Howard Reed and Stewart Lansley, Universal Basic Income: An idea whose time has come?

Howard Reed and Stewart Lansley, Universal Basic Income: An idea whose time has come?  Compass, 2016, 35 pp, free to download here

This new report from Compass is a most welcome addition to the increasingly widespread debate about Citizen’s Income. In the preface, Ursula Huws offers a concise description of changing employment patterns, and calls for a benefits system fit for the future. The report then outlines the case for Citizen’s Income in terms of the secure financial base that it would provide in an uncertain world, in contrast to today’s complex and punitive benefits system. The report then extends the argument of the preface by predicting a highly automated future and proposing Citizen’s Income as a necessary social protection in the midst of such major change. We might legitimately respond that we do not know what the future holds for computerisation, automation, and the employment market, and so cannot make such predictions: but the conclusion of the argument would be the same. In a context of uncertainty, a rigid benefits system posited on the economic and social structures of a bygone era is highly unlikely to be appropriate, and only a far simpler system that does not need to be adapted as the world changes can be guaranteed to be appropriate.

The report follows the character of the current debate in moving quickly into questions of feasibility. It models two schemes that mirror schemes A and B in Two feasible ways to implement a revenue neutral Citizen’s Income scheme, [1] and concludes that the first scheme, which would abolish most means-tested benefits, would be difficult to implement, but that a scheme that retained means-tested benefits would contain a genuine Citizen’s Income and would be possible to implement. (The authors call this a ‘modified’ scheme, and then a ‘hybrid’ one. It is not. It is a genuine Citizen’s Income scheme that contains a genuine Citizen’s Income. The abolition of means-tested benefits is not intrinsic to the definition of Citizen’s Income.) The authors find that this second scheme would reduce poverty levels – significantly so for children – and would reduce the level of inequality. There are minor differences between the report’s schemes and the schemes published in Two feasible ways to implement a revenue neutral Citizen’s Income scheme, and microsimulation suggests a net cost of £8bn per annum for the report’s second scheme – which, as the authors suggest, is a small price to pay for the reductions in poverty and inequality that would be achieved.

Looking to the future, the report proposes that the additional costs of what they call a ‘full’ Citizen’s Income scheme – one that abolishes most means-tested benefits – should be met by creating a social wealth fund. Whether this proposal belongs in this report is an interesting question. Stewart Lansley’s recent book on social wealth funds, A Sharing Economy (Policy Press, 2016), has filled a significant gap in the literature, and there are lots of good arguments for a social wealth fund: but there is no necessary connection between Citizen’s Income and a social wealth fund. Such a fund could be used for a variety of purposes, and there would be a variety of ways of funding a larger Citizen’s Income, of which a social wealth fund would be only one. But there is no harm in flying these kites, because sooner or later we shall need a Citizen’s Income, and although we would probably start with something like the first scheme trailed in this report, a more substantial Citizen’s Income would be useful in the longer term.  To start to discuss how it might be funded could be helpful.

This report is a most welcome contrast to the proposal put to the Swiss population in their recent referendum: a proposal that emphasised a Citizen’s Income’s desirability but neglected questions of feasibility, that contained no suggested Citizen’s Income levels or funding methods, and that therefore allowed the proposers’ suggested level of £400 per week to doom the proposal. Compass’s Universal Basic Income: An idea whose time has come? proposes an entirely feasible Citizen’s Income scheme, and alongside the recent report from the Royal Society of Arts it has already contributed constructively to the UK’s current debate on Citizen’s Income. That debate has already moved on from Citizen’s Income’s desirability to its feasibility, while not neglecting continuing questions of desirability. There is now a sense in which the debate can move on from financial feasibility to additional feasibilities and to questions of implementation. We shall look back and see the Compass report as an important element in that process.

[1] Malcolm Torry (2015) Two feasible ways to implement a revenue neutral Citizen’s Income scheme, Institute for Social and Economic Research Working Paper EM6/15 (Colchester: Institute for Social and Economic Research, University of Essex),