A UBI Is Now A Moral Imperative

Craig DalzellA new research paper has found that a Universal Basic Income sufficient to eliminate poverty across the entire EU would cost about as much as defence and, in some modelled scenarios, would cost less than the poverty it eliminated. In other words, bringing in a Universal Basic Income could cost less than the price we’re currently paying by not doing it.Common Weal’s support for Universal Basic Income goes back just shy of a decade ago to before our founding as an independent think tank and we marked an influential milestone in 2017 with the publication of my paper on social security including a fully costed UBI for an independent Scotland. That paper remains one of my favourite of the ones I’ve written for Common Weal though the landscape of the campaign has changed significantly since. Back then, we were still fighting for the recognition of a UBI as a concept and so when I chose the scheme to illustrate the impact of the policy, I essentially copied a proposal that would “drop in” to the then existing UK benefits system and provided a UBI approximately equivalent to the then Job Seeker’s Allowance or the then up-and-coming Universal Credit. That amount is far too low to make a significant difference to poverty (which is entirely why the UK maintains benefits at that pittance level – workers cannot be exploited with low wages without the threat of an even poorer unemployed person serving as an example of what will happen if they try to demand more). What has been remarkable since then though is that the concept of this “radical policy” has essentially been won in Scotland. The SNP, Greens, Labour and Lib Dems all now agree with the concept of a UBI at least in principle and so should one of them deign to propose a scheme that can either work within the bounds of devolution, can work with some changes to devolution or can work as soon as Scotland becomes independent, then there should be – in principle – a parliamentary supermajority in favour of a Scottish Universal Basic Income.Now, at this point, I expect at least one comment from someone saying that we should do a Job Guarantee Scheme instead of a UBI. For my detailed objections to that, see my articles here and here but in short while I support Job Guarantee, it cannot be to the exclusion of adequate social security, or those who cannot or don’t want to work (for any reason) will be threatened with destitution, and no means tested social security can be called adequate due to the number of people who will fall through the gaps in the system, therefore a Job Guarantee Scheme MUST include a Universal Basic Income as well. We need both.The new UBI paper by researchers in Catalonia has posited several versions of UBI, all designed around what is actually required to life people out of poverty. They’ve calculated that at around €6,857 to €10,286 per person per year depending on the scenario – Even the least generous figure (which was calculated as the sum required to only eliminate “severe poverty” across the EU) is about 40% more than the UK’s current Universal Credit with the most generous coming in at just shy of twice the level of Universal Credit.There are some devils in the detail of the four proposals in the paper in that only one of them (scenario 4, the least generous) is a truly “universal” income. The other three scenarios are based on household poverty levels rather than individual and it takes into account the fact that costs of living are essentially pooled when two or more people live under the same roof. These schemes set a kind of diminishing returns on how much is granted to the household depending on how many people (adults or children) who live there but then, in keeping with the idea that a UBI should be paid to each adult individually rather than merely to the “head of the household”, the sum is divided equally amongst all residents. This has some merit but it will lead to awkward edge cases such as individual payments changing if someone moves out of the house or possibly even people not taking in a flatmate because it would incur a financial penalty on the people already living there. Personally, I prefer a more universal payment where everyone gets the same amount regardless of circumstances. It’s easier to understand and to “buy into” politically. The paper itself does acknowledge the shortcomings of applying different rates depending on the number of adults in the household and appears to have designed these scenarios based on shortcomings in statistical data (many countries, including the UK and Scotland though neither is included in this study due to Brexit, tend to publish poverty statistics on a household rather than individual basis).The benefits of a UBI are clear and overwhelming (see this thread by Scott Santens for the outcomes of various UBI pilot schemes around the world) but the big question is always “How do we pay for it?”. MMT arguments around the nature of financing social security aside (the equivalent MMT question is “How do we recover spending from wealth sinks?” - the answer to the two questions are essentially identical), there is always a misconception about the costs of a UBI with the gross cost being calculated as the Amount of UBI x Number of People (i.e. a £7,000 per year UBI for each of Scotland’s 5.4 million people would cost £38 billion) but it’s not as simple as that. The net cost of a UBI is always going to be much lower. Almost every UBI scheme allows for changes to income tax which, at minimum, taxes a UBI back off of high earners – and usually a fair bit more than that too. The UBI would replace certain existing benefits such as unemployment benefits, low income tax credits and child benefits (though not disability benefits) which reduces the overall cost and, in addition, replacing the complex system of means-testing, interviews and threats of sanctions will reduce the cost of administering the system (remember as well that the persecution and discrimination of the poor is part of the point of benefits systems as implemented in the UK). There is also the cost of poverty itself to consider – being poor makes it more expensive to live and the cost of treating the effects of poverty, including homelessness and ill health, are all burdens on individuals and on society that could be saved if we eliminated the root cause of those effects.The gross cost of a pan-EU UBI looks huge – something like €3 trillion per year – but the net cost after all of the savings and after the modifications to income tax are much more reasonable – something between €100 and €400 billion per year depending on the scenario. This is approximately 1% to 3% of the GDP of the EU. In other words, in a world where the warhawks are drumbeating about increasing defence spending from 2% of GDP to 3.5% of GDP or beyond, we have a proposal here that would be cheaper and would result in far more public good.The paper goes on to suggest mechanisms for generating (or recovering) revenue for the remaining deficit in the plans. The two proposals on top of changes to income taxes are a wealth tax of less than 1% per year on savings and other capital above the 98% percentile of average savings (which could bring in around €110 billion per year) and a carbon emissions tax of between €42 and €331 per tonne of carbon (amount determined by the wealth of the EU state and their emissions per capita) which would bring in around €330 billion per year. Between these two taxes plus the income tax included before, the net costs of a UBI could be more than covered. Indeed, in one scenario – albeit the least generous – the costs of the UBI are entirely covered by income tax and the reductions in the costs of poverty. Consider that for a moment. A pan-EU UBI of €6,857 per person, per year would be sufficient to eliminate severe poverty across the continent and doing so would cost less than the price currently being paid by not doing it. At this point, a UBI moves beyond the scope of “radical policy” or even “interesting idea” but an actual moral imperative where those blocking the policy are committing a great evil by actively allowing poverty to exist.I would quite like to see the modelling from the paper replicated for Scotland specifically so that we could see what a poverty-elimination UBI could look like. With the political consensus (if not the political will) now firmly in favour of the policy it really is only a matter of time but this paper gives us one final question to level at those who oppose it. Why do you support maintaining poverty when we know now precisely what it would save us to eliminate it?