Not quite Universal Basic Income: the new selectivity

UBI is universal when it provides for everyone in a category, without further conditions; basic, when it is only the starting point, and people are free to add income from other sources; income, when it is paid periodically.   The Basic Income Earth Network identifies five main points:

1. Periodic—It is paid at regular intervals (for example every month), not as a one-off grant.
2. Cash payment—It is paid in an appropriate medium of exchange, allowing those who receive it to decide what they spend it on. It is not, therefore, paid either in kind (such as food or services) or in vouchers dedicated to a specific use.
3. Individual—It is paid on an individual basis—and not, for instance, to households.
4. Universal—It is paid to all, without means test.
5. Unconditional—It is paid without a requirement to work or to demonstrate willingness-to-work.

There is more to being ‘unconditional’ than not having a work test – benefits that are restricted to people with disabilities or care needs have to impose a test, and to that extent they are selective.  UBI tries to avoid the pitfalls of selective benefits, which have three great problems: complexity, the difficulty for claimants of knowing whether  or not they will be entitled, and potential stigma.  Selective benefits commonly fail to reach many of the people who ought to be receiving them.

Arguments for Basic Income have captured the imagination of many people.  I have my reservations about them, and those reservations are serious, but I’m sympathetic to the core objectives: providing people with a foundational income that is consistent, reliable,  and as simple as possible.

It seems, however, that some recent programmes have departed somewhat from the script. In Wales, a ‘basic income’ experiment is being conducted for 500 young people leaving care.  The programme is linked to advice and support relating to financial management, education, employment and welfare.  That’s the right way to go about supporting vulnerable people, but it’s three steps removed from ‘Basic Income’: it’s selective, time-limited and not just a cash payment.  In San Francisco, there are three such programmes.  The first is the “Abundant Birth Project“, which offers a ‘Basic Income Supplement’ to pregnant women who are African American or Pacific Islanders, mainly for the duration of their pregnancy and shortly afterwards.  Next is the Guaranteed Income Pilot for Artists, supporting two cohorts of 60 artists, nominated by partner organisations.  The third, and most recent, is the Guaranteed Income for Transgender People, offering both cash support for 55 transgender people and ‘wrap-around’ support (including medical care, case management and financial advice).  Again, these initatives are time-limited.

These programmes don’t have much in common with the idea of Basic Income.  They’re selective, short-term, and eligibility is highly restrictive; they are linked, beyond cash, to other forms of support; and their target groups are highly visible.  I don’t think we can draw any lessons from them about how Basic Income might work, or how people might adapt to a UBI.  It’s interesting, however, to see that arguments for UBI have influenced the development of highly targeted, selective benefits – for example, this paper on supporting transgender people.  We’re seeing, not a commitment to universality, but a new selectivity.

Evidence to the Welsh Affairs Committee on Universal Basic Income

I gave oral evidence to the Welsh Affairs Committee at a session on November 3rd, and have only just got round to reading the transcript, which is here. I made three important reservations about Universal Basic Income: the distributive impact, especially if it was to be funded by closing down existing benefits; the impossibility of defining a level that would be ‘adequate’; and the many other purposes that benefits have.

There are two points in the transcript at which the MPs misconstrued what I was saying, and while the format of the session wouldn’t allow me to go off on a tangent to explain, I can clarify the points here.

Q116 was not addressed to me – it was answered by Jonathan Williams.  Q117 was, and Geraint Davies MP seems to have taken me to mean that people should be forced to work. I can’t see where he got that from, which makes it difficult to answer; I said no such thing, and wouldn’t.  I did say that conditionality does not work and was counter-productive.

In Q143, Robin Millar MP thought I was arguing to ‘tweak’ the system. This, at least, is an understandable misapprehension; I should have been clearer. I have argued, here and elsewhere, to break up big benefits into smaller ones.  However, I don’t think that’s a ‘tweak’ – it would be a fundamental reform.  See, for example, my blog on How to abolish Universal Credit.  The rationale for redesigning the system about simpler,  smaller benefits with common pay-days is that then ‘income packages’ – the money people finish with – can be adapted to their needs without massive intrusion or putting everyone on the same conveyor belt.

