Wednesday 18 March 2020

UBI debate - a good idea or a sily one?

As we know the virus is currently laying waste to the UK economy. The Leisure and Tourism industries combined are over £400 billion of revenues per year according to Government statistics.

The £350 billion that the Government announced in bailout loans yesterday is only going to be a band ai for a few months, unless the virus challenge is overcome, then so too will our modern economy and our Government finances.

What a challenge that will be!

However, we cna hope that the worst of it is over in the next couple of months. Until then the US Government is considering giving everyone $1000 into their accounts to help them with bills and see through these dark times. On paper I like this idea, as it is simple and easy to do (IRS/HMRC have everyone's bank account details already) - it gets the cash where it is needed.

I am less sure about Universal Basic Income as a long term play though - becuase although it should allow for a more felxible and less stressed workforce it is also ruiniously expensive. It ends up being a middle class subsidy for wannabe actors and muscisians or those who endlessly study degrees - or even those who want to apprentice as MP's for a while. Meanwhile the workes pay huge taxes to support this and the truly needy see their benefits cut.

To give an example, the NHS costs around £2200 per person, with UBI we would have to give say £500 a month for it to be realistic - so £6,000 a year. That plus the NHS is £8,2000 per person per annum. At over £750 billion, that is more than the UK Government's entire spending and 250% more than we currently spend on all social benefits and the NHS added together.

Where would the tax come from when so many people could eeek out a meagre living by doing nothing?

So for me the principle of UBI is quite sound, the practical implementation of it makes it financial suicide - what do you think?


Thud said...

A big NO! from me.

jim said...

Having killed off the economy for the sake of a few oldies Boris might have the decency to send all those between 18 and 65 about £1000/month until Christmas. Snag is no holidays, no pubs, no fun at all, only box sets and canned lager.

The snag is that starting with the Italians Europe has gone into economic spasm mode and we have had to follow suit. I suspect the cure is worse than the disease. Almost as if democracy has created an autoimmune response that attacks its own corpus.

Eyeballing the numbers, apart from Italy, they are not that dramatic and are not really a sign that lockdown is the cure - you take a week or two to get ill enough to die from CV. I feel the politicians have been bounced into this on the back of frightening hypothetical numbers. Might be a torrid time for the medics though.

As for UBI, not sure. Moral hazard and all that, we have plenty of p*ss takers high and low.

Anonymous said...

With caveats, I'm a big fan of the prospect.

I wouldn't want it universal - but for British citizens in education, employment (paid or voluntary), caring for a relative or employment. So no sat on your arse watching Netflix with a spliff on the taxpayers expense.

Minimum wage has to go.

As does SSP, universal benefit, state pension, etc. Only bennos remaining would be housing and disability.

Get made redundant, sacked or walk out of work? You get 50% of previous time worked, with a minimum of one month to a maximum of six, as a grace period to find something else (paid or voluntary) or the tap is turned off.

Kiss goodbye to a pile of government employees, job centres can be turned in HMOs...

Now the savings from that wouldn't pay for it all, but it would a fair chunk, and I'm pretty sure we could find a way to afford it.

I mean, we can pay for various government departments - MOD, NHS - to spunk billions up a wall, and companies like Crapita to piss it away, so I'm pretty sure we can find the cash somewhere without screwing over workers.

Timbo614 said...

Rather than UBI I would prefer a UJG (Universal Job Guarantee) This is where if you don't have a job the government(probably vis LAs) gives you something useful to do and pays. There are certainly lots of things locally that need doing!

Jan said...

Or they just turn on the printers or rather the BOE does. The Fed have started and other countries will follow. I've been joking for a while now that we already have UBI but unfortunately you have to wait until you get to state retirement age to get it. I agree the US have the right idea with helicopter money for all instead of our overcomplicated methods.

I can't haelp thinking this virus is a good cover for the financial shenanigans which were/are necessary to reset markets with the added benefits of putting a halt to the gilet jaunes/Hongkong unrest etc.

They won't need taxes if they just use the magic money tree. All the currencies will be debased together.

E-K said...

A guy sold me a loo roll the other day and the bastard had sold me a roll of money wrapped in a small layer of tissue instead !

Perhaps a large organisation are going to wipe all national debt meaning that China holds the baby for this one - or demands very easy terms on existing debt.

Perhaps this is why the reaction to this disease is so extreme when such a small minority are killed by it and can avoid it with targeted isolation.

God. Imagine you'd been one of those poor sods flooded out of their house a few weeks ago - now this.

E-K said...

There's no bread and there's no circuses - so this may well be the end of single issue pressure groups and Political Correctness.

It will no longer be tolerated.

Anonymous said...

I don’t really know.
But even one month of no work would mean default on mortgage and fuel bills.

