The most universal benefit of them all

While the UK debates ending universality, economists in America are talking about making income itself universal.

With Labour's decision to push for the end of winter fuel payments for all, Britain has seen yet another step against the principle of universality in benefits this week. But while the tide here is pushing more and more in favour of means-testing every intervention possible, in the US, the opposite debate is being had: should even the largest interventions be universal?

In early May, Mike Konczal wrote an article in the Washington Post proposing a universal basic income (UBI), also called a "citizen's income". The idea is that significant proportions of the social insurance system get replaced with a "poverty-level" income which is given to all, universally and unconditionally. So rather than claiming unemployment benefit when out of work, disability benefit when sick, or a state pension in retirement, you claim a standard sum every month from the age of majority to your death, regardless of your status.

Many of the benefits of a UBI are the same as the benefits of universalising any part of the welfare system: it massively reduces bureaucracy at all stages; it's far easier to get benefits where they need to go; and it removes the stigma of claiming help from the state. For some benefits, even one of those arguments is enough to justify universalising them. So, for example, we don't means test the NHS – among other reasons – because the thought of keeping someone in the emergency room while we check their past six months of payslips is anathema to most people.

But the UBI carries its own additional upsides, by virtue of being so large compared to other benefits. The most important one is that its universality reduces so-called "income traps", points in the tax-and-benefit system where the marginal value of every pound earned drops too low. So, for example, as your earnings rise, you may find that you leave the personal tax allowance, lose working tax credits, and become ineligible for housing benefit all around the same time. That could mean that a job which pays thousands of pounds leads to a take-home pay rise of a tenth of that, giving you a serious incentive not to take it at all.

That problem is also what the Universal Credit is aimed at solving in Britain; but despite the name, it's not a universal benefit, and so it can at best smooth over the problems caused by withdrawal, rather than remove them already.

But Konczal's most interesting point is that there are strong right-wing – or, more accurately, libertarian-right – arguments for a UBI. By removing conditionality of benefits, it also removes a method of state control. It is no longer up to the government, for instance, to determine which types of work experience you can do while still being paid unemployment benefit; nor can they shape society by deciding which types of non-labour activities ought be rewarded – carers, community gardeners, political activist or artists all get the UBI without having to prove their worth.

In fact, as Konczal points out, it's the left which should really be wariest of arguments for a UBI. It has the potential to extend market logic to every reach of society, by equating "being a citizen" with "being paid". That's exactly the sort of thinking Michael Sandel warned against when I spoke to him last month, because, in his words, it "may crowd out attitudes and norms, non-market values, worth caring about".

Konczal's piece sparked a wide debate in the economics community. Despite his strong argument that a UBI ought to be a libertarian idea, many of them opposed it, arguing that handing out a UBI would mean that people would never work, and the government would instantly lose the tax revenue it takes to pay it in the first place.

That argument doesn't quite work; in fact, the understanding as to why that is was the great breakthrough in 19th century economics, the marginal revolution. People tend to make their decisions, not based on absolute levels, but on marginal changes. If you are given a UBI, then you still face the choice as to whether or not to go to work and earn an extra sum of money. And since people working on poverty pay don't tend to decide never to increase their income, it seems likely that a UBI wouldn't discourage much work.

But it would discourage some, because that's the point of it. By removing the link between "having to work" and "starving to death", a UBI would promote a healthier attitude to work, removing the element of fear which forces employees to sell their labour to exploitative employers. Instead, work would occur based on equitable negotiation: if the employee no longer lives in fear that they will be on the streets without a job, their bargaining position is greatly improved.

In the end, it's that outcome which will mean the UBI can never truly catch on among right-wingers – or even the centre-left – leaving the Green Party the only one in the UK to support it. In radically redistributing economic power from capital to labour, it is anathema to the conventional order . That is true despite the fact that elements of it ought to be hugely appealing to people from across the political spectrum. It is freedom-enhancing, bureaucracy-reducing, and in some cases life-saving, but it's also going to remain no more than a thought experiment. That's a crying shame.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

Richmond is a wake-up call for Labour's Brexit strategy

No one made Labour stand in Richmond Park. 

Oh, Labour Party. There was a way through.

No one made you stand in Richmond Park. You could have "struck a blow against the government", you could have shared the Lib Dem success. Instead, you lost both your dignity and your deposit. And to cap it all (Christian Wolmar, take a bow) you self-nominated for a Nobel Prize for Mansplaining.

It’s like the party strategist is locked in the bowels of HQ, endlessly looping in reverse Olivia Newton John’s "Making a Good Thing Better".

And no one can think that today marks the end of the party’s problems on Brexit.

But the thing is: there’s no need to Labour on. You can fix it.

Set the government some tests. Table some amendments: “The government shall negotiate having regard to…”

  • What would be good for our economy (boost investment, trade and jobs).
  • What would enhance fairness (help individuals and communities who have missed out over the last decades).
  • What would deliver sovereignty (magnify our democratic control over our destiny).
  • What would improve finances (what Brexit makes us better off, individually and collectively). 

And say that, if the government does not meet those tests, the Labour party will not support the Article 50 deal. You’ll take some pain today – but no matter, the general election is not for years. And if the tests are well crafted they will be easy to defend.

Then wait for the negotiations to conclude. If in 2019, Boris Johnson returns bearing cake for all, if the tests are achieved, Labour will, and rightly, support the government’s Brexit deal. There will be no second referendum. And MPs in Leave voting constituencies will bear no Brexit penalty at the polls.

But if he returns with thin gruel? If the economy has tanked, if inflation is rising and living standards have slumped, and the deficit has ballooned – what then? The only winners will be door manufacturers. Across the country they will be hard at work replacing those kicked down at constituency offices by voters demanding a fix. Labour will be joined in rejecting the deal from all across the floor: Labour will have shown the way.

Because the party reads the electorate today as wanting Brexit, it concludes it must deliver it. But, even for those who think a politician’s job is to channel the electorate, this thinking discloses an error in logic. The task is not to read the political dynamic of today. It is to position itself for the dynamic when it matters - at the next general election

And by setting some economic tests for a good Brexit, Labour can buy an option on that for free.

An earlier version of this argument appeared on Jolyon Maugham's blog Waiting For Tax.

Jolyon Maugham is a barrister who advised Ed Miliband on tax policy. He blogs at Waiting for Tax, and writes for the NS on tax and legal issues.