Universal Basic Income

Jim Shannon Excerpts

Tuesday 13th October 2020 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to participate in this debate. I thank the hon. Member for Inverclyde (Ronnie Cowan) for setting the scene and I am pleased to make a contribution. I am also pleased to see the Minister. I believe he will do his best to respond to what we are asking for.

As others have said, covid-19 has been with us over the past few months. I recollect many conversations with constituents about these matters back in March. Never at any point did I honestly think we would end up where we are now, with these restrictions in place. Even as we were fast hurtling towards the changes, I never envisaged us being here.

I thank the Government, Ministers, the Chancellor and everyone who has been forthright and helpful. Others have done so, but I would also like to put it on the record, as it is important to include it in Hansard. Many of my constituents in Strangford have survived until now because of the Government’s commitment and help. To be honest, those people would not be there without that, so I put on the record my thanks to the Minister.

As elected representatives, the nature of our job means that people do not necessarily come to us to tell us how good things are or to say thank you, although many do and we appreciate that. People come to us because they have concerns and worries. Some have come to me—others have referred to this—because they fell outside the scheme.

Even with all the schemes that the Government have brought forward, it is clear that people have missed out, including the 3 million people referred to in a question to the Prime Minister during his statement on covid-19 yesterday, as well as the self-employed and directors. I do not want to labour the point, but they invested their profits and income back into their family businesses, thereby employing 12, 15 or even 20 people. But when it came to helping them, the help was not there.

Why do I look sympathetically on this particular methodology of benefit? It is because universal basic income could be the system to help those who did not receive the income they needed. I am not being critical of the Government, but I want to put that on the record. If we cannot help people, we have to consider different ways of doing things. That is why the hon. Member for Inverclyde has promoted this issue and other Members have supported it.

The experience of my constituency of Strangford is no different from that of the hon. Member for North East Fife (Wendy Chamberlain), who said that tourism is important to her constituency. The core economic driver of Ards and North Down Borough Council, which covers the majority of my constituency, is based on tourism. Tourism is vital because it provides income and jobs, thereby keeping the whole thing going.

I am realistic about the system. I understand that the Government do not have bottomless pockets or a money tree at the bottom of their garden. There is no money at the end of the rainbow, so they have to work practically with the moneys that they have. I do believe, however, that the Minister should at least consider a pilot scheme for universal basic income, so that we can judge and consider it. Can we pay for it? That is important. We have to be realistic and honest. Can we reach out and help those people who have missed out, including in my constituency? Those are the people on whose behalf I am speaking today.

There are some 52 million adults aged 18 or over in the United Kingdom, and 12 million children and young people under 12. I understand the economics, the figures and the statistics that mean that some earners are taxed at a higher rate. My life is no different from that of anybody else, and the same is true of the lives of others in this Chamber. Society is judged by how it looks after those who are less well off. When I was a child—that was a long time ago, by the way—we never had much back in those days. It was a fact. We did not have material possessions, because that was the way it was in those days, but it made me more understanding of those who need help. That is why I am here today, to speak up and to support the hon. Member for Inverclyde.

The Minister is a compassionate person as well. I believe in my heart that he understands very well the policy we are putting forward and why it is so important. Can we do better than universal credit? I felt a wee bit embarrassed sometimes whenever people came to me during the covid-19 crisis and I said, “You can get universal credit.” I knew right away, though, that the guy or lady across the table had a business from which they were earning £300 a week—some were earning more—and I had to tell them, “Look, £94.50 is what you get.”

I understand that the Government offered what they could—I am not criticising that—but there must be a way to ensure that those businesses can hold on long enough so that they can then turn the corner and do better. I am really conscious of the issues. We need conditions when it comes to universal basic income. I understand that some of the naysayers are saying that it could reduce the incentive to work. Well, I tell you this: every person who came to me looking for help wanted to work. They wanted to continue to work and they wanted that opportunity. They just needed that wee bit of help to get them over the line. The Government have, in fairness, responded positively, but I wonder exactly what we need to do.