E-K said...
This comment has been removed by the author.
Matt said...

Numbers seem a little off...

The NHS apparently cost £129 billion in 2018/2019 ( and the population of the UK is 66.44 million (Google) so the cost per person of the NHS is £1,941 - still a lot!

We should also bear in mind that the NHS is a massive drain on the UK and the number we should be paying is probably < £1,500 per person.

In terms of UBI, £500 per month is not going to happen. More like £200 (£50 per week) and it replaces all other benefits. So the total cost of UBI is £172 billion per year. We spend around £231 billion on benefits and tax credits so it's in the ballpark at least.

L fairfax said...

Brilliant idea, but what about single parents who can't work.

Mark Wadsworth said...

Matt is on top form. UBI is about timing and ease of claiming, not about exactly how much.

I have summarised the ACTUAL NUMBERS here, in place of your completely made up numbers, which only look at half the equation anyway.

Wildgoose said...

Mark Wadworth's article makes perfect sense to me. Anti-UBI people always use unreasonable numbers to inflate their (otherwise genuine!) disagreements.

We can't do an overnight change in how our Benefits System works, and it could never handle the differences in Housing Costs UK-wide in any event, which means it could never be a universal panacea.

But that doesn't mean we can't use it to remove the lower level of benefits altogether and gradually evolve the system to a more sensible approach than we have now.

polidorisghost said...

No fun? Whatever happened to lots of sex?

CityUnslicker said...

£50 a week mentioned above to replace all otrher benefits, thatis just silly. The pro-UBI comments here accuse me of getting the number wrong (I did, guessing them and yet only by 10%).

But this is the key. £500 a month to live is less than the state pension which is £516. How is this survivable, this is for people who have a house and have saved over their lives. £500 a monhth, which even the pro-UBI's above say is unachievable, is below a minimum threshold to live.

So I stil remain in the camp that socially it is a fantasitc idea with a lot of merit but the unreal amounts of money needed make it totally unaffordbale. As for it replacing all other benefits, the Government is already trying to do this with Universal Credit as a half way house and it getting no thanks for it.

Don Cox said...

In the 19th century and earlier, England wasn't rich enough to provide state pensions for all over a certain age, or sickness or unemployment benefits. These were all introduced in the 20C as the country became more wealthy.

I don't think we are rich enough yet for UBI. Perhaps in the next century it may be practical.

When governments spend too lavishly, the result is inflation. It's no use having a UBI if its value drops like a stone.

Don Cox

Anonymous said...

According to the Finnish experiment, it didn't work. And that is as reported by the BBC. Or are the BBC trying to hide something?

andrew said...

from memory the state pension was introduced by Bismark.
The retirement age was set to 65 as that was the average lifespan at the time.

Matt said...

You're not meant to be able to live off UBI (unless you are extremely frugal). It's a flat rate payment in lieu of other government handouts that have significant overheads in distibuting them. Hence why everyone gets it whether rich, poor or somewhere inbetween.

Matt said...

State pension is about £90 billion a year (which at £516 per month means there are about 14.5 million claiming state pensions). Other sources say about 12 million pensioners so we'll take the lower number.
Take pension costs off the £231 billion welfare costs and you have £141 billion.
If we assume that UBI is part of the pension, then the remaining 54.4 million people can still get £50 per week (just over £141 billion).
Pensioners no worse off on this measure (but if UBI replaces tax thresholds that may change matters).

Matt said...

The difficult question for me is how you set a level where some special interest group doesn't lose out. My last examples gave pensioners more (because they'd paid NI all their working lives) but then what about people who are sick? You can't trust them to tell the truth (bad back, stress etc) so is that tested in some way?

For me, the welfare state was always a safety net rather than a means to live without any other income. So I'd make it universal with X number of years of cash to taper people (like the sick) off what they are used to now.

Wildgoose said...

We can't afford to replace all other benefits with a UBI - but that isn't what many of us here are arguing for. (For example I explicitly mentioned the disparities in Housing Costs in my previous comment).

On the other hand, the existing Job seeker's allowance is just £57.90 per week.

Can we scrap Jobseeker's Allowance and pay every adult citizen that amount, including deducting that value from existing pension payouts, and including making these payments be treated as part of your taxable income?

Yes. We could do that right now.

Baby steps first.

CityUnslicker said...

but set at a level where it does not cover other benefits then Matt - so it only will work if set higher - which then is not affordable? How do you square that circle?

andrew said...

A UBI has a lot of weaknesses.

