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Is Switzerland about to introduce a universal basic income?

A referendum on 5 June, triggered by a 100,000-strong petition, will determine whether the country transforms its welfare state with a monthly no-obligations cash handout available to all.

The Office Cantonal de l’Emploi (OCE), Geneva’s unemployment administration, is what you might expect of a modern bureaucracy. Not exactly Kafka-esque, it moves slowly but rationally: take a ticket, wait your turn, learn which paperwork is missing from your dossier, repeat. Located in a big complex of social administration behind the main train station, the office is busy for a region with an unemployment rate between 5 and 6 per cent, well below the European average. The staff, more like social workers than bureaucrats in dress and demeanour, work hard to reinsert people into the job market: officials can be responsible for over 40 dossiers at a time.

Objectively, Switzerland is a good place to be out of work. For a low-tax country the welfare system is robust. On condition of having worked and paid taxes in the state for over 12 months, a newly-unemployed is assured 70-80 per cent of his previous salary for a period up to 2 years: ample income in a country with some of the highest average wages in the world. In practice, the system is a hybrid between the OCE (which tries to get people back to work) and union-allied social insurance bodies (which take care of monthly payments) and is complex but effective. There are welfare trade-offs – easy firing, expensive healthcare – but Switzerland is far from a free market machine without a safety net.

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It seems strange that such a well-oiled system could soon be obsolete. On 5 June, Switzerland will hold a referendum on an initiative to introduce a universal basic income (UBI): a guaranteed, no-strings-attached, monthly payment of 2,500 Swiss francs (£1,784) for each legal resident. Driven by a popular initiative which collected the requisite 100,000 signatures, the UBI would revamp the welfare state by streamlining its core into this single monthly cash transfer. No more obligations to apply for a certain number of positions per month in order to “qualify” for your handout: you could choose to continue working and earning, or you could lead a life of leisure. The existential fear associated with finding, and maintaining, employment would disappear.

Last month, a “robot rally” was held in Zürich to drum up support for the initiative. Hundreds of badly-disguised campaigners paraded through the city advocating a futuristic social contract between man and machine: according to these robots, as they become more advanced, displacing more and more blue and white-collar jobs, the only solution is a UBI allowing for dignified coexistence. Robots must be our friends, not our foes, they claimed. This common refrain of digital disruption is a core tenet of the campaign and echoes a zeitgeist debate in Switzerland around the future of work and technology. The concept of a “Fourth Industrial Revolution”, championed by Klaus Schwab, Executive Chairman of the Geneva-based World Economic Forum, has risen from soundbite to serious topic. Schwab says that current shifts in AI and connected technologies amount to “nothing less than a transformation of humankind”, one which will need solutions guaranteeing some sort of a minimum-income for all.

A record-breakingly large poster in the Pleine de PlainPalais, Geneva. Photo: Fabrice Coffrini/AFP/Getty

But the ego of an epoch tends to historical self-aggrandisement. Hasn’t technological change always been an issue? In the opening scene of the 1986 Only Fools and Horses episode “Let Sleeping Dogs Lie”, Rodney complains about computers and mass unemployment in Thatcherite Britain: “How many people have been put on the dole by a robot what [sic] can build a car?” Digital advances aside, this is hardly the case in Switzerland, where the average unemployment rate is 3.7 per cent. Che Wagner, spokesman of Basic Income Switzerland, the organisation behind the popular initiative, concedes that the country is not suffering from any “emergency problem”. Yet it is precisely the triad of “political stability, economic wealth and a strong liberal culture of self-determination” which makes Switzerland an ideal testing ground for opening the debate. Whereas welfare politics have traditionally aimed to solve problems, this initiative is a more positive affirmation of how best to organise an affluent society of the future. The key goal is more philosophical than economic; he is determined to “decouple the concepts of labour and self-worth”.