[Ronnie Cowan]

I should perhaps have said this earlier. One complaint about basic income is that it makes people indolent because people are paid for doing nothing. I refer the Minister to all the pilots that have been run throughout the world, which show that there is absolutely no evidence for that whatsoever. People the world over are just like us: they want the opportunity to work and earn a wage. Basic income does not make people indolent.

[Jim Shannon]

I wholeheartedly agree. I was sympathetic to the really good question that the hon. Member for Brighton, Kemptown (Lloyd Russell-Moyle) asked the Prime Minister yesterday in the Chamber. I am not saying that because he is sitting across from me; I told him it was a good question at the time. It was about the minimum wage. I understand how it works. There are arguments to reduce the working week to four days and to reduce wages, but if someone on a minimum wage loses wages, they have nowhere to go. This is about every penny they have.

I remember the stories that people in my constituency have told me. They managed everything almost to the last pound for that week. Even a small reduction in what they have will mean that they will not be able to pay their rent or their car off. They may be paying off furniture for their property, too. The whole thing becomes a real difficulty. If somebody takes ill, it becomes a real problem. The hon. Gentleman’s question was pertinent, because I could relate personally to what he was saying. I thank him for that.

In opening the debate, the hon. Member for Inverclyde referred to other schemes. I read in the briefing about the Finnish experiment. It is not all about money. I am conscious of time, so I will come to my conclusion fairly quickly. Those who participated in the Finnish experiment

“were more satisfied with their lives and experienced less mental strain, depression, sadness and loneliness. They also had a more positive perception of their cognitive abilities, i.e. memory…and ability to concentrate.”

Giving people that help improves their quality of life, physically and mentally. We have to look at that, because there is cost otherwise. If the Government or others are not able to help, there are impacts on people’s physical and mental health, which then has to be paid for by the NHS. I suggest that although the Finnish experiment may not be the best example, it did highlight that issue.

As I see every day, those who are under financial pressure and who are worried about their future also face mental stress and difficulty. I meet people every day, every week, in my office—my staff do most of that, to be fair—and recently, when universal credit first came in, I remember that there were great problems. The hon. Member for Glasgow South West (Chris Stephens) and I have spoken about these things on a number of occasions, and we understand that.

[Rachael Maskell]

That brings to mind another aspect of this issue, which is sickness absence from the workplace. We obviously know the impact that has, but if people have the underpinning of a universal basic income, that will help with their rehabilitation and get those people back into work, whatever form of work that is. It may be volunteering experience or it may be through social prescribing, and therefore having a universal basic income could be a real aid to rehabilitation. Does the hon. Gentleman agree that this is another opportunity?

[Jim Shannon]

I certainly do. That is why I brought up the issue of people’s physical and mental experiences—because if we can get people into volunteering or get them back to work and moving up, that will make the Minister’s job a lot easier as well.

The hon. Member for York Central (Rachael Maskell) referred to the five-week period, which turned out to be an eight-week period in many cases. In a way, with all the experiences we had early on with universal credit, we overcame many of those issues, and the Government did as well. I therefore say gently to the Minister that we should perhaps be looking at a methodology for a universal basic income, at least on the basis of a pilot scheme, because with a pilot scheme the Government can perceive the issue, look over it, challenge it and investigate to see whether it is possible. In Northern Ireland, 16% of people—300,000 people—live in poverty, and that is before housing costs, which are enormous. With that in mind, the Northern Ireland Assembly also asked questions on this matter, although I understand that responsibility for the DWP lies here.

We have always had the greatest respect for the Minister, as he knows, and I believe him to be a compassionate person who can understand why we, the hon. Member for Inverclyde, and others have spoken on this topic. We believe there is a necessity for the universal basic income to be looked at through a pilot scheme. I believe it will help others, and therefore, along with others, I ask for that as well.