There are about 52m adults in the UK in dec 18
We spent about 263bn on the welfare budget + pensions in '16

It is advertised that a 'real living wage' is about 9.30ph outside london in '19. This is about 1600pm
Median income in 2019 was 2450pm (29400pa)

Good questions before you start:
What is a UBI - a) unconditional b) enough to live on ?
What should a UBI be per month - £500, 1000, 1500 ?
Is the UBI a flat amount or does it depend on household size, children, disabilities

... and this is where I stopped being in favour of it

Are you really going to give _everyone_ the money - richard branson, boris johnson, pablo escobar, garry glitter, that scrote of a nephew you never liked, that refugee who has just got citizenship
If you are not, the U is gone and you need a big complex govt dept to police those complex rules.

Are you going to replace _every_ benefit with a flat amount regardless of need (stephen hawkins cannot make his own brekkie) even if some people need a lot more
If you are not, the B is gone and you need a big complex govt dept to police those complex rules.

Are you going to move towards a point where the govt has files on every person eligible, probably something that uniquely ids you like dna+prints+iris scan+photo
and knows your main bank account and where you live. Sort of living in the more closely watched parts of China or N. Korea.
Otherwise the UK will become a world magnet for immigration.

and least important, how to pay for it
There is a sliding scale. If it is not enough to live on the BI is gone.
If it is enough to live on, it will be undoubtedly v.v. costly and that cost will fall on those who choose to pay tax (literally it will be a choice as you can always stop working)

I can see this might work in a country where there are immense natural resources or and immense soveriegn wealth fund.
It would make the UK a very different - and I am not sure better - place.

Some people would use it as a lever to try to make the current benefits system a little more generous and a little more humane. and that makes sense.
But the full implementation of UBI is best left to another country imo

Matt said...

The answer to affordability lies in taxing things other than people. Robots for example - if everything was automated, then production wouldn't need people and they could spend their days doing something they wanted to instead of being bribed to give their time to working. Perhaps then we could pay an actual UBI that people could live reasonably comfortably on.
Of course, this wouldn't happen as any dystopian sci-fi film will portray (I suggest Elysium for reference) because the people controlling the robots would bribe politicians to change the rules so they can keep all the money themselves. The rest of us would be Soylent Green (or fertiliser).

Nick Drew said...

All futurology it a bit suspect at the moment (but always fun)

I'd say we are indeed going to start seeing taxes on new Things. For example, as EVs remorselessly take over from ICEs (which they will), Govt has to tax electric recharging - the Duty on petrol & diesel is irreplacable otherwise

And of course there's the constant pressure for a FB tax - and while I accept th "bribery" point above (very much so), the tolerance for that may be limited

etc etc

Oli said...

For all its advantages in theory, UBI is the thin end of a wedge. We may like the idea because it may be cheaper than means-testing everything. But where does it lead? It will reinforce the idea that the state is responsible for everything, and that our money isn't really our own to do with as we please.

Every year there will be calls to increase it, and there will be more people who would benefit from such an increase than who will pay for it with higher tax.

Slippery slope.

GurzelWummage said...

No UBI, unaffordable at any rate that would 'work'. AIUI, UBI replaces all benefits hence saving costs and thus able to be paid to all.

When this corona virus situation is over is there an opening for some big changes (negative income tax, flat income tax) to sort out the FUBAR economy?

andrew said...


Tax on private travel of _all_ types that is powered
- popular with all who do not travel much

Tax on robots / the internet
- popular with all who do not own lots of robots or internet

- popular with all who do not own lots of property

The downside is that the govt will be looking into places they have not in the past and that often does not end well.
Income tax was supposed to be temporary.

English Catholic said...

Any comment on Sunak's new measures?

What is money even going to mean after this? I fear heavy inflation on the way.

Timbo614 said...

@EC. Money will be what it always has been: A means of exchange and a short term store of value.
If this crisis continues long enough and the western economies are really badly damaged I believe there will have to be a debt write-down a jubilee of sorts.
Many people especially "working class" and small business people are already living on their debt limit. With reduced economic activity and opportunity following this shutdown it will become apparent that these debts can't be paid back.
In the financial crisis one of my favourite sayings was "the numbers are too big" well the numbers are going to get even bigger - huge in fact especially for governments. Currency issuing governments of course don't need to pay it back they normally inflate it away but this time around I'm not sure high inflation will be tolerated as this effectively removes people's buying power with their reduced income/prospects.
In these circumstances who is going to lend this vast number of affected people enough money to get back on their feet, start new businesses or revive old ones.
Similarly if the chancellor thinks all these businesses that are being bailed out or granted time-to-pay on VAT and Taxes will be remotely able to pay it back in any reasonable time-scale given the new economic circumstances he's dreaming. The Govt. must know that they are basically giving the money away.
Debt jubilee is possibly going to be the only way to get economies restarted quickly. I'm not going to be investing banks any time soon!

"Debts that can't be paid won't be paid" - Michael Hudson.