Universal Basic Income

Debbie Abrahams Excerpts

Wednesday 14th September 2016 Westminster Hall

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

As ever, it is a pleasure to serve under your chairmanship, Mr Davies. I start by congratulating the hon. Member for Inverclyde (Ronnie Cowan) on securing this debate, which is most welcome and timely. The contributions that we have heard demonstrate that we are in absolute agreement that our current social security system is not fit for purpose. It is not delivering for claimants, who frankly deserve better, in a whole range of different ways. The Minister and I have exchanged views on that in many debates in the past; the detail is there for everybody to review.

Like the hon. Member for Banff and Buchan (Dr Whiteford), I am open-minded on this issue. I want to see the evidence, and it is very early days yet. We know that the current social security system is not delivering, in particular for people in work on low incomes, who might also go from in-work to out-of-work and back into work. The system is not flexible enough. The rapidly changing labour market is not currently catered for by our social security system. The Bank of England’s chief economist, for example, suggests that 15 million jobs are at risk of automation. These are huge changes, which have been growing over the last 20 years or so. Whether or not those jobs will be replaced by new sectors, we have seen a massive change in the labour market, with zero-hour contracts and insecure, low-paid work—our social security system is just not dealing with that. It is not fit for purpose in today’s labour market and there are huge ramifications for how we adapt and develop our social security system to ensure it can properly respond to the rapidly changing circumstances that workers face, and provide them with the necessary security to build happy and fulfilling working lives.

In the light of those great challenges, the Government’s ongoing failure to implement the universal credit programme is of serious concern, and questions about that were again raised last week. Universal credit was meant to attempt to address some of the challenges around flexible working. Unfortunately, because of the way it has been pared back in recent years, as well as the difficulties with implementation—at great public expense—that has just not happened.

[Kate Green]

Would my hon. Friend accept by contrast that Labour’s working tax credit, after initial teething problems, was very effective in reaching low-paid workers, lifting families out of poverty, making work pay and responding to changing work circumstances?

[Debbie Abrahams]

Absolutely. My hon. Friend has, as ever, hit the nail on the head. I am proud of Labour’s record of lifting nearly 1 million children out of poverty as a result of that policy. It is one of which we should be justifiably proud.

We need to respond to the rapidly changing labour market. The Government’s failure to deliver on the heavily diminished universal credit project has led to considerable problems and it is right that we look at the alternatives out there.

There are, of course, different views on what universal basic income is. At its simplest, it is about all of us having a non-contributory, unconditional lump sum, which would be available to all citizens regardless of means. I would like to explore both the positives and negatives. We have already heard some of the positive arguments, such as its simplicity and the way in which it may lift people out of poverty. Currently, there is very poor take-up of income-related benefits across the country. A mere half of those entitled to income-based jobseeker’s allowance are claiming their entitlement. That might have something to do with the current Government’s sanction regime, but it is undoubtedly affecting the numbers of people experiencing poverty in the UK, which now stands at 13 million people. By offering a simple, single sum to all, UBI may go some way to tackling the poverty that so many of our citizens are facing.

In replacing our complex system of universal contributory and means-tested support with a single, simple mechanism, UBI would also allow for a greater simplification of social security administration, with subsequent savings to the Department’s budget. Again, we really need to look at that.

Secondly—this is a really important point—by offering support to everyone regardless of their circumstances, UBI could go a long way to ensuring that the British public retain trust in the social security system. Over the last six years, we have seen the complete erosion of the social security system and the denigration of claimants. Some of the language that has been used—not by the Minister but by some of his colleagues—is frankly shameful.

The recent Fabian Society report, “For Us All”, demonstrated that the Government give as much tax support to people on high incomes through the shadow welfare of tax reliefs as they do to the poorest in our society. It has been suggested that if we were to replace the Government’s tax reliefs for the wealthy with a single universal payment, the reality that social expenditure benefits us all would be much clearer. It would get us away from the Government’s divisive rhetoric of strivers and skivers. Fundamentally, Labour believes that we should value our social security system, which, like our NHS, is based on the principles of inclusion, support and security for all, should any one of us become sick or disabled, or fall on hard times.