--- Later in debate ---

[Ms Karen Buck (Westminster North) (Lab)]

It is a pleasure to contribute to this debate under your chairmanship, Mr Davies. I congratulate the hon. Member for Inverclyde (Ronnie Cowan) and others for securing the debate. We have heard strong contributions from Members who have critiqued the existing social security system and shown how its weaknesses have been exposed during the pandemic. That is absolutely right, for reasons that I will come on to, but we have heard not only about the pandemic, but about a recognition that the current social security system has a number of fundamental problems.

We have rehearsed the problems with the universal credit system on many occasions in the past and will no doubt do so again, 10 years on. Many problems have arisen from the fact that many people have been excluded from receiving help and the restrictions that apply, ranging from the five-week wait to the benefit cap and many other problems.

It is also true that there is a very long-term and fundamental issue with social security that those who support versions of universal basic income recognise. No system stands still. The world has changed fundamentally, particularly the world of work and the extent to which we are increasingly in a world of flexible employment, income volatility and fundamental demographic change.

Even the principles that Beveridge set out as the basis of the post-war social security system, starting with the concept of a flat-rate system, soon had to change as the world changed—as women went into the workplace and different pockets of disability emerged. The interaction between those at work and the nature of the jobs they were doing also changed and increasingly became a system that topped up the basic, flat-rate insurance-based systems, so we have ended up with a complex hybrid.

It is also true—I will come on to this in a minute—that whatever system we end up with will have to accommodate a variety of different approaches. Members have stressed this morning, and I agree, that if we want to build an argument for a form of universal basic income, the Government have done a lot of the work for us by introducing a system that has embraced conditionality and sanctions with vigour in recent years. If we want to convince people of the merits of a basic income, we could not do much better, given that the DWP seeks to micromanage so much of people’s lives, whether they are out of work or in work conditionality, where interaction with job centres often feels like an obstacle course of booby-traps designed to trigger sanctions. Those sanctions are wildly disproportionate including, until last year, cutting people off without support for up to three years. The social outcomes of all those policies include what many refer to as the soaring numbers of people whose destitution is such that they are dependent on food banks.

I do not want to cover all the points that have been made, but I will refer to two areas where the basic income argument is particularly relevant. The first is income volatility and the ability of the social security system to deal effectively with the fluctuations in income that have become characteristic of the labour market. Again, the problem is not new but, as self-employment, sometimes very dubious forms of self-employment, the gig economy and zero-hours contracts have become more prevalent, it is particularly pertinent.

The ability of the social security system to react in a timely manner to sudden drops in income is stretched to the limit. Despite the use of realtime information from the tax system, the monthly cycle of universal credit payments does not correspond to real-life volatility in many household incomes, as John Hills of the London School of Economics has certainly shown. There is a strong case for mitigating that volatility through payments that do not respond to changes in income, which is precisely what child benefit—the nearest thing we have to an element of basic income—does. The stability of child benefit has been shown to be one of the most valued components of the social security system. Whatever happens to earnings from other benefits, child benefit can always be counted on.

The second point concerns the basis on which benefits are awarded, whether to individuals or households. Our personal taxation system is overwhelmingly based on individuals, but our benefits system is increasingly based on the assessment of household income. Universal credit has reinforced that disparity. It is a benefit designed around an out-of-date model of a single breadwinner and it disadvantages second earners in the household, who can find most of their earnings lost to household means-testing. We should not be comfortable about the fact that people in lower-income households face a completely different set of implicit tax rates from the better-off.

[Jim Shannon]

I want to underline the issue. It is not just about finance, but about health, and the physical and mental responses to that. Does the hon. Lady feel that that has to be taken into consideration when it comes to support in such a scheme?

[Ms Buck]

I totally accept that security is fundamental to people’s physical and mental wellbeing. That is implicit in the idea of recognising the weaknesses of the existing system and how it responds to volatility, most obviously demonstrated during a crisis such as the pandemic, but consistent over the long term.