 

A utopian vision of money for everyone

One of the Zoom sessions I went to today was fuelled by optimism about a most unlikely scenario: the idea that the United Nations should provide people around the world with a universal basic income.  The advocates were arguing that the money could be raised to pay everyone $30 a month, and that it should be.   Their position paper can be read here.

I don’t want to dismiss this as a thoroughly bad idea.  In the course of the last 20 years or so, many countries have been introducing cash support for their populations, that support can make a huge difference to people’s lives, and the support doesn’t have to be conditional. The case is well made in a short book by Hanlon and others, Just give money to the poor (2010), and reinforced by the experience of small area provision in India and Kenya.  (These experiences don’t translate well into a case for the same policy in developed countries, where BI proposals are often being developed in terms that will not improve the incomes of many poor people, and may make some worse off.)

Nor do I see the proposal as being intrinsically unaffordable.  It would call for redistribution from richer countries, but that already happens in the form of Oversesas Development Assistance.  Asking the UN to take it on seems like a long shot, but the UN is at least an appropriate forum for discussion: the UN’s Guiding principles on extreme poverty and human rights marks out their interest in the area.

The core problems are somewhat different.  The first question to ask is obvious: is this the greatest priority? People in developing countries need money, but many of them are poorly integrated into any formal economy where the money can best be spent. Other contenders for support might be health care, education, water, and sanitation – all of which are essential to welfare, but probably better delivered without depending on private, commercial markets.-

The second problem is logistic.  How does one distribute money to seven billion people – or even to four billion?  I raised the point on the forum, and the answer came back: mobile money wallets.  For which people need first to have access to electronic devices, and the means of powering them, and local providers need to have the means to process the payments.   It’s not much of an argument to say this has been done in small communities.  Implementation changes with scale.

Advocates for Basic Income are not all utopians, but the curse of Basic Income schemes has been a common failure to think through how things can practically be done, and what the rules should be.  Who gets the money? Do they have to claim? How is the money paid? How are children to be treated? How can we ensure that the money is used by the person it’s intended for? What happens when someone dies?  These are the sort of details that experiments in BI ought to have engaged with and sorted long ago – not all the nonsense about incentives and behaviour change.

The UNDP considers the case for a temporary Basic Income

In previous writing, I’ve expressed reservations  about the idea of a Universal Basic Income, but I’ve also noted that the key objections – the opportunity costs, and the distributive implications – may not apply in the same way in the current crisis.   The United Nations Development Programme has taken forward the idea of a temporary basic income, which might make provision for half the world’s population in 132 developing countries.  They examine three main options: a top-up income (which would be complex, difficult to administer and liable to be inconsistent); a BI which is different in different countries; or a uniform BI paid at a standard rate across the developing world.

None of the proposals would have the long-term effects that proponents and opponents of Basic Income claim would result from such a scheme – people should not be expected to to change their lives, give up work, enter education, start businesses or start a family just because a change in their immediate income is made for six months.  (I’ve doubts as to whether we’d see those effects fully realised in decades – after old age pensions were introduced in the UK, it took the best part of 60 years, two world wars and a health service before we could see the full effects on labour market participation.)    The primary case for offering something like a basic income is much simpler: to maintain enough demand for an economy to function, and to make sure that people in developing economies are included despite the crisis.

There are, however, major obstacles in the way.  Most proposals for Basic Income are so much concerned with the principles that they don’t get into the practical detail of how such a benefit can be delivered – for example, ID, banking, physical addresses or the lack of them,  responsibility for dependents and communications.  That is all challenging enough for a developed economy, and in a less developed one it is easy to see how the ship could hit the rocks.

The social protection system is failing. We have to find ways round the problem.

We have moved into lockdown, and the government has still given little thought to how to protect the situation of people on very low incomes.  The main concessions relate to the failing system of Universal Credit: work allowances and benefit levels have been increased, the presumptive income of self-employed people no longer applies, and new sanctions have been suspended.  Universal Credit is not, however, equipped to respond to people’s circumstances even in normal times, and it cannot cope with the surge in applications.

