As David Cameron allegedly plots a return to frontline politics, we should recall his government’s responsibility for welfare reforms such as Universal Credit and Personal Independence Payments that have brought deprivation and misery to Britain’s poor and vulnerable. As it readies itself for power, the Labour Party must envision a compassionate welfare state legitimately built upon social justice.
Shadow Chancellor John McDonnell has promised that the next Labour government will conduct a root and branch review, and suggests that this could include trials of a Universal Basic Income (UBI). UBI being a simple but radical concept: that every working age adult, regardless of wealth or income status, should receive regular, unconditional payments from the state. At the greatest extent, this could replace the traditional welfare state which grants money based on applications and means-testing (excluding pensions and allowing for supplemental support for disabilities).
Previous advocates of UBI range from American revolutionary Thomas Paine in the 18th century to Martin Luther King in the 1960s, but the policy has really come into vogue in recent years, with Switzerland holding an (unsuccessful) referendum on its introduction and French Socialist presidential candidate Benoît Hamon including it in his 2017 platform. While opponents view UBI as reckless and impractical utopianism, it can also be understood as a quintessentially centrist idea.
For the left, UBI is an obvious method of tacking inequality and guaranteeing a social safety net. UBI pilots in Finland and Toronto, Canada have made a remarkable improvement to recipients’ lives: helping them to return to education, start small businesses, pay for mental health counselling and volunteer in their communities. For the right UBI, or another basic income like the “negative income tax”, has the appeal of shrinking state bureaucracy and eliminating “welfare traps”. This ideological ambiguity has made leftist critics wary of UBI. They point to enthusiasm from billionaire plutocrats such as Elon Musk, Jeff Bezos and Mark Zuckerberg, as evidence that UBI is a wolf in sheep’s clothing that would serve the interests of the ruling class and excuse worker exploitation.
Yale University’s Alyssa Battistoni describes UBI as “a transfer of responsibility for a living wage from private employers to the public”. The Joseph Rowntree Foundation’s Chris Goulden argues that UBI is also unaffordable, and that a more realistic approach would be to make preexisting benefits more generous and less conditional, in addition to increasing tax allowances for mid-to-lower earners. Labour should bear in mind that broader tax increases, currently pragmatically resisted by the Corbyn leadership, could provide funds for these proposals.
UBI, of course, cannot address all of poverty’s various causes. The insecurity of zero hour contracts, and the challenges of the gig economy, are culprits as much as a Tory “national living wage” which is not actually a living wage. Labour already has a suite of policies designed to substantively address social mobility and the cost of living: including postwar-style housebuilding and tenants’ unions, the National Education Service, public ownership of utilities, and universal childcare and school meals. McDonnell’s plans for employee stakeholding could pave the way for a significant redistribution of power and wealth to workers. Realistically, these policies are more likely than UBI – often perceived as being about people getting ‘something for nothing’ – to receive widespread popular support.
Additionally, a universal basic income would of course need to be paid from public money. A University of Bath study estimated that a UBI of at least £72 per week would require £288 billion per year in additional tax revenues. Proponents claim that the expense would be cancelled out by further redistribution, but the cost still seems exorbitant when Tory cuts continue to decimate public services. There is, however, a compelling alternative to UBI that achieves the same ends while being funded directly by a new revenue stream: the universal dividend, championed by former Greek finance minister Yanis Varoufakis. Under this policy the state would purchase a “public percentage” in capital, most notably in technology firms that have thrived from public investment, and use the dividend to fund a basic income and/or other public services.
We can imagine the Tory press reacting to this policy with anti-Marxist fury, but it is a social democratic idea at heart. The private sector would be compensating the state for the support it relies on to function, while also providing the wider economy with a Keynesian stimulus. While UBI is far from a one-size-fits-all solution, it does highlight the virtues of universalism, and the universal dividend emphasises how capitalism could be harnessed for transformative social change. In a post-crash age of rapid automation and gross inequality, the left has a duty to keep all options on the table.