Universal Basic Income: Has Covid made the Impossible Inevitable?
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Universal Basic Income (UBI), sometimes known as a Citizen’s dividend, is a system of wealth distribution that seeks to implement a comprehensive safety net, preventing people from falling below the poverty line. UBI, a system that offers “free money” to all those that “have a pulse”, may sound like an unattainable, unrealistic, and unaffordable concept, but it is more mainstream than people realise, and COVID-19 has only solidified its place on the agenda.

Under UBI, a monthly deposit — not intended to allow for a lavish lifestyle but enough to survive upon — would no longer be a dream, but a fundamental right. Historically the idea has received support from across the political spectrum: the founders of the neoliberal school of thought (Freidrich Hayek and Milton Friedman) were amongst over 1000 economists that urged the US government to adopt the policy. Thomas Paine and Martin Luther King, as well as many on the left, have also supported UBI. A bill intending to introduce a form of UBI even passed the House of Representatives twice, before being blocked by the Senate under President Nixon.

In recent years, many on the left in the United Kingdom have adopted the policy; the Green Party incorporated it in their 2019 manifesto, pledging to “transform our social welfare system”. More recently in March 2020, 110 MPs and Peers signed a letter urging the government to adopt a universal basic income as part of the COVID recovery plan. The Mayor of London, Sadiq Khan, has thrown his hat into the ring; supporting UBI in an email that was sent out to Labour party members in London. The devolved government in Scotland has also voiced interest in UBI, with Nicola Sturgeon stating that it “could be worth pursuing”.

Caroline Lucas, Green Party MP and supporter of UBI
Image Credit: UK Parliament Official Portraits

Despite the support from many prominent economists, politicians, and historical figures, UBI is still often dismissed as simply a ‘utopian fantasy’, destined to fail in any attempt to pass through Parliament. However, UBI is not the first radical idea that has begun with a whiff of utopia and has since become very much a norm – consider universal suffrage, the NHS, and many, many more. 

According to renowned economist Albert Hirschman, ‘utopian’ ideas are typically criticised on three core grounds: futility, danger, and perversity. If UBI did not already have concrete rebuttals to each of these claims, the pandemic has definitely provided them one. A silver lining of the COVID-19 pandemic is that it has offered us a lens through which to explore the social and economic makeup of our country; and through this lens, we can see more than ever the need for UBI. 

I will tackle each of these claims in turn.

Firstly, that it is futile. Critics of the policy often like to raise the “how would we pay for it” spectre by asking the ever funny question: “where’s the magic money tree?”. However, the cost would not be as great as many suggest. Some claim that the gross cost of introducing UBI would be upwards of £580 billion; however, it is the net cost that we need to be concerned with.

According to JRF, poverty costs the UK £78 billion per year (4% of the UK’s GDP) when calculating its impact on the NHS, schools, the criminal justice system, child services, social care, and housing. Introducing a UBI, alleviating the nation from poverty, would dramatically decrease this number. Furthermore, with UBI replacing the vast majority of current benefits, the army of administrators required to check eligibility for universal credit and other benefits would no longer be needed. Removing the tax-free allowance and closing tax loopholes would further reduce this figure. One study suggests that the real net cost of UBI would be £67 billion

Some solutions as to how to pay for it include an automation tax to account for lost jobs through automation, a financial transaction tax, an increase in income tax for the most privileged, and a wealth tax for the billionaire elite. According to a 2015 piece in the Guardian, over £93 billion per year is spent by the UK government on corporate subsidies and tax breaks.

If the COVID-19 pandemic has proven anything, it is that the government is willing to pull out their chequebooks in the face of a crisis. With over 1/3 of children living in relative poverty pre-COVID, and one study finding that 700,000 more people – including 120,000 children – have been plunged into poverty as a result of COVID, it is clear that poverty is a crisis that needs immediate addressing.

