Social Market Foundation, October 1998 (Review by Hugh Baillie and Judith Diabate)
In this chapter Lord Desai claims to answer two questions: is a Basic Income affordable? If so, should it be universal? The theoretical arguments in favour are not so convincing when one looks at the figures. Desai argues that the current system of social security (i.e. the emphasis on means tested benefits and the current vogue for welfare retrenchment) is based on political ideology rather than economic theory. The past 15 years have seen a ‘chronic demand’ for the reduction of social security benefits as a share of the PSBR. Despite the enthusiastic adoption of managerial orthodoxy aimed at achieving efficiency it has not been possible to reduce the cost of welfare. The current vogue for the reduction and/or ‘targeting’ of welfare benefits is discriminatory and has led to an increase in ‘social problems.’ Furthermore, the steady increase in the welfare budget can be seen as a displacement of other social policies (i.e. the reduction in the public housing stock has led to an increase in the demand for housing benefits; the extension of means-tested benefits has led to a corresponding increase in those taking up sickness benefits). This in turn distorts Treasury figures and makes any projections based on these figures fundamentally flawed.
By challenging the implicit assumptions and ideologies within the current benefits and taxation system, Desai presents a coherent and accessible argument for the introduction of BI. However, in arguing that the current system undermines the two-adult household, Desai is implying that this is a desirable norm and (with the current government policies designed to promote and support two parent families and marriage) appears to be suggesting that alternative household arrangements (i.e. single parent families and same sex relationships) are based on purely economic self-interest rather than a positive choice. Instead of indicting free-market premise human nature and motivation, Desai tacitly supports them.
Desai proposes a Basic Income of £2,600 for all adults of voting age (£3,250 for those over 60). This could be financed by an increase in income tax (to 35%) combined with the abolition of means-tested benefits (i.e. Job Seekers Allowance, State pensions and Income Support). The main thrust of the argument is that the introduction of a Basic Income would not be as expensive as some have argued, if coupled with a fundamental overhaul of tax allowances and reliefs and/or an increase in the income tax rate. Lord Desai concludes that yes, a BI is affordable, should be universal and should be unconditional. Fine words, but given the rather confusing calculations much of the argument for a Basic Income is lost.