Written by Mark Kirby –
As anyone who has seen Ken Loach’s I Daniel Blake can attest, the Tories have successfully turned the DWP into a punitive instrument and the stories about the treatment of ill, unemployed and disabled claimants rightly disgusts socialists. The anger about Universal Credit was summarised by Gordon Brown as being likely to become the next Poll Tax. 3.2 million working families are expected to be worse off, with an average loss of £48 a week. By 2021 when it is supposed to be fully operative, they expect £60bn of expenditure for working-age benefits, £3bn less than the current system. So, a cut of about 5%. John McDonnell made clear in his Austerity dossier the scale of the problem. But for him the worst is the treatment of the disabled. A UN inquiry into the rights of persons with disabilities has found this Government guilty of the “grave and systematic violations” of their rights.
Unfortunately for many this chimes with their experience of the welfare state and makes them question whether the state is competent in the same way that nationalised industries always faced questions about competence. Clearly these are not arguments we should accept. Most of the so-called efficient developments today heavily rely on state inventions such as the mouse and click technology on PCs to the Apple Mac and iPhone to the Kalashnikov or Sputnik. Anyone tempted down that mythical route about the inefficiency of the state should read the Entrepreneurial state by Marianna Mazacotto
UBI: The Proposals
UBI stands for Universal Basic Income (Sometimes known as Citizens Income), is not a particularly new idea and its key adherents and promoters include many on the right including Milton Friedman but for some reason it has gained a radical sheen of late and the support of some on the left has added to this.
The idea is that all adults would be given a basic amount of money as a citizenship right. Clearly one key advantage is that in contrast to the multiple forms and tests required to qualify for benefits today, this would require minimal or no enquiries into a person’s activities or household arrangements. The actual amounts involved vary with the scheme, but the partial scheme proposed by Compass would work as follows:
There are some other key possible advantages of this idea:
Since you are guaranteed a basic income you have some degree of choice about how much engagement with paid employment you make. As such it alters the balance of power between capital and labour.
Since it is paid to all adults this would avoid some of the gender inequalities in the Beveridge derived system that relate to gender assumptions from the 1940s that are no longer accepted today.
If as researchers from Oxford University argue, we are facing a situation where up to 35% of jobs in the UK and 50% of jobs in the USA will be replaced by robots in the next 20 years, it provides a way of dealing with this.
It would also seek to provide some income security to those (particularly the young) caught up in the insecure new economy labelled as the ‘gig economy’
It would also avoid the problem of people facing sanctions or having their benefits cut and insofar as it is linked to citizens’ rights, it should be inalienable, although this is clearly one of the most pernicious liberal myths and socialists should not give over credence to this.
It could also be argued that it does not require continual growth and continual economic activity to make it work and as such is more appropriate to the era of environmental concerns although this is a tendentious claim.
There have been several concrete proposals to use this idea. Hilary Clinton considered using it as part of her campaign but eventually dropped it. Phillipe Van Parijs at the Catholic University of Louvain have worked on the proposals. The right-wing Finnish govt is currently testing it out by using it to replace all its unemployment benefits although it recently announced that it will not be continued after next April and there are similar tests occurring in Ontario in Canada and in Holland.
In the UK the main source of ideas about UBI come from Guy Standing and the BIEN network and the soft-left thinktank Compass. Standing has also published a book called Basic Income and how we can make it happen, launched last year at a day to debate the ideas held at LSE with speakers including Malcolm Torry, Polly Toynbee and David Graeber.
(1) UBI would involve a shift away from the collective risk-sharing inherent in the idea of the Welfare state to a much more individualised form of provision based on the liberal idea of rights.
(2) Precisely because it aims to replace collective state provision with a much more individualised model, the idea is strongly supported on the right to close the welfare state although the more punitive workfare models seem to have won out for now.
(3) The apparent simplicity and equality of a Basic Income for all adults is problematic as it makes no allowance for additional needs.
By increasing the use of money, it commodifies more of life whereas socialists as Esping-Andersen points out should seek to decommodify life and the welfare state is a key example of this because services are provided without payment. As such the welfare state can be seen as an institutional embodiment of the central thrust of the Communist manifesto where Marx and Engels call for a system based on “From each according to his abilities, to each according to his needs”.