Despite this, many still believe UBI would be too dangerous to introduce. One of the main concerns is that people would just stop working, however, the evidence suggests the contrary. Analysis following the largest basic income trial ever to be conducted, which took place in Canada, found that working hours barely changed at all: -1% for men, -5% for married women, and -3% for unmarried women. Additionally, studies into the behaviour of lottery winners found that the lucky winners rarely quit their jobs, even if they did not need to work. In both cases, where hours decreased or time off was taken, it was typically to spend more time with their children or to seek different work.

The introduction of UBI allows people financial security while they seek more meaningful work. Under UBI, the government’s patronising “rethink, reskill, reboot” scheme could be transformed into an empowering reality that allows for human flourishing. 

The evidence overwhelmingly suggests that, regardless of whether or not people need to work, they want to. A brilliant quote by Victor Frankl offers an explanation for this:

“What man actually needs is not a tensionless state but rather the striving and struggling for a worthwhile goal, a freely chosen task. What he needs is not the discharge of tension at any cost but the call of a potential meaning waiting to be fulfilled by him.”

The benefits of financial security also offer the prospect of divorce for those that are discouraged due to economic dependence. An experiment conducted in Seattle found that there was a 50% increase in divorce following the introduction of UBI.

When confronted with the analysis from the studies referenced above, some conclude that UBI should not be introduced solely as it is contrary to our entire approach of welfare and ‘workfare’, social responsibility, and the importance of personal finance – put simply UBI is perverse. But on what grounds?

On the grounds that eradicating absolute poverty and lifting the nation above the poverty line is unacceptable? I do not think so. Eradicating poverty is well within the government’s reach – if anything it would be perverse not to do so. What is perverse about ensuring the rights of a nation’s people? 

Article 25 of the Universal Declaration of Human Rights covers a wide range of entitlements; including those to adequate food, water, sanitation, clothing, housing, and medical care, as well as social protection covering situations beyond one’s control. Many of these are not met under the current system – UBI would go a long way in fulfilling these rights.

So why now?

In the words of Milton Friedman: 

“Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”

In the face of a crisis, ideas that once appeared utopian and radical begin to feel a little less daunting. Radical problems require radical solutions, and the pandemic has not only shown the extent to which inequality is a problem but has exacerbated it further. Although the furlough scheme offers some security to those out of work, the 80% payment is not substantial enough to support families already at risk of falling below the poverty line. With furlough currently expected to end at the end of April, those who are unable to find work as a result of economic damage and business closure, caused by consecutive lockdowns and COVID restrictions, will be left out of pocket. 

Finally, not only would UBI offer a safety net, but it would also stimulate economic growth. Covid-19 has led to the biggest recession in British history, unemployment has skyrocketed, and redundancies have reached record heights. The government has been borrowing money at a rapid rate to prevent economic destruction; funding the furlough scheme, giving loans to businesses, and financing emergency public health provisions. However, while interest rates remain low and borrowing is low risk, the introduction of a policy such as UBI could help to stimulate economic growth by ensuring cash flow and keeping demand for services and goods high. 

Economist Editor Henry Curr stated that direct cash transfers can work fairly well, however, also said that the furlough scheme may not be the most efficient application of this.

“The downside of furlough schemes is that they do have this potential to keep people locked in zombie jobs which aren’t coming back when the economy recovers, but the principle that household incomes in some sense can be underwritten during a large economic shock, over which those households have no control, is an interesting one that I think could be applied in future.” 

UBI could just be that future application. 

In any crisis, we have the ability to move forward or to move backward, to establish a new normal, or to go back to what once was. 

Although it is often the case that “following extensive periods of economic upheaval there is a reforging of the relationship between people and the state”, it is too early to tell what this new relationship will look like.

Following the Great Recession of the 1930’s, we saw the New Deal be introduced in the United States. Following WW2, we saw an expansion of the welfare state across Europe, including the founding of the NHS in the UK. Following the recessions of the 1970s we saw the explosion of free-market ideas under Prime Minister Margaret Thatcher and President Ronald Reagan. After COVID-19, what will we see? 

Arundhati Roy described the pandemic as a portal, but will life on the other side have a UBI? Will UBI inevitably become the ‘new normal’?

Only time will tell.