In this age of chronic uncertainty, we need a basic income
OPINION: Millions in the UK are facing insecurity, impoverishment, stress and ill-health. Radical change is needed
13 September 2022, 9.40am
We in the UK are living in an age of chronic uncertainty, in which crises pile into one another, plunging millions of people deeper into insecurity, impoverishment, stress and illness. There was the financial crash of 2008, a decade of austerity, a series of six pandemics culminating in COVID-19 (with more to follow), and now the cost-of-living crisis as inflation mounts, possibly reaching an incredible 20% this winter.
And then, of course, there’s the impending ecological disaster confronting the whole world, as climate change spirals out of control, bringing famine, droughts, flooding and more.
Nassim Taleb coined the term ‘black swan’ to designate shocks that were rare, unpredictable and had devastating consequences. They are not rare now. But they are uncertain – in terms of when, where and why they occur and who will be adversely affected.
There is something else, too. It looks as if a large proportion of the British population will be affected by such a shock. Millions of people are expected to suffer from fuel-related hardship this winter, bringing more deaths and ill-health. Natural disasters such as floods could hit numerous communities. Being in a job is not a guarantee that you will escape poverty or economic insecurity. You and I cannot be confident that we will not be among the victims.
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Three deductions should flow from this bleak scenario. First, feasible economic growth will not overcome the threats. Second, old policies are not valid for tackling the new crises. Third, we need to build societal resilience, a new income distribution system and a new social protection system. Targeting a minority would be futile and inequitable.
The postwar welfare state was built on a presumption of full employment of men in full-time jobs earning family wages, in which there was a need for compensation for ‘contingency risks’ or ‘temporary interruptions of earnings power’. It was always sexist; women were barely mentioned. But the essence was ‘ex post’ compensation – that is, money after the event.
This is inappropriate today, where the core challenge is chronic uncertainty, for which one cannot devise a social insurance system. What is needed is an ‘ex ante’ protection system – in other words, money that precedes the event – which gives everybody guaranteed basic security.
But our politicians are failing to appreciate the nature of the challenge and are resorting to yesterday’s answers, to yesterday’s problems.
Economic growth is not the answer
The Tory and Labour leaders have both made overriding commitments to maximising economic growth. Keir Starmer says that the Labour motif for the next general election will be “growth, growth, growth”, and that he will only consider policy proposals from the shadow cabinet if they promote growth. Meanwhile, an adviser to several Tory chancellors says the new Conservative prime minister will commit to an “absolute priority” of maximising growth.
This brings to mind Michael Gove’s characterisation that Liz Truss is taking a “holiday from reality”. Both the Conservatives and Labour are misdiagnosing the nature of the recurrent crises. Both are chasing the mirage of high-GDP growth, wishing away the awful ecological implications.
Starmer says the free market has failed. But we do not have a free market. It is rentier capitalism, in which most income flows to the owners of property – financial, physical and intellectual. Economic growth has to be unrealistically high for the precariat and other low-income groups to gain anything. This is why real wages have stagnated over the past three decades, and why earnings have lagged behind GDP growth, the difference made up by rising debt.
The income distribution system has broken down. Across all OECD countries, financialisation has accelerated, and is fuelling inflation for its benefit. As shown elsewhere, in the UK, financial assets of financial institutions have risen to more than 1,000% of GDP, with most finance used for speculative activity rather than productive investment.
A rising share of income is going to capital, and more is going in rent, in excess profits. Within the shrinking share going to labour, more has gone to the top, again in forms of rent. The value of wealth has risen sharply relative to income, while wealth inequality is much greater than income inequality.
All the time, the precariat grows. What should exercise progressive politicians is that, for a growing proportion of the population, income instability and insecurity have grown by more than is revealed by trends in average real wages.
People lack income resilience. Millions are living on the edge of unsustainable debt. Raising the minimum wage (desirable as that is) will not solve that, nor will trying to be King Canute in banning flexible labour relations.
So what are our politicians proposing in this context of chronic uncertainty, a broken income distribution system and a daunting ecological crisis? Ad-hoc window dressing that seems deliberately intended to avoid the reality that we have a transformation crisis on our hands.
Tax cuts would benefit the relatively secure; price freezes would cost the public finances and distort markets; raising the minimum wage would bypass the precariat and those outside the labour market; and targeting more benefits to those on Universal Credit would merely bolster an unspeakably punitive and inequitable scheme.
As William Beveridge wrote in his 1942 report, which led to the post-1945 welfare state, “It’s a time for revolutions, not for patching.” The strategy should be one of dismantling rentier capitalism and recycling rental incomes to everybody. Above all, the base of social protection should be the provision of ex-ante security. People – all of us – must know that, whatever the shock, we will have the wherewithal to survive and recover.