First, people have to apply.    This is a clip posted on Twitter by an applicant looking to verify his identity:  it will take nearly a month for the position to rise to the point where it can be dealt with and then there is a 45-minute window to respond.  After that, there is a five week wait for benefit delivery. Claimants are offered loans to fill in the gaps, which means a long-term reduction in the future amount of support available.

What are the alternatives?  There is a strong case being made currently for something like a Universal Basic Income.  UBI only provides people with cash, but that meets the present situation: there are plentiful supplies of goods, and what we need to do at present is to make sure that people have the resources to buy them.  I’ve objected to the idea in the past, mainly on two grounds: the distributive impact, which is likely to exclude people on existing benefits, and the opportunity cost.  Neither of those reservations really applies to the present situation.  The government could do worse than offering a flat rate payment to everyone.

However, the mechanisms to deliver a universal income don’t currently exist, and in a crisis, we need to be considering what can be done quickly and immediately.  There are three benefits which have widespread coverage, making it possible to make special payments using mechanisms that are already in existence.

    • The Xmas bonus currently goes to 17.5 million people, mainly pensioners, carers and people with disabilities.
    • The Winter Fuel Payment, which might be more adaptable to special one-off payments, goes to 12 million pensioners.
    • Child Benefit goes to 12.7 million children in 7.3m households.

It should be possible, then, rapidly to make arrangements to make special payments,  with minimum fuss and no additional verification, to up to 37.5 million people (17.5 + 12.7 + 7.3).   It’s not ideal, but we need to find mechanisms that are practical and effective; this would cover a lot of the ground that needs to be covered.

This still leaves a large hole: the position of adults of working age who have no children.  The government obviously hopes that employees within the PAYE system can be supported through businesses, using roughly the same mechanism as Statutory Sick Pay – it won’t work, unfortunately, for the most precarious workers, or self-employed people.    I’ve canvassed in the past another option: make the tax allowance convertible, so that people can claim the equivalent in cash.   That should, in principle, cover most of the people left out by the first proposition, with the added advantage that people who already have sufficient taxable income will be paying it back in tax.

The Green Party Manifesto proposes a Universal Basic Income

The Green Party is first to reveal its manifesto for the General Election.  An important part is the proposal to introduce a Universal Basic Income, offering £89 a week to every adult, supplements for disability, single parents, lone pensioners and means-tested allowances for families with children.  Housing Benefit (or the housing element of Universal Credit) will be retained only for existing claimants.

I’m sure that advocates of Basic Income will welcome the direction of movement, but there are problems with the specific proposals.  First is the distributive effect.  If other benefits are stopped, the financial gains to better-off households far outstrip any benefit to people on lower incomes.  This scheme is highly regressive.  Secondly, there are the supplements.  Disability benefits will require a test; supplements for lone parents will require a cohabitation rule; means-testing for families will inevitably be complex.  Third, there is the proposal to freeze Housing Benefit.  That means, bluntly, that new claimants (mainly younger people) will not be able to afford housing; and that social housing providers will not be able to provide it.  Overall, this scheme will leave many poor people worse off.

Some reservations about Basic Income

Yesterday I was at the launch of the report from a seminar series organised by the Scottish Universities Insight Unit in conjunction with Citizen’s Basic Income Scotland.  My role has been as the resident sceptic; I prepared a series of background papers and a paper outlining the reasons for my doubts, and how they might be overcome.  The results are in the report, Exploring Basic Income in Scotland, available here.  There are my papers on Basic Income and Human Rights and Equality on pp 12-17, Care  on pp 47-52, Housing on pages 62-65.  The longer paper on Reservations about Basic Income is on pp 90-104.

The summary of those reservations goes like this:

Even if we accept all the arguments for Basic Income in principle, there are serious issues to resolve relating to cost, distribution, adequacy and practical implementation.

