Labour may offer basic income at next election
Labour’s big idea would be too expensive and socially destructive. It is also not the answer to automation
LABOUR is considering giving voters a universal basic income worth thousands of pounds a year if the party wins the next general election.
John Mcdonnell, the shadow chancellor, said he had commissioned a review into the policy. The concept involves ditching traditional, meanstested benefits and replacing them with a flat-rate payment to all citizens.
A year-long scheme involving 2,000 participants was launched in Finland in 2017, with each individual receiving a €560 (£490) monthly basic payment, equivalent to £5,880 a year.
Mr Mcdonnell told The Independent: “It’s one of those things I think we can get into the next manifesto and see.”
Academics at Bath University have said in a paper that the policy would cost £427 billion to implement.
Brandon Lewis, the Conservative Party chairman, said: “This handout would cost hundreds of billions of pounds and is a kick in the teeth to hardworking taxpayers, who would have to pay for it through huge tax rises and more borrowing.”
Universal Basic Income – Labour’s big new idea announced this week – is normally advocated by thinkers who worry that artificial intelligence will destroy jobs and the economy as we know it. Many of the neo-marxists who run today’s Labour Party, however, support it not because they fear this change but because they hope we will soon be “liberated” from having to work at all.
“UBI”, as the wonks call it, is a simple idea. In its purest form, it would see the Government scrap all traditional means-tested benefits and replace them with a single, unconditional flat-rate payment to all citizens. Because the payment would be made whether or not the recipient was in work, there would be no disincentives to find a job. And because the payment would be universal and flat, there would be little need for complex bureaucracy.
It does not take much inspection, however, to realise that the policy is a dud. A report by the Institute for Policy Research at the University of Bath summed up the problem:
“It is impossible,” it concluded, “to design a UBI scheme which is fiscally feasible, has no adverse distributional consequences, and is sufficiently generous to eliminate the need for means-testing.”
In other words, UBI is either prohibitively expensive or it is less efficient than existing policies at reducing inequality and poverty. And this is down to one obvious flaw: the administrative savings caused by UBI’S simplicity are not nearly enough to compensate for the cost of making universal payments of the same value as means-tested payments.
To pay UBI at the existing level of benefits, the University of Bath calculated, the Government would need to eliminate the personal income tax allowance and the national insurance lower and upper thresholds and still increase income tax by four percentage points. And they are not alone in making these calculations: prominent think tanks, including the Resolution Foundation and respected economists like John Kay, agree. The only alternative to eye-watering tax rises would be welfare payments to the needy that are less generous than those on offer today.
Yet there is an extraordinary ideological range of support for Universal Basic Income. Libertarians on the Right who like UBI see it as a means of cutting welfare bills and – although there is evidence that it achieves the opposite – encouraging people into work. Those on the Left who favour UBI – and have no qualms about taxing and spending more – see it as a means of increasing welfare payments not just for the most needy but for everyone.
But why the sudden fascination with a policy that does not work? In the last two years, it has been piloted in Canada and Finland, and there are proposals to do the same in Scotland and now England.
The answer is the speed with which the labour market is changing. Estimates vary but some predict that as many as half of existing jobs are vulnerable to robots. Some experts fear that automation and artificial intelligence are taking us towards a “barbell economy”, in which wealth is concentrated at one end, the masses – unemployed or low paid – are at the other end, and there is no longer a middle class in between.
So for some a Universal Basic Income is the emergency life raft for the scary future that awaits us. But for radicals on the Left, a life without work is the opportunity to put history right and finally realise their Marxist dreams: new technology, and artificial intelligence in particular, will mean we can finally move beyond capitalism.
The new communist manifesto will demand, in the words of one advocate, “the full automation of everything and common ownership of that which is automated”. The result will be “fully automated luxury communism”, in which we will all receive a Universal Basic Income, and, alongside it Universal Basic Services, including free housing, healthcare, and higher education.
Automated or not, however, the problems with this new communism are the same as the problems with the old communism. Without pricing mechanisms, rationing for scarce resources like housing can be managed only by queues or corruption. There can be no progress without incentives for people to innovate and work hard for their families. And work is not something to escape but a way of achieving knowledge, skills, independence, dignity and status. Unemployment, on the other hand, is associated with poor mental health, crime, drug abuse and family breakdown.
And yet unemployment – conventionally something politicians try to avert – is what these ideologues are offering us. Sensible Labour politicians, and pretty much all Conservatives, know that paying people to do nothing is not the answer. But it is the responsibility of mainstream politicians to grasp the big issues of our time – new technology, globalisation, the changing nature of work – and start to work out an alternative way forward. Otherwise fully automated, and very dangerous ideas await us.
READ MORE at telegraph.co.uk/opinion