Universal Basic Income: Some Political and Economic Advantages

Universal Basic Income:
Some Political and Economic Advantages

Sean Gabb
16th August 2020

My vision of Utopia has remained constant since I was thirteen. It is a nation of free citizens, keeping jealous watch over a state strong enough to defend the borders and keep a minimal internal peace, but restricted from doing anything else. Sadly, this vision is further out of reach today than when I was thirteen. The modern British State is a vastly extended despotism, limited only by incompetence and corruption. It is also a despotism to which the majority of people, with whatever success and at whatever overall cost, look for immediate benefits. Libertarians and conservatives may dream of a coup in which the present order of things will be torn apart and replaced with something more natural and sustainable. But we might more usefully dream of winning the Lottery or being offered three wishes by a fairy. Any scheme of change requires the acceptance that, even if it can somehow be captured, the British State cannot in the short and medium term be minimised.

Given enough political will at the top, an end could be made in days to political correctness and lifestyle regulation. Beyond the readership of The Guardian, I see no yearning for political censorship and surveillance. I doubt there would be a general outcry if the BBC were closed, and the universities purged and the schools depoliticised. None of the fake charities would be missed. Ditto the Green agenda and most bureaucracies of intrusion. The health and welfare budget is another matter. Regardless of how little health is preserved and how little welfare is delivered, any government that announced an attack on that budget would lose immediate legitimacy. A riot of sacked BBC apparatchiks could be dispersed by a half-hearted truncheon charge. Touch the welfare state, and the demonstrations might fill a triangle tipped by Marble Arch, St Clement’s and Parliament Square.

This being said, pragmatic acceptance is not the same as acceptance of present arrangements. The principle of universal welfare cannot be touched. Its modes of provision can and should be harmonised with a new and more libertarian and conservative order of things. I will leave aside health and education. I have already discussed these here and here. I will instead focus on welfare entitlements. I propose abolishing every present entitlement, including old age pensions, and replacing them with a universal basic income.

If I am no expert on public finance, here are some figures. According to the Office for National Statistics, the British State spent £264bn on welfare payments in 2016-17. According to Indexmundi, the population of the United Kingdom over the age of 25 was about 46 million in 2019. I will, for present purposes, assume that these are all British citizens. They are not, and non-citizens would be strictly excluded from the scheme I am proposing. But I see no benefit in excluding them for purposes of costing. Now, divide one figure by the other and we get about £5,700 per head, or £110 a week. Because there would be no means-testing, payments could be automated, perhaps through the existing tax system. Payments should be made free of tax. It is not a generous figure. However, it would mean a guaranteed annual income of £11,400 for a couple. For most couples, this would be just about liveable. Even low earnings for one member of a couple could double the figure.

Here are some benefits of the proposed scheme:

First, it would end financial uncertainty for millions. As said, this basic income is not generous. Again, as said, it is just about liveable. The present system is both more and less generous almost at random. Those who know how to tell the right lies, or to organise themselves into the right pattern of fecklessness, make more than I earn – sometimes considerably more. Others fall through the net and live from hand to mouth. A universal basic income would put a solid if low floor beneath every adult in the country.

It is, I accept, a little strange of a free market libertarian to speak of giving economic security to the poor. But I am also a bit of a conservative. We should have the legal right to be left alone by the State. At the same time, we should accept that we have moral claims on each other, and that these claims should sometimes be mediated through the State.

Second, and following from the first, it would contribute to faster economic growth. The public sector is stuffed with people whose employment is justified so far as it depresses the unemployment figures. A universal basic income would make these as non-controversial as the trade figures have become. No doubt, sacking hundreds of thousands of public sector workers would reduce their incomes – but it would not often be a catastrophic reduction: and, once a further point, not yet mentioned, is taken into account, it might be a catastrophic reduction for very few indeed.

Obvious gains in efficiency could be had from computerising what is now administered by humans, thereby reducing costs. Further gains would come from abolishing whole branches of government. The costs of public sector workers is not always just the salaries they draw, but also the work that is found for them to do. With one hand, they take money from our pockets. With the other they hold us back from a more efficient filling of our pockets.