Basic income as a fully individual entitlement could go some way towards addressing that problem, although it must be recognised that it is not a complete solution, because most of the proposals for basic income retain large parts of the existing social security system, most critically, housing benefit. Beveridge was defeated by the disparity in housing costs across the country, and that remains now—if anything, it is probably more pronounced than it was. A basic income is not the only imaginable way to improve the current situation, but the argument for it sets out the problem with great clarity.

Some contributions to the basic income debate, however, suggest that the reform could be easily implemented—“oven ready”, to coin a phrase—and that all that is necessary to deliver it is political will and progressive values. I do not want to drown the debate in figures, but it is important to get a sense of the scale of change involved in even modest basic income proposals. I will refer briefly to two important studies that address the issue of how to fund basic income. Both show incredible clarity and are from people who are sympathetic to the idea.

The first is a paper by the late Tony Atkinson, who was a towering figure in the study of inequality. The paper was published after his death in 2017. Tony Atkinson favoured what he called a participation income, which would be conditional on some form of social contribution, but not unpaid work. As those conditions do not influence the modelling, we can take the results as relevant to basic income in general. The adult participation income in his model scheme is £75 a week. Child benefit is raised to £52.60 and £89 for the first child. The scheme prioritises children, and is certainly not extravagantly generous to adults. Other social security benefits would be retained, so it is essentially a partial basic income scheme. The modelling shows that it would not eliminate poverty, but would lead to significant reductions.

How is the model funded? The personal tax allowance is abolished, so income is taxed from the first pound. The basic rate of income tax rises from 20% to 30% from the first pound of earnings, rising to 40% of gross income at £25,000 to 50% at £45,000 and 60% at £90,000 and beyond. An earned income tax discount is introduced to avoid excessive taxes on lower-income groups.

Members will appreciate that those are not trivial changes to the system of personal taxation. My hon. Friend the Member for Brighton, Kemptown (Lloyd Russell-Moyle) said that a basic income would require a total restructuring of the taxation system. That is not something that we can enter into lightly. The scale of what is needed to accommodate such changes is considerable. A doubling of the marginal tax rate on gross incomes of £25,000 a year would surely make even the most ardent supporter of basic income hesitate.

Any basic income scheme faces the problem that spreading payments out over the entire population will require either cuts to other expenditure programmes or increases in tax revenue. The Compass basic income model, which is widely quoted, does not offer a blueprint for immediate reform. The other scheme is intended as a policy that could be adopted immediately. Therefore, the basic income for adults and children is lower, at £60 and £40 a week respectively. To balance the books, the income tax personal allowance is abolished, as is the primary threshold for national insurance contributions, so all income is subject to tax and national insurance. A new lower rate of 15p in the pound is introduced for the first £12,000 of income to avoid successively disadvantaging the lowest earners. All other marginal rates are increased by three percentage points, so the basic rate would be 23% in England, Wales and so on. That gives an indication of what the implications would be for changes to the tax system. In both cases, marginal rates of income tax increase not just for the rich, but for middle and lower earners, and income that was never taxed before becomes liable for income tax and/or national insurance contributions.

Although I accept a number of the arguments about the positivity of changes to the social security system that give people security, we cannot dismiss the fact that we will either have to find significant additional contributions to make it work or look at how the changes to the taxation system will affect people and ensure that is part of the debate. It is worth pointing out that the pilot studies that have been conducted in other countries do not have the advantage of being able to do all this in realtime, precisely because to make a full basic income work requires social security and tax to be fully integrated as part of the model; it cannot simply be about testing some aspects of the scheme.

I welcome this debate, and I certainly do not dismiss the idea of basic income. I recognise and support the contributions made this morning. People are saying that a basic income can address long-term problems that are poorly handled by existing social security models. As Labour develops our proposals for replacing universal credit with a more generous and less stigmatising system, I hope we will rise to some of those challenges.