Universal Basic Income

Geraint Davies Excerpts

Wednesday 14th September 2016 Westminster Hall

[Ronnie Cowan]

I am not here to speak on behalf of either the Irish Government or the Swiss Government, but there is absolutely no indication that providing somebody with a basic income removes the incentive to work. Instead, what it does is to put life choices in front of people, so that if they want to study part time, work part time or work on a farm voluntarily they will not be penalised for doing those things, and therefore it is more likely that people will be prepared to take on work at a level that suits them.

If policy makers regard the basic income idea as simply an academic or abstract economic concept, we will never see it being used to break down the worrying levels of poverty and inequality that we have in the UK. The United States, Canada, Namibia and India have all piloted basic income schemes, while Finland and the Netherlands plan on trialling limited local schemes.

Many Members will be aware that Switzerland has already held a referendum on the implementation of a basic income. Although the proposal was rejected, that shows that other nations already have a more developed understanding of the concept. The charity GiveDirectly has announced that it will launch a full basic income trial. The project will involve at least $30 million and academic support from leading researchers. The trial will fully adopt the basic income model by making regular cash payments to every resident in several villages in Kenya.

I secured this debate with the humble notion that I do not have all the answers to the questions. I hope to facilitate discussion, to debate with my parliamentary colleagues and to consult the relevant organisations about the benefits and feasibility of the basic income concept. I believe it was first proposed by Thomas Paine in his 1797 pamphlet “Agrarian Justice” as a system in which at the “age of majority” everyone would receive an equal capital grant—a “basic income” handed over by the state to each and all, no questions asked, to do what they wanted with. Could this be an idea whose time has finally come?

On 25 May 1961, President John F. Kennedy announced before a special joint session of Congress the dramatic and ambitious goal of sending an American to the moon before the end of the decade and returning him safely. Not for one minute did he intend to design the rockets himself, and he had no ambition that I know of to be on the flight. His not unrealistic and ultimately correct proclamation was built on the premise that he knew America had the time, the money, the brain power and the will to achieve the goal. He challenged the American people to succeed and they rose to that challenge. I stand here in front of the Chamber today and I challenge all of us to work together to create a fairer welfare system—one that does not trap people in poverty, but instead acts as a platform from which the citizens of the United Kingdom can build better lives for themselves.

[Geraint Davies (in the Chair)]

If Members want to take off their jackets, as I already have, they are obviously free to do so.

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[Damian Hinds]

According to this morning’s figures, we still have good wage growth in this country, and at a time when we have low levels of inflation, so real wage growth is also close to 2%. The hon. Lady mentioned universal credit, which is a massive reform to the welfare and social security system, with the smooth taper rate taking away the cliff-edge points at 16, 24 and 30 hours a week. Those are important developments in supporting people into work and up the hour scale.

Some of the extra things we are doing include childcare, with the 30 hours for three and four-year-olds, the tax-free childcare and the increase under universal credit relative to tax credits from 70% to 85% of eligible childcare costs. Those are all critical things that the Government have been doing to reform welfare, and to help people into work and to develop in work.

Our high employment rate shows that an active welfare system that helps people into work, rather than only handing out money to everyone in the same way, is the right approach. Compare that to a system of universal basic income. I have already mentioned the report from Compass and the JRF, which shows that UBI would be prohibitively expensive. The report also shows that UBI would create too many losers among the poorest families and dramatically increase the number of children living in poverty—a point confirmed through modelling even by the Citizen’s Income Trust. UBI would dramatically increase inequality, because it does not account for individual needs and circumstances.

Some, such as the RSA, in what was a reasonable line to develop, suggest introducing adjustments—some such points have been made in the debate—and maintaining additional means-tested benefits alongside a UBI to fix that inherent flaw. The problem, however, is that the more we adjust to counteract the inequalities inherent in a UBI system, the closer we come to something that begins to resemble universal credit.

Universal credit is far more than simply a system of giving out money. It incentivises claimants to move off benefits and it provides tailored support to help people find work and increase their earnings. In contrast to UC, a UBI allows for no work-based conditions on payment to encourage that or to increase incentivisation, and for no complementing support to help people make the most of their potential.

Even the most modest of UBI systems would necessitate higher taxes, as I was discussing just now with the hon. Member for Brighton, Pavilion. Those increased taxes would be combined with the erosion of the tax-free allowance. At the same time, it would cause a significant decrease in the motivation to work among citizens, with unforeseen consequences for the national economy.

Trials of UBI have been mentioned in the report and in the debate today, such as those in the 1970s in the USA and Canada. The results showed that 5% of primary earners moved out of work, and an even greater number among secondary earners. The recent report that we have been discussing highlighted those results, but called that a small drop. From the perspective of a Government who have had to work hard with business—to have the entire economy working hard—to increase the employment rate by 4.3% over the past six years, that does not sound like a small drop to me.

Whereas at first sight a UBI seems attractive, as more scrutiny is given to the idea, the less attractive it becomes. As recently as June of this year, the concept of a universal income was formally rejected by Switzerland, as hon. Members know, with nearly 77% of people opposing the plan in a referendum.

I will briefly address some of the particular points made by hon. Members during the course of the debate. The hon. Member for Inverclyde suggested that our existing system has been driving up inequality, but 300,000 fewer households than in 2010 are now in relative low income. The evidence is clear about the role of work in helping families, and children living in those families, out of poverty. The evidence is strongest about where it is possible to move into work—[Interruption.]

[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?

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[Damian Hinds]

Will the hon. Gentleman forgive me if I press on? The extremely important point of technological change was raised, and that needs to be debated in the House and elsewhere. Some proponents of a universal basic income cite the inevitable changes in the world of work, driven by technological advance and artificial intelligence, which they believe will make many jobs obsolete and increase unemployment. That argument has a long pedigree, which goes back beyond the spinning jenny, and I do not at all belittle the importance of that discussion or the implications of structural change. We must of course be sensitive to such possibilities, but time and again over the decades, as technological change has removed the need for one type of work, it has created another.

In conclusion, although a universal basic income may appear to be desirable at first glance, any practical implementation would, I am afraid, be unaffordable. Because UBI does not properly take into account individual needs, it would markedly increase inequality. Universal credit is the right system for the United Kingdom. This responsible Government are implementing a system that encourages work, supports the most vulnerable and is affordable.

[Geraint Davies (in the Chair)]

I invite Ronnie Cowan to wind up the debate, for a couple of minutes.

[Ronnie Cowan]

Thank you very much—and it is pronounced Cow-an, as in cow, as in “moo”.

[Geraint Davies (in the Chair)]

Cowan—sorry.

[Ronnie Cowan]

I thank the Minister, the hon. Members for Oldham East and Saddleworth (Debbie Abrahams) and for Brighton, Pavilion (Caroline Lucas), and my hon. Friend the Member for Banff and Buchan (Dr Whiteford) for their contributions. I also thank the Members who interceded and kept the debate going, which is an important part of the process: the hon. Member for Stretford and Urmston (Kate Green), my hon. Friend the Member for Caithness, Sutherland and Easter Ross (Dr Monaghan) and the hon. Member for Solihull (Julian Knight), who is no longer in his chair—he adopted the seagull strategy of fly in, make a lot of noise and leave.

I am disappointed that the Minister seems so intransigent in his support for the current system. It concerns me slightly that he is so happy with the status quo. I end with a quote from Noam Chomsky, who said:

“Optimism is a strategy for making a better future. Because unless you believe that the future can be better, you are unlikely to step up and take responsibility for making it so.”

I ask the Government to take responsibility.