A basic-income floor should be part of a recovery programme

With the UK’s social safety net full of holes, support has grown for a basic income to underpin a mean and means-tested benefits system.

With livelihoods shattered, surging unemployment and falls in household incomes, attention across Europe is turning towards the vital question of post-crisis reconstruction. Covid-19 has already breathed new life into a centuries-old idea, that of providing all with a guaranteed, no-questions-asked, basic income (BI) as of right.

Following a campaign by a European network of activists—Unconditional Basic Income Europe—the European Commission agreed in May to register a citizens’ initiative for an EU-wide BI. If the initiative collects one million signatures from at least seven countries within a year, the commission will be required to respond. In the same month, the full findings of the Finnish two-year trial of an unconditional scheme for a group of 2,000 unemployed found significant improvements in wellbeing, including less financial stress and depression, without affecting work incentives.

In the UK, while Parliament has largely ignored the idea of a BI in the past, 110 MPs and peers, across parties, have lobbied the chancellor of the exchequer, Rishi Sunak, to implement a recovery-linked scheme. These voices have been joined by the Financial Times, which has called for a concerted debate on the merits of a BI.

Many flaws

A key reason for this surge of interest in the UK, previously behind the European curve, has been the exposure of the many flaws in the current benefits system, which is a good deal less generous than in most European welfare states. Even before Covid-19, millions fell through a mean and patchy ‘safety net’, forcing Sunak to introduce a raft of measures to prop up incomes—from wage subsidies to easing of the rules on the core benefit, ‘universal credit’, with its heavy work-related and sanction-backed conditionality. 

While these government measures are welcome, millions have been missing out, opening up a new divide between those who are well protected and those who are not. This special support is also to be rolled back in the coming months.

Another reason for growing interest is the potential power of such a system to mitigate, at speed, the economic fallout from destabilising shocks, which have become increasingly frequent in recent times. If a basic-income scheme were in place today, it would provide an automatic mechanism for injecting cash into the economy on a temporary basis, while also providing a robust safety net through which no one would fall.

Child benefit

A BI scheme would require a single record of all citizens and a system for paying them, neither of which currently exists in the UK. While such a comprehensive list could be drawn up relatively quickly by Whitehall, there is one immediate step the government could, and should, take. It should raise child benefit—essentially a basic income for children—for a limited period. Paid to 12.7 million children in 7.3 million households, this would be a fast and cost-effective way of getting cash to families.

After compiling a more comprehensive list, this emergency measure could be extended to adults. Giving adults (say) £500 a month and children £200 a month (through child benefit) would provide a family of four with £1,400 a month. The benefit to higher-income groups could be clawed back through tax adjustments. 

The upfront cost of such a scheme would be of the order of £15 billion a month (financed by conventional borrowing or some kind of ‘helicopter money’) but much or all of this would be redeemed by faster recovery. This commitment compares with an estimated £10 billion a month for the Treasury’s ‘job retention scheme’ and the cuts to the annual benefits budget since 2010, when Labour lost power, of nearly £40 billion.

Income floor

A recovery measure could then be used as a bridge towards a more permanent basic income, one with lower rates of payment, which would sit below the existing benefit system. There is a strong case for reframing this debate around theidea of a firm and guaranteed income floor, a vision promoted over centuries by a long list of visionary thinkers but yet to be realised. Such a floor would constitute a powerful instrument for social protection in increasingly fragile times, while building an automatic anti-poverty buffer into the system.

It would bring a modest income for the small army of carers and volunteers—mostly women—whose contribution, as the epidemic has revealed, is critical to the functioning of society but greatly undervalued. By providing all citizens with much more choice over work, education, training, leisure and caring, it would also lay the foundation for greater personal empowerment and freedom.

A study by the progressive UK think-tank Compass has shown that a ‘modest permanent scheme’—placing a new, holes-free, income Plimsoll Line under the benefits system—would be feasible, affordable and highly progressive. It would reduce poverty and inequality, strengthen universalism and cut means-testing, and it could be introduced at a cost which could be broadly revenue-neutral. Adopting such a scheme would of course require a wide political debate, but it would put down a marker for the kind of society which could emerge when the crisis subsides.