I turn to the private sector. The present benefit system joins with atrocious levels of education and training to provide a large and generally docile pool of cheap labour. Working tax credits in particular are a subsidy on the employment of the unskilled. We have little of the incentive that other countries like Japan have to automate. There are times and places – America after 1890, for example, or modern China – where cheap labour is a means to general enrichment in the long run. In our own country, cheap labour is a hindrance to economic progress. It makes sense for any one enterprise to remain or to become labour-intensive. The overall result is mass-employment of the unskilled in sectors where no productivity gains are to be expected. I think of most retail. I think also of much agriculture and some industry. I assume, by the way, but will not discuss, that the voluntary unemployment of the unskilled will not be balanced by increased immigration.

Third, I am old enough not to believe that most of the voluntarily unemployed would open micro-businesses or use their new security to enrol in worthwhile training courses. Many would sit at home feeding themselves on BOGOF multi-packs from Aldi. But some would make themselves more productive. They would of necessity make themselves happier. Their own success would be a good in itself. It would also provide a valuable example to those around them of what forethought and enterprise could achieve – an example that is presently lacking in those places where it would be most valuable. This might not inspire the present generation, but might inspire the next.

Fourth, it would encourage stable unions. I do not think anyone can live well on £5,700 a year. Two can scrape by on £11,400. Two can live rather well if one goes out to work and the other stays at home to raise the children. The present system gives an incentive for feckless young men to drift from one young woman to another, each of whom lets herself be impregnated in the sure knowledge that she is married to the State. The universal basic income I suggest would put an end to these arrangements. For the avoidance of doubt, I have no objection to sexual pleasure. My objection is to the large and growing underclass that present arrangements have brought into being.

Fifth – and here is one of the main benefits – there is no reason for the basic income to remain at the very basic level I have mentioned. The present welfare budget is divided under many headings, and each of these is one item among many of government spending. There is no general conception of government spending as a zero-sum game. Even if there were, drawing present forms of welfare is at least slightly disreputable, and hardly anyone will confess to benefitting from larger entitlements. But let us combine all benefits into a single pot, and divide its contents by a simple calculation. Do this, and it becomes obvious that every pound spent on encouraging Sikh transsexuals not to smoke, or building offshore wind farms, or paying a council head clerk as much as all the Secretaries of State combined, is a pound not in the welfare pot – a welfare pot distributed by right rather than by means-tested need.

With my scheme, there might be no pressure to cut the overall budget. But there would be pressure to reallocate the existing budget. This, rather than specific arguments of ideology or cost and benefit, would be the engine for bringing about the reductions of government that I mention above. In 2016, to take one obvious target, the Government spent £13.4bn on foreign aid. Add this to the initial welfare pot of £264bn, and we raise the basic income from £5,700 to just over £6,000. According to Greenpeace, writing in 2019, government spending to fight “climate change” was £17bn. Add that to the pot, and we get £6,400 per head. And this may be just the beginning. I have mentioned sacking hundreds of thousands of public sector workers. Their salaries could go straight into the pot. So too the rents saved on all the office buildings that presently house them. I will mention but not analyse the pharaonic infrastructure projects that excite government ministers, plus the oceans of money handed out to the various regional governments. But whatever I mention is just the beginning. Even if we strip out the equality commissars and the health fascists and the outright wreckers, and if we discount the welfare budget, the Government is still spending upwards of half a trillion on God-knows-what. Much of this, I have no doubt, goes to the rich or the quietly malign. Paying every adult in the country £12,000 a year – something we could do and still have money left over for a decent navy – would be vastly less harmful than most present spending.

Sixth, and following again from the first, I miss the democratic England of my youth. In 1982, when I was at university, I had an argument with one of the lefties about the morality of the Falklands War. One of the middle-aged waitresses in the coffee bar stood close by us in silence for a few minutes, before exploding over my opponent. She spoke her mind with all the security of someone who knew there would be no complaint, no investigation, no warning or summary dismissal. Of course, I expect efficient service when I am spending my money. At the same time, I am sick of being treated like royalty by waiters and shop assistants who are scared every minute of their working lives of a call to the back office to deal with some piffling complaint. I want once again to live in a country where everyone, high or low, feels no reluctance to speak his mind, or – so long as I am not expected to pay for its consequences – to break with convention.

Now to the objections and my answers to them:

First, a universal basic income would remove incentives to work. The answer here is to look at the present system.

Second, it would make us dependent on the State – and that would be an end to all our freedom. What the State can give, the State can take away. Again, the answer is to look at the present system. We live in an authoritarian police state where unpotemkin dissidence is ruthlessly punished. A universal basic income would be a matter of right, not of arbitrary discretion. It would be rather like the payments for jury service that enhanced Athenian democracy.

