Coronavirus: Universal Basic Income could serve as welfare solution during and after pandemic

ONCE a fringe proposal, Universal Basic Income (UBI) has been thrust into mainstream political discourse in recent months.

The policy – which would see an unconditional sum of money given to every citizen on a regular basis – is championed by numerous politicians, economists and activists from all over the world.

Perhaps the most prominent push for the measure came from the US presidential candidate Andrew Yang, who stood for the Democratic nomination on a platform of giving every American adult $1,000 per month.

In the wake of the Covid-19 pandemic, calls for Basic Income have been amplified as a potential solution to support those at risk of losing their jobs and livelihoods.

Redaction spoke to Basic Income UK – a movement supporting the measure – about the prospect for the introduction of UBI amidst the coronavirus outbreak.

Barb Jacobson, a co-ordinator for the organisation, said: “A UBI would work by providing everyone with the finances required to cover their basic needs. The current welfare system and approaches all have conditions attached, which makes them difficult to claim and be successful.

“If you do get the support, it could be taken off you later, often on the whim of a job centre ‘coach’.”

Since the Covid-19 pandemic hit the UK, tens of thousands more people have applied for support via Universal Credit – the current benefit payment scheme.

However, this system is only accessible to people who meet certain criteria – applicants must, for example, have less than £16,000 in savings between themselves and their partner.

Barb continued: “A universal payment, without conditions, doesn’t have the same problems, which is why we think it is preferable to the current system. It would be administratively simple to implement with a transfer from the state to every individual through the bank accounts details the government have for most of us.

“If you don’t have a bank account, the government could help you, for example, by giving you a prepaid credit card to spend as you see fit. So, it’s straightforward to do and, ultimately, it’s the fairest way of supporting people.”

Screenshot 2020-05-14 at 20.11.51
Andrew Yang is a prominent proponent of Universal Basic Income. (Image: Gage Skidmore @Flickr)

In an attempt to stem a potential unemployment crisis, the UK government introduced the furlough scheme to allow employers to keep their staff – with 80 per cent of the salary covered – while not at work as a result of the pandemic.

But Basic Income UK says these measures are not good enough.

“The furlough scheme is dependent on employers completing the application and then the government decides whether they get the payments or not.

“There are conditions in the current scheme that have made it more difficult for certain groups (those how started new jobs just before the Covid crisis started who are not eligible for support), while the scheme didn’t address the issue of support for the self-employed, or the freelance/gig economy community.

“Although the government came up with another scheme to cover their income it still missed out groups with its conditions.

They added that the furlough scheme does not guarantee that jobs will be protected in the long run once the economic impact of the coronavirus is felt in full.

“It should be noted that the furlough scheme is not a guarantee that jobs will be maintained – at the end of the scheme businesses may not be able to keep going, so stating it will protect jobs doesn’t stand up all of the time.”

However, the UK Treasury defends its measures, citing furlough payments of £10.1 billion, £8.3 billion of Bounce Back Loans and small business cash grants of £9.1 billion.

A spokesperson for the Treasury said: “We’ve announced an unprecedented package of measures to support the jobs and incomes during the outbreak, including our job retention and self-employment schemes, tax deferrals, grants, business rates holidays and loans.

“As the OBR have outlined, the actions we’ve taken will help to mitigate the impact of the virus on our economy and without our package of measures things would be worse.

“A flat rate universal income would not take into account people’s circumstances and the additional needs and costs faced by some individuals. Therefore, it would not target support where it is most needed.”

How would Basic Income work – and what are the drawbacks?

Like any fresh policy idea, Basic Income has its fair share of critics and detractors.

‘Where is the money going to come from?’, some sceptics will ask.

Others say, ‘people will abuse the grant – they will drop out of society and spend their money on drugs, alcohol and other nefarious goods.’

While acknowledging these criticisms, Barb Jacobson says there are solutions to all of them.

Regarding the source of money, she said: “There are many possibilities, but common suggestions are to reorganise the tax set-up that we have – including some new taxes on higher or unearned incomes, small increases in ones that currently exist and getting rid of the tax free personal allowance.

“By doing so you could fund a significant proportion of a basic income – research by New Economics Foundation demonstrated that every adult could be given £48 by simply scraping the tax free personal allowance alone and with additional taxes you can easily double that.”

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Image: Pixabay

Another common criticism of UBI is its potential to cause inflation and drive up living costs.

Barb said the potential for this problem would depend on the system of UBI. “It does depend on the individual scheme, but there is no evidence of this happening in any UBI trial that’s taken place, ever.

“Most of the mainstream UBI proposals are more a redistribution from the wealthiest to the majority, rather than pumping more money into the economy, so UBI will not be inflationary.

“It’s also worth pointing out that any UBI would be a modest amount, and therefore it’s unlikely to cause huge ripples in the current markets by driving up demand.

“If anything, they will cause more investment locally, growing local economies and keeping inflation down. Basic Income would allow people to set up their own businesses and fill gaps in most local economies.”

While noting that it would be possible for people to misuse their basic income, she added: “You can use the money as you please, as you can current benefits, however the payment is modest and trials show the vast majority of money is used to ease people’s current problems – a lack of security, putting food on the table etc – or invest in themselves, family members/friends and in the community.

“In basic income trials substance abuse went down.”

So how have the trials gone? Does Universal Basic Income work?

Through 2017 and 2018, a trial run of UBI was carried out in Finland. A total of 2,000 of the country’s unemployed were granted an unconditional 560 euros a month for the two years.

The results?

In findings published earlier this year, the study suggested that, while the employment boost among recipients was modest, there was a greater sense of security and wellbeing for the participants.

Barb said: “The preliminary Finland results were met with a disappointing reaction by the press despite the results not being negative.

“The latest results – each year of the two year trial was analysed separately – were met with widespread approval and further confirmed what was expected, that wellbeing increases, people felt a greater sense of belonging to their community, were happier and actually did (a little) more work than those not on the scheme, which debunks the myth that people will become lazy.”

Data also shows sizeable support for UBI among the public. A Gallup poll last year suggested that 77 per cent of British people, 75 per cent of Canadians and 43 per cent of Americans support the measure as a means to help people who lose their jobs to AI.

A recent YouGov poll also found that just over half (51 per cent) of Britons support UBI.

Barb added: “It is important that basic income is paid on an individual basis. One of the biggest problems with the current social security system, made worse by Universal Credit, is that it’s paid on a household basis.

“Not only does this mean the government becomes intimately involved with everyone’s personal lives, it also means some people, especially women in households who don’t have access to their own money, can find themselves trapped in abusive relationships (physical, emotional or financial) without the financial means or security to leave.”

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