Let me focus on some of the concerns. Alongside those arguments in support of UBI, it is clear that tension could arise between its simplicity and its adequacy in supporting people with vastly differing needs and circumstances, which the hon. Member for Banff and Buchan described. A flat rate could not possibly provide the additional costs associated with disability—approximately an additional £500 a month—which are one of the causes of disabled people being twice as likely to be living in poverty. The Government, with their swingeing cuts, have not recognised that. To allow for variations in need, UBI would need to be supplemented with additional top-ups, increasing its expense and complexity, which is where we get to some of the issues discussed earlier.

My final substantial concern is the cost. A recent report by the Joseph Rowntree Foundation suggested that realising the policy would require not only an increase in income but a considerable shift in the general public’s understanding and knowledge of what and whom a social security system is there for. We know from the British social attitudes survey’s time-series analysis that although superficially there are peaks and troughs of support, when people understand what the system is for, whom it is for and the circumstances in which people make claims, they are a lot more supportive of it, so we need to inform people and extend their understanding.

I welcome this debate and I again thank the hon. Member for Inverclyde for securing it. I look forward to further exploring the strengths of UBI, but we must make informed decisions and evidence-based policy.

[The Minister for Employment (Damian Hinds)]

It is a great pleasure to serve under your chairmanship, as always, Mr Davies. I would like to join the congratulations to the hon. Member for Inverclyde (Ronnie Cowan) on securing this important debate. I thank everybody from all parts of the House who contributed to it. I was particularly interested in the speech of the hon. Member for Oldham West and Saddleworth—

[Debbie Abrahams]

Oldham East.

[Damian Hinds]

I am so sorry.

I think she confirmed that the official Opposition are considering a universal basic income. We already knew that the Scottish National party will look into it further after their conference, and we now know that the official Opposition also see some benefits in it.

[Debbie Abrahams]

I think the Minister is running away with himself. I said it would be useful to explore it. That is not how he characterised it.

[Damian Hinds]

I am grateful for the clarification.

A universal basic income or similar systems that guarantee a minimum income to all have been debated and discussed at some length across the world. This debate has been stimulating and important, and discussing UBI and similar concepts, such as the negative income tax, which was a popular subject for academic debate before UBI, is an engaging activity. Any system that promises protection and, to quote the recent report from the Joseph Rowntree Foundation and Compass,

“freedom of choice for individuals between work and leisure”

is bound to sound appealing. It is difficult to argue with a utopian system that enables individuals to choose whether to work or to engage in leisure activities, alongside all the other valuable things that people do, such as voluntary work and caring.

However, as the Compass report suggested, the big issue with UBI is not whether it is desirable but whether it feasible. Would it be affordable, and could it be introduced in a way that prevented losses among the poorest sections in society? The hon. Member for Inverclyde said we should not turn our back on laudable aims. I could not agree more, but laudable aims are not enough. When Jack Kennedy said he wanted to put a man on the moon, he knew that just willing it would not make it happen. It had to be technically feasible.

The Citizen’s Income Trust, which the hon. Gentleman cited, and the RSA claim to have developed cost-neutral models for a scheme, but less highlighted is the fact that they could do so only by collecting huge amounts of additional tax. I can confirm that that is not everybody’s definition of cost-neutral. As the JRF and Compass report found, the additional tax revenue required to deliver a sustainable UBI would be as much as £160 billion. Such a system is clearly unaffordable, even if we assume that the introduction of a UBI would not affect individual behaviour in the labour market and that nobody would give up paid work as a result of its introduction. That assumption, of course, goes against common sense. It goes against trials that have happened in other countries, which have been referred to, and the principles of this Government and all recent Governments that I know of.

[Damian Hinds]

I think the hon. Lady has the relevant page in front of her; I do not, but I have it nearby. From memory, if she casts her eye about three lines further up above the £8.2 billion figure, she will find another figure for what the impact on income tax will be. That is where the total effect, which is so much greater, is laid out.

[Debbie Abrahams]

rose—

[Ronnie Cowan]

rose—

[Damian Hinds]

I am spoilt for choice. I give way to the hon. Member for Oldham East and Saddleworth.

[Debbie Abrahams]

I am interested that the Minister is picking on one model. We need to be clear that there is a range of different models. He needs to clarify that in his remarks.