Third, some would lose from the levelling of benefits. The old age pension, for example, is more than the initial £110 that I suggest. My answer for the old is to top up the basic income until its gradual rise was more than the present level of pension. We might also grant half of a deceased’s income to the surviving spouse. Then we have those with many children whose tax credits and other benefits run to thousands a month. My personal answer is – tough luck. I never asked anyone to have fifteen children, and I object to paying for them, especially when I have only one. A more emollient answer would be a tapering payment over five or ten years in addition to the basic income. But there should be no more public subsidy on unlimited procreation.

Fourth, I have excluded everyone under the age of twenty five. I do this partly because my cursory research failed to give me the figures for starting the benefit at twenty one or eighteen. A better argument is that the young should be encouraged to look after themselves or to remain with their parents until they are ready to make their way in life.

Fifth, a general objection to this kind of scheme is that the benefits would be universal. The Duke of Westminster would get his basic income. So would I. So would a bus conductor and his wife and three children. I suppose we could tax the benefit when incomes rose above a certain level. But I am not sure if this would be the right approach. The benefit of these schemes are that they are universal and uncontroversial. No shame is attached to receiving them. Short of being put in prison, there are no grounds for withdrawing them. A universal income would be more basic than one aimed at the poor. On the other hand, there would be no welfare trap, and a universal basic income would be a more stable settlement than anything more partial. It would be more stable because many more people would benefit than the actually poor. People like me would benefit from a roundabout increase in our tax allowances. Yes – in an ideal world, it would be better if our taxes were just cut. But an ideal world is not on offer. This scheme has the advantage of diverting government spending from bad or useless ends to supporting the poor, while taking from the rest of us with one hand and giving back with the other.

Sixth, it might lead to a rise in immigration. But I doubt this. The benefits would be confined to citizens, and there would be a raised awareness of the costs of unproductive immigration when anyone with a calculator could divide the welfare pot by the adult population. The only immigration likely to increase would be of those whose presence increased the welfare pot. And we might finally take a more Athenian approach to the granting of citizenship.

Seventh, my notional increase of the basic income to £12,000 per adult would bring the total cost of the scheme to £552bn. This is an odd suggestion from a free market libertarian – even one with conservative leanings. My answer is to repeat, that, so long as it came from a reallocation of the existing budget, it would be an improvement on how the Government presently spends our tax money. A further point is that, so long as there were the efficiency gains I have suggested, the cost would shrink as a percentage of gross domestic product.

There is a further objection – that the majority might not be satisfied with increases in this basic income by reallocations from existing budgets, but would vote for politicians who promised a thorough plundering of the net taxpaying classes. This is a possibility. On the other hand, it has always been the potential of the welfare state we presently have. It has not happened. The objection is a variant of the argument some Victorian conservatives made against extending the franchise – that the enfranchised poor would elect a government of Levellers to destroy all property. They were wrong. They were wrong because the percentage of the actually poor shrank markedly after about 1850, until, at some time in the last century, they ceased to be the majority. They were also wrong because the democracy that came into being after the 1867 and 1885 franchise extensions had no place for outright socialism. This democracy was used to shift power from the landed classes to a new and statist middle class. This new class legitimised itself for the first few generations by talk of helping the poor. But its main object was always to expand the State to provide wealth and status to its own members. Now it has turned cultural leftist, this new class is more than it ever was the only enemy. The logic of the scheme I am suggesting is fatal to that class. It makes government spending into a zero-sum game in which seventy thousand social workers and an army of anti-spoking activists must compete for funding with the managers of a welfare pot that offers tangible cash benefits to the poor and the not-so-poor. I say that fears of a levelling orgy are misplaced.

So there it is – my suggestion of how to end poverty by all reasonable definitions and to unfund the agencies of our police state. Since the 1970s, the argument over government spending has taken place between those who want more of it, and present this as good for the poor, and those who can be accused of wanting to start with Public Health England, but having welfare as their real target. My scheme reconfigures the argument. It becomes a tug of war between those who want a bigger welfare pot and those who want a managerial police state. It would, I grant, be preferable to cut taxes and regulations in the conventional way. But this is not at present other than wishful thinking. It has no democratic constituency. There probably can be a constituency for a system that takes £100 from you and me, gives us back £25, and gives nearly all the rest in cash to the poor. This would be a minimal state of sorts.

I look forward to any objections.

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