The case for a basic income
Politicians should be looking at ways of introducing a basic income for every UK usual legal resident. It would not replace all existing benefits, and would have to involve supplements for those with special needs. It would have to start at a modest level, but would be paid to each person, equally and individually, without means-testing or behavioural conditionality.
Newly arrived legal migrants would have to wait for a period (which does not mean they should not be assisted by other means). And to overcome the objection that it should not be paid to the rich, tax rates could be adjusted to be more progressive.
Experiments with basic income have shown it results in improved physical and mental health, less stress and more work
Before coming to how to pay for it, I want to emphasise the reasons for wanting a basic income for all. The fundamental justification is moral.
First, it is a matter of common justice. Our income owes far more to the contributions of our ancestors than to anything we do ourselves. But as we cannot know whose ancestors created more or less, we should all have an equal ‘dividend’ on the public wealth. After all, if we allow the private inheritance of private wealth, there should be a public equivalent. Pope Francis has come round to that rationale in his support for basic income.
It is also a matter of ecological justice: the rich cause most of the pollution, while the poor pay most of the costs, primarily in diminished health. A basic income would be a form of compensation for that.
Second, it would enhance personal freedom, including community freedom. Although paid individually, that would not make it individualistic. Experiments, as summarised elsewhere, have shown that everybody having a basic income induces stronger feelings of social solidarity, altruism and tolerance.
Third, it would enhance basic security, in a way that means-tested, conditional benefits cannot possibly do. Insecurity corrodes intelligence and induces stress and loss of the capacity to make rational decisions. We are experiencing a pandemic of stress and rising morbidity. None of the existing policy proposals would reduce that.
Finally, there are instrumental reasons. Experiments with basic income around the world have shown it results in improved physical and mental health; less stress; more (not less) work; and enhanced social and economic status for women and people with disabilities.
Basic income is not a panacea, but it should be part of a transformational strategy, complemented by putting public utilities – most notably water – back in public hands and by rent and energy price controls. Fiscal reform is required to fight against ecological decay while helping to overcome chronic uncertainty.
Progressives should accept that taxes on income and consumption should be raised – because they are relatively low in this country, and because more revenue is needed to pay for our public services and, in particular, to reverse the privatisation of our precious NHS.
Some people, including (previously) the Labour Party, have called for the provision of universal basic services rather than a basic income. As laid out in a 2019 report by University College London’s Institute of Global Prosperity, this would cover services such as housing, education, healthcare and transport.
But this goes too far into state paternalism, and would not help with the nature of our current crisis. People need assured financial resources to overcome the economic uncertainty and lack of resilience.
No government can know the particular needs of particular people, which means that subsidising some services over others would be both arbitrary and distortionary. What would ‘universal basic housing’ look like in Britain? One bedroom per person with a kitchenette and a toilet, with a bedroom tax for any extra room? What about food and clothing? Better to move towards enabling people to decide on their own ‘basic needs’.
How to pay for it
In addition to higher taxes on income to pay for services, we should think of the ‘commons’ – that is, all that inherently belongs to every citizen of the UK, beginning with the land, air, water and sea, and the minerals and energy beneath. Over the centuries, these have been taken from us illegitimately, without compensation to us or our ancestors. This includes all the land that has been enclosed, the forests and public spaces that are being privatised, the sea bed that is being auctioned off, and the oil and gas sold for windfall gains and given away in tax cuts for the wealthy.
This line of reasoning leads to the proposal that levies should be put on elements of the commons that we have lost, with the revenue put into a ‘commons capital fund’, which would be charged with making ecologically sustainable investments, from which ‘common dividends’ would be paid out equally to every citizen.
The initial base for paying for a basic income would be conversion of the personal income tax allowance, which benefits higher-income earners and contradicts the view that in a good society everybody should be a taxpayer. If the revenue from that were put into the fund, it would provide enough for £48 a week for every adult.
Then add a 1% wealth tax. This is justifiable for many reasons. Wealth has risen from three times GDP in the 1970s to seven times now; wealth inequality is much greater than income inequality; and more than 60% of wealth is inherited and unearned. A 1% wealth tax would be sufficient to pay a modest basic income.
A lot more revenue could be raised by rolling back many of the 1,190 subsidies and tax breaks given mostly to wealthy people.
A modest land value tax, based on the size and value of land, is also justifiable on common justice grounds. Then add a carbon tax. It’s vital if we are to reduce greenhouse gas emissions and global warming, but will only be politically popular and feasible if all the revenue from it is recycled as part of common dividends.
Other levies could include a ‘frequent flyer levy’, and a ‘dirty fuel levy’ on all those cruise liners and container ships that keep their engines running all the time they’re in port, poisoning the atmosphere and causing widespread cancers.
This is the basis of an income distribution system suited to this current era, with supplements for all those with extra needs. It’s an approach that would open up a vista of multiple forms of work, unpaid as well as paid, putting care at its centre.