Is Labour planning a universal basic income?

Social Development Minister Carmel Sepuloni has announced the appointment of an 11-strong “mega-panel” to review the welfare system. It consists of some of New Zealand’s leading advocates for increased state intervention and has been tasked with looking at fundamental aspects of our welfare system and its purpose.

Its remit includes removing stigma for those receiving a benefit and ensuring people have adequate income.

It has been panned as a highly politicised panel but has the potential to be one of the more radical in the bevy of reviews that have defined the Government’s work in its seven months to date.

On the basis of Sepuloni’s more recent comments, it could be argued that her proposed welfare “overhaul” amounts to little more than a cursory removal of a few obligations on those in receipt of benefits, such as ensuring their children are up to date with health checks and enrolled at school — not a fundamental reform of the benefit system.

But I think that’s wrong. The panel’s real purpose, it would seem, is to develop the blueprint for universal basic income in New Zealand, or at the very least a pilot. This could end up being Labour’s flagship 2020 election policy.

A basic income would see everyone receive a minimum monthly payment from the Government. It’s a highly controversial idea but not really new. Indeed, the idea of an income like this has its roots not in the musings Gareth Morgan advanced last year, but in Thomas More’s Utopia written in 1516. It has divided economists across the political spectrum from libertarians such as Milton Friedman to fashionable doyens of the political left like Thomas Piketty.

Basic income strikes at the heart of debating what the state’s role should be as we confront major and unavoidable changes in our society and economy and it could well be the dividing line of the next election.

Supporters of a basic income argue it is administratively cheaper and fairer than a clunky means-tested benefit system that is disproportionately costly in comparison to the social outcomes it has achieved. It would apparently incentivise higher wages and remove the stigma that people face when receiving a benefit, and offer security to those whose jobs are displaced by technological change.

At the very least, the idea is worthy of debate but implementing it would come with massive risks.

Opponents of a basic income argue that in practice it is hugely expensive, giving cash to those who don’t need it as well as those who do. A Treasury document last year showed that implementing it in New Zealand would require the average rate of tax to rise to over 50 per cent.

There are further practical questions arising about whether basic income would replace the benefit system entirely or just part of it, as well as the moral impact of removing requirements on those in receipt of public money to look for work.

Basic income was floated by Labour at last year’s election with Sepuloni endorsing it as a means of destigmatising those on benefits provided it was affordable. Indeed, from the Opposition benches, Jacinda Ardern said a debate on universal income was inevitable and scolded Simon Bridges for laughing at her. In Government, however, she has yet to make any efforts to advance the idea.

National took welfare reform to the 2011 election and there’s nothing stopping Labour doing the same in 2020. Of course, Labour will need to weigh up the political appeal of campaigning on giving New Zealanders a set amount of cash each month with taxing them at an average rate of over 50 per cent at the same time.

Either proposing basic income is cynical politics and Labour dangled cash in front of the most vulnerable New Zealanders to try to win last year’s election, or we are on the cusp of not so much an overhaul of the welfare system as an overthrow of it not seen since the 1930s and not attempted since Roger Douglas’ flat tax proposal in 1987.