It is important to bear in mind that the current welfare state fulfils three key functions: (a) a redistributive function via the tax and benefits system; (b) a social consumption function via provision of services for free such as the NHS, social care and social housing and (c) a social investment function via education and training and job security and employment policy.
The cost of these three in 2018 is around £400-£420bn. It is important to remember that UBI offers nothing for (b) and (c) which would therefore still be needed and merely seeks to be a replacement for the benefits part of (a). While the total cost of (a) in 2018 was around £220bn, £160bn of this was in pensions and whether this is included in UBI is debateable. At minimum therefore, we are talking about something that might replace £60bn out of the £400-£420bn welfare state budget. The limits of the radicalism of this should be therefore clearly apparent.
The Simple Impracticality of it:
Although the points above should be enough to convince socialists of the problems of this, due to the prevalence of libertarians and the soft left the idea continues to be raised. However, it is not often considered as a detailed practical programme and there is a reason for this: Luke Martinelli at the University of Bath makes the point clearly: “an affordable UBI would be inadequate, and an adequate UBI would be unaffordable”
The simple problem with the full-blown versions of this idea is (1) the cost and (2) the relative ineffectiveness of any benefits of it. UBI is very expensive but does little if anything to reduce inequality and poverty and may make it worse.
We must remember the claims being made – the key claim is that this form of operation would revolutionise worker-boss relations by giving people choice and freeing them up and would also avoid waste on state bureaucracy. Like most utopian lazy thinking these strong claims vanish when you delve into the detail of the actual proposals (as opposed to the vague claims). Clearly although it is described as UBI, there are variations and debates about how much we are talking about and how it would be administered, and it is the examination of the detail of these that the thing falls apart. Although there are claims that the system gives choice and totally undermines the power inequality between capital and labour this is only true if the system provides people with enough money to live on. In considering this we must bear in mind that the current level of JSA is £57.90 per week for those under 24 and £73.10 for those over 24. That is £3010 pa or £3800 pa. Unless we can envisage a system that provides significantly more than this we should clearly be wary of the claims for the revolutionary nature of this proposal.
Often it can make things worse. For example, the system advocated by the Green Party:
The Green Party advocate an approach to Basic Income which according to the Citizen’s Income Trust would lead to 35% of households being made worse off.
Equally it would make 20% of those in the poorest 20% of households more than 10% worse off.
The key reason for this is the abolition of income tax allowances and NI Allowances which effectively introduce taxation from £1. This has the effect of making the scheme in some respects more regressive than the current system.
The cost of the scheme estimated at £240bn is only reduced by the fact that to pay for this much of the welfare state will be shut down, although housing benefit and benefits for the disabled are excluded from the proposals and would add at least £8bn further cost.
To give you a comparison the cost of the NHS in 201718 is £142bn, the cost of welfare spending (excl pensions) is £57.9bn and the cost of pensions is £159.3bn. The cost of Education is £87.8bn.
Perhaps the most fantastical version is the one promoted by the French economist Yann Moulier-Boutang. This proposes a UBI of 1,100 Euros per month. The cost of this would be 871bn Euros or 35% of the French GDP. This means it would cost the equivalent of the entire social security budget in France plus the entire education and health budgets. When asked about how to fund this, the suggestion was a tax on financial transactions of 5%. Given that most of these transactions occur to gain small fractions of a percent gain through arbitrage, such a tax would undoubtedly remove most of those transactions but would therefore also remove the tax revenue. The most famous proposal in this respect, the Tobin tax is envisaged at a rate between 0.05% and 0.2% and is designed to reduce speculation (and therefore tax revenue based on it). So, this one is very unlikely fly. This falls into the category of an adequate UBI being unaffordable.
A second point about this is that even if we could afford it we should resist as it is extremely ineffective in reducing poverty and inequality. Compass modelled such a full scheme for the UK. The results are catastrophic:
“there are two key issues with such a scheme: the question of cost, and the finding that despite a gain on average, there would be many losers at the lower end of the distribution in all three schemes. Because of these losses, all the schemes lead to sharp rises in relative child poverty”
Let us underline this: a scheme which is potentially ruinously expensive and leads to sharp rises in relative child poverty is somehow being hailed as radical. Child poverty would increase by 10 percent, poverty among pensioners by 4 percent, and poverty among the working population by 3 percent.