  • Cost. Basic Income schemes are all very expensive. The first question to ask is not whether we can afford BI, but whether we should – whether the money would not be better used in some other way.
  • Distribution. All the Basic Income schemes which have been developed to date make some poor people worse off. That mainly happens because they try to pay for BI by cutting or reducing existing benefits. Any scheme which does that it is going to benefit some people on higher incomes more than it benefits people on lower ones.
  • Adequacy. The treatment of existing benefits and of current tax allowances cannot work as intended. Basic Income cannot meet all the contingencies currently covered by social security benefits. It should not even try to do so.
  • Implementation. BI will not be without its complications. It is time to address them.

Basic Income cannot be ‘adequate’, but it does not need to be; it only needs to be basic. A modest income could be provided without damage to poor people, so long as it does not affect the status of other benefits.

 

Nothing personal: a proposal to convert the personal allowance from tax to benefits

About ten months ago, I put an argument for a convertible tax allowance on the blog – here is the link. The New Economics Foundation has just floated a very similar idea, in a report called Nothing Personal. The main difference between their proposal and mine is that they are proposing not an optional conversion, but a universal one.  That would have the advantage of ensuring coverage, but it would also have two large disadvantages.  One is that it would call for much more extensive direct administration, because it doesn’t use the existing PAYE system in the same way. The other is that the personal allowance would be reduced to zero, requiring declaration of every penny earned.

Unifying benefits is hardly a new idea

In the comments to a previous posting, Andrew Hatton asks when the idea of first unifying benefits was seriously considered by a UK Government. I started to respond within the comments, and then thought it might stand as an entry on its own.

It might reasonably be argued that governments in these islands have always thought in terms of unified systems. The Tudor poor law  of 1536, inspired by the model of Ypres, created national law for responding to poverty. The statutes of 1598 and 1601 – the “Old Poor Law” – instituted a national scheme, at least in principle. The 1834 Poor Law Amendment Act – the “New Poor Law” – was designed to implement a uniform regime within that scheme, treating for example older people and unemployed people on the same terms. The Beveridge scheme was supposed to create a unified national administration based on insurance – popularly described as a system to cover people ‘from the cradle to the grave’. National Assistance initially included income and welfare services for every group not covered by insurance. And Supplementary Benefit, its successor, incorporated a range of provisions into a single means-tested benefit: income, unemployment, disability, rent, mortgages, sickness, old age, residential care for older people and child support among them. Universal Credit is not a great, original idea; it revisits the portmanteau benefits of the past.

Marina Hyde, writing in the Guardian, puts her finger on one of the key problems with Universal Credit.  “The most dangerous type of politician”, she comments, is “the sort who thinks that very complicated things are actually very simple.”  And I wrote something similar in the Guardian myself shortly after Universal Credit was first mooted.

Benefits deal with millions of people, and recipients’ lives are diverse and complicated. If universal credit responds to their needs, it will also be diverse and complicated – and therefore expensive. If it does not, it will cause hardship – and it will look unfair.

There have been, of course, other types of unifying scheme, and currently the one which is most discussed is Universal Basic Income – an idea which has been around since the eighteenth century.  Some of the models for UBI are utopian, but if we take UBI to mean an all-singing, all dancing answer to every human problem, it will fail for the same reason that all the other combined schemes fail: people’s lives are too complicated to be covered neatly and simply in a uniform way.  It’s more important to focus on the idea that Basic Income is meant to be basic – a springboard, an element of income that can be mixed with other income – and forget the idea that it will then be possible to junk everything else about the benefit system, because it won’t be.

Discussions of Universal Basic Income

I’ve written several background papers for a series of seminars on Universal Basic Income, and the first of them has been put online by Citizens Basic Income Network Scotland.   The series will include specific discussions about employment, rights and equalities, housing,  care and implementation; I was asked to do papers for three of them (rights, housing and care).  (The seminar series is organised by the Scottish Universities Insight Institute at Strathclyde University; details are available on request.)  In due course, after the seminars are finished, I’ll be revising the papers for an integrated presentation.

I’m still sceptical.  While I’ve always been sympathetic to arguments for more universal benefits and services, there are lots of key problems that need to be thought through before a scheme could be introduced.  Too many of the published schemes either wave those problems aside or try to manage them by making poor people worse off.  As things stand, the best possible schemes would not offer anything like an adequate, secure income.