Should there be a Universal Basic Income in the UK?

The idea of a Universal Basic Income (UBI) is being trialled in Wales. Here we ask the main political parties for their verdict on the idea and offer AAT’s own assessment.

Depending who you speak to, a Universal Basic Income (UBI) is an idea whose time has come or an expensive disaster waiting to happen.

The idea is relatively simple, all means-tested benefits are scrapped in favour of an unconditional, non-contributory flat rate of monthly payments given to every adult in the country irrespective of income.

Senior members of the Labour, Liberal Democrat and Conservative parties, put their case below:

UBI would help millions forgotten in the pandemic

Christine Jardine, Liberal Democrat Treasury spokesperson, MP for Edinburgh West

I’m a recent convert to UBI. Two years ago, as the DWP spokesperson at our party conference, I was not in favour of it because I did not think that we should dismantle what we have at the moment, I thought that we had enough problems with universal credit without going back to scratch. However, that was before I had heard the word “coronavirus” and before we arrived at a situation where 4.5 million people in the UK were living in poverty.

UBI would help the people on whom we rely but we often miss: the carers, the people who are low paid. I am thinking of people who have worked long hours to get our food to the supermarket shelves who are not on a huge salary and who could do with some help.

We need something that makes sure that nobody falls through the cracks as we have seen in this crisis: the 3 million people who have had no support and who, regardless of the Government schemes we hear about, still have no support, no financial safety net, no way out. UBI could be the solution.

Two years ago, perhaps, I did not see it, but now I firmly believe that UBI is an idea whose time has come. This time needs something special – it needs us to have the courage that a previous generation had, to do something radical and progressive.

A safety net for 7.6 million who struggle to afford food

Geraint Davies, Labour MP for Swansea West, member of the Welsh Affairs Committee

I’ve repeatedly called on the UK Government to support the Welsh pilot study into a Universal Basic Income (UBI) as a strategy to build back better out of the ashes of the pandemic but they’ve refused, meaning the Welsh Government’s initiative remains a ray of hope in a cloud-filled sky.

Put simply, the UK is gripped by mass hunger with 7.6 million people in “food insecurity” whilst front line workers face the highest Covid death rate and are more likely to be from diverse and poorer communities – and their children face more digital exclusion and less parental educational support as their parents are less likely to be working from home with less formal education.

At such a time, a UBI would be a safety net for which people can train, innovate and work in the knowledge they won’t face hunger in the wake of illness. This may require some fiscal structural engineering, in particular an adjustment of the tax thresholds and a change in marginal tax rates to enable some progressive cost recovery.

We don’t need to go back to the economic illiteracy of balancing the books over the next few years and it would be harmful for the government to do so. We face a choice between inequality and stagnation or supporting productivity and a fairer future. The time for moving forward with a UBI and green recovery is now. Let us choose hope in place of fear.

Incredibly expensive but failing the most vulnerable

Will Quince, Minister for Welfare Delivery at the Department for Work and Pensions, Conservative MP for Colchester

Universal Credit has provided support for over six million people during this pandemic, yet despite this, some still attempt to deride the system, demanding a UBI. The concept – a standard monthly allowance paid to all working-age adults – may at first glance be appealingly simple. In reality, it would be a costly, unfair mess that would leave the vulnerable in society worse off and would disincentivise work.

If each of the 41 million working age adults in the UK were to receive £10,000 a year, the cost would amount to nearly half of the UK’s total budget, an eye-watering £410 billion. Clearly, to fund such an outlay, the government would have to take some very tough decisions.

It would also be grossly unfair and likely leave the most vulnerable in society worse off.  Universal Credit is a sensible, targeted model of welfare support; if your earnings from work start to drop, Universal Credit reflects this, and you get extra payments if you have children, a disability or if your housing costs are higher – all done at a reasonable cost to the taxpayer. How would UBI match this, let alone provide an improved offering?

With such astronomical levels of taxation and guaranteed monthly payments, the incentive for people to work practically disappears. Key industries would very quickly be struggling to recruit, or wages would have to be raised so high that many businesses would become unprofitable.

UBI would provide little benefit to many, not least those who rely on our welfare safety net the most, that’s why countries like Finland abandoned trials. It’s unaffordable, unworkable, undesirable and should be permanently consigned to the bin of failed policy ideas where it belongs.

A nice idea but expensive and problematic 

Phil Hall, AAT Head of Public Affairs & Public Policy

There is little doubt that UBI has a number of attractive features, not least its apparent simplicity and the notion that everyone is treated equally.

However, we are not all equal. Those with disabilities, caring responsibilities and with complex issues have greater needs and often require greater levels of targeted support. The current system is far from perfect, but it does recognise and seek to reflect this reality, unlike UBI.

The costs are enormous. They would surpass the total cost of Coronavirus debts amassed since March 2020 and result in substantially higher taxes for the majority of employees, the self-employed and small businesses. Such rises at any time would be both economically and politically challenging, but in the current environment, probably impossible. 

Whilst sympathetic to the objectives of a UBI, the practicalities are such that questions relating to cost and effectiveness currently appear to outweigh any potential gains.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.