[Damian Hinds]

I am more than happy to clarify that the report looks at five models. There are three different proposals that might be called pure UBI models, which would deliver different levels of universal income; then there are two hybrid or adjusted models. The one that the hon. Member for Brighton, Pavilion (Caroline Lucas) referred to was, I believe, model No. 5, so it was the second of the adjusted models. The other ones are more expensive. The pure UBI models are more expensive than that one.

--- Later in debate ---

[Damian Hinds]

If the hon. Lady will bear with me, the claimant count is close to its lowest for 40 years, unemployment is at the lowest rate for 10 years and pay is rising. Our reforms are working. Why would we put all that at risk by implementing a blunt policy of financial handouts that does not treat people as individual human beings, with their own different ambitions and aspirations? UBI would also make no allowance for those with additional needs—a pure UBI system has no additional payments for those with disabilities or variations in housing costs, as the hon. Member for Banff and Buchan (Dr Whiteford) highlighted. Our reforms are about supporting people to reach their full potential, treating them as individual human beings and giving them the opportunity to get on.

Universal credit lies at the heart of the Government’s commitment to reform the welfare state, as the Opposition spokesperson, the hon. Member for Oldham East and Saddleworth, rightly identified. We want a welfare state that is fairer and more affordable, tackling poverty and welfare dependency, while supporting the most vulnerable households. The Government believe that work is the best route out of poverty, which universal credit supports by supporting people into work and by making work, and more work, pay. Together with the rise in the personal tax allowance, investment in childcare and the national living wage, our reforms are ensuring that support goes to those who need it most. There is additional help to cope with essential living costs, such as housing and childcare, and we will ensure that being in work will always pay.

Universal credit is already changing people’s lives for the better. Claimants are moving into work more quickly and staying in work longer than under the legacy system. For every 100 people who would have found employment under the old jobseeker’s allowance system, 113 universal credit claimants will have moved into a job.

[Debbie Abrahams]

There is so much in that sentence, and the preceding ones, that I do not know what to pick on first. The increase in wages is slowing down, according to today’s figures. Also, will the Minister explain why millions of people will be affected by the cuts in work allowances for UC under the Welfare Reform and Work Act 2016? In effect, they will get a £2,000-plus a year cut.

--- Later in debate ---

[Geraint Davies (in the Chair)]

Order. There has been some sedentary commentary, but we have until 17.38, so if people want to ask to make an intervention, please do—obviously, it is for the Minister to allow.

[Debbie Abrahams]

Will the Minister give way?

[Damian Hinds]

indicated assent.

[Debbie Abrahams]

Three out of four people in low-paid work are still in low-paid work 10 years on. How is the system helping them?

[Damian Hinds]

Helping people on relatively low incomes to increase their incomes by moving up the hours scale or the earnings scale is of course an objective that the hon. Lady and I share. That is why we have made the childcare reforms that I alluded to and brought in the national living wage, which will affect people who were previously on the national minimum wage but will also have a ripple effect on pay grades immediately above that. The critical thing, which we come back to time and again, is that universal credit will reform the system, in which there are certain cut-off points on the hours scale, to ensure that there is as smooth as possible a transition through work.

The hon. Member for Brighton, Pavilion talked about less secure employment. It is certainly true that today’s labour market differs in several ways from the labour market of the 1960s and 1970s. Several factors are at play, including the long-term shift to the service sector and the fact that people are living longer. Yes, it is also true that people are much less likely to stay in a job or work for one employer or even in one sector for their entire careers, but it is important to note that three-quarters of the increase in employment since 2010 has been in full-time work. Only around 14% of people in part-time work would prefer to be working full time, although obviously we want to increase the opportunities for them.

Relatively few people in the economy rely on zero-hours contracts, which give people on average around 25 hours of work per week. We know from surveys that most people on zero-hours contracts are not seeking to increase their hours. Although those types of contracts clearly are not even close to being suitable for everyone, there are some people for whom they work. A lot of people on zero-hours contracts are students or people coming back into the labour market, and such contracts can be a good way in. It is absolutely right for the Government to have banned exclusivity clauses that prevent people from taking up other work.