Compass are aware of this, so they suggest instead a modified scheme. This comes under the heading of an affordable UBI would be inadequate. Under the modified scheme state pensions are maintained and UBI paid out on top of this. Equally all the current means-tested benefits systems remain in place (although Child benefit is abolished) so further undermining the universal bit. For those of working age the benefits are little different to the current JSA at £71 for those over 25 and £61 for those under. (Modified Compass proposals provide £51 for those under 25 and £61 for those over 25). One key thing to notice is the complete undermining of the universal in this as the key divisions based on age are maintained. A second problem is that there are still a large amount of losers among the poorest: In the Compass schemes up to 23% of the poorest 10% of households lose more than 20% of their income and up to 40% of the second poorest 10% lose more than 20% of income. Equally the rate of child poverty INCREASES by up to 10% – since the amounts provided per child do not compensate for the loss of child tax credits. This is an issue that has also surfaced in relation to Universal Credit.
But there are key problems with this as well as outlined by Ian Gough of the LSE:
“The Compass scheme does set out how to pay for a partial basic income for all: a rise in all income tax rates of 5p, the abolition of the personal tax allowance and the extension of national insurance contributions to all employees. These will raise the bulk of the £210bn gross cost. What is achieved? A big cut in child poverty, yes, but tiny falls in pensioner and working age adult poverty, despite the latter being the basic goal of the policy. And the numbers reliant on means-testing will be cut by only one-fifth.” (Letter to Guardian, 10/6/2016)
The key reasons for this are that the tax changes involve getting rid of the personal allowance plus raising the rate of income tax including the basic rate by about 5 pp. In exchange for this cost people of working age are offered little more than the current system.
In exchange they are expected to embrace individual commodification and be complicit in the destruction of the collectivist welfare state. This is a dangerous blind alley and those who see it as radical are deluded.
The best conclusion comes from Prof Ian Gough, who is Prof of Social Policy at the LSE:
“The problem is that it combines a radical vision with a naive or insouciant view of politics. Like all big-bang solutions it ignores contexts, politics and transitions. Somehow the fact that it is also advocated by neoliberals and Silicon Valley libertarians is seen as a plus.
I fear that this latest plan will drain the energies of the left in social policy and will divert attention from so many other worthwhile policy alternatives: the living wage, boosting trade unionism, free childcare, radical changes in housing policy, policies to reduce working time to limit turbo-consumption, green investment and so on.” (Letter to Guardian, 10/6/2016)
I see nothing that has changed this conclusion. Socialists should take every opportunity to undermine the hold of this naive libertarianism at every turn and instead point to the living legacy of the welfare state created by socialists which has immeasurably improved the lives of millions over the last 70 years. We need to fight so we not the Tories administer it, but we do need to retain it rather than destroy it in some libertarian nonsense.
Reinforce and strengthen the welfare state
We do know that Education Health and democracy are all provided free of charge. We would wish more money to be spent on them but that will not necessarily reduce inequality. For instance, we know access to university is unequal so increasing spending on tertiary education mainly benefits the more affluent not the poorest. A clear critique of the 2017 Labour manifesto was that it was too focused on the middle class with the headline promise to get rid of HE fees but in terms of welfare benefits the promises made were less and less progressive than those of the Lib-Dems as the IFS analysis made clear:
That cannot happen again and that means seriously thinking about the distributional impact of services. We must remember that as the IFS made clear the working age benefits system provides support to a majority of the UK population at some point in their lives.
We also know that merely increasing public spending may lead to more money going to the private sector (as in NHS hospitals using private ones for minor ops) and this needs to be avoided. Precisely because by using the national state we can get massive economies of scale we can provide much more benefit from the same cost by developing the welfare state idea rather than UBI. Instead let us push for UBS.
As can be seen adding these 4 services as free services in the way health and education are provides people in lowest decile with equivalent benefit of £126.46 per week. Using the same money to provide a UBI would only give an extra £12.47 per week. This shows UBS is 10x more efficient than UBI. It also reinforces collective provision rather than individualises us as consumers
The cost of making these 4 services free is an extra 2.3% of GDP or roughly 5% of current government spending. This is a figure of possibly £40bn. Still expensive but much cheaper than UBI and with 10X the benefits in terms of collectivism and equality, the two key principles of socialism.