 1834 – will be published later this year.