In this sense the initiative is a radical departure from both “welfare-politics-as-usual” and neo-liberal proposals for basic incomes. Che and his colleagues make up an independently-funded, wilfully apolitical group which eschews traditional concepts of left and right. There are no Marxist hangovers in the proposal (“we don’t want to take anything from anybody to give it to somebody else”), yet there is also no indication that they support a radical rationalisation of taxation and wealth creation implied by liberal economists like Milton Friedman. The UBI would not negate certain benefits guaranteed under the current welfare system – disability allowances, for example – and is not Randian model of eradicating poverty to let the wealth creators run free. The core raison d’être is an individualistic, humanist empowerment; any socio-economic reorganisation which would be bound to arise is secondary.

This reflects the messy international debate, which has come on the agenda in recent years and attracted inputs from across the spectrum. Both Yanis Varoufakis and Joseph Stiglitz have voiced approval. Slavoj Žižek, the loud Slovene philosopher of the far left, wants a reconceptualisation of UBI to recognise that “in a knowledge-based economy, collective productivity of the ‘general intellect’ is the key source of wealth” – a similar idea to Paul Mason’s vision of a “post-capitalist” socialism for a digital age. Unsurprisingly, the companies and tech evangelists who reap the largest benefits from this data-based economy are also concerned. Some are researching liberating models of “seed money for everybody” which would have the dual-advantage of reducing annoying government bureaucracy and mitigating the possible backlash against future technological gains. In true internet-emancipatory fashion, they also want to liberate people’s latent creativity by replacing the obligation to work by the incentive to innovate.

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It is difficult to argue with the idea that people should work because they want to, not because they have to. But Swiss referendums are not won and lost on philosophical niceties. Direct democracy depends upon an engaged and pragmatic population which deliberates more earthly concerns: is our society ready for this? What would happen to the Swiss economy? Most importantly, how would it work in practice? Unfortunately for the “yes” side, these matters have proven more difficult to communicate.

One opinion poll conducted in January found that just 2 per cent of the population would quit their jobs if the measure came into effect. This is far from any imagined society of freeloading slackers which people seem to fear (ironically, one-third of the same respondents said that they expected that others would leave their jobs). But in a nation where, like elsewhere, the education system is designed to train people for specific professions and the social expectation is that you are what you work, it is difficult to see beyond a vanguard of creative or entrepreneurial youth who might embrace the freedom. Of course, those working part-time positions paid little more than 2,500 Swiss francs would have little incentive to keep working, but elsewhere it may be business as usual. My local kebab vendor told me that he had been working since he was 14, so he would see no reason to stop now.

What the experiment would do to Swiss GDP is also unclear. According to the initiators of the plan, the extra cost to the exchequer to pay a UBI to all those currently under the 2,500 Swiss franc level would be a meagre SFr18 billion (the federal government puts this at SFr25 billion). This shortfall could be met by imposing a small tax on financial transactions, they suggest. Savings could also be made through the rationalisation of the welfare system, and VAT hikes have also been mooted. Under current conditions, then, the scheme would be feasible. But this is without factoring in various known unknowns: possible outsourcing of some industries due to less competitive wages, or a global reduction in GDP due to many workers reducing - if not eliminating - the hours they work. “A step too far in the right direction2, was how economist Tobias Müller put it recently in the daily Le Temps, echoing the consensus of the Swiss political class.

At the practical individual level, finally, how it would affect the pockets of the Swiss middle class is unclear. For those earning more than the minimum amount, the only difference would be that the first SFr2,500 of their salaries would be “re-packaged” as UBI. Being presumably tax-exempt, the measure therefore would mean an incremental gain but ultimately a maintaining of the status quo. An employee in an international organisation complained to me about the lack of clarity communicated both by the campaign and the government on the initiative: the actual vote hinges on three short constitutional amendments to ensure a “dignified” minimum income for the population, but details are scarce. Although she is “of course in favour” of the suggestion, she will thus vote against it. The middle and upper classes of Swiss society simply haven’t been convinced of the need for such radical change, she said. Who benefits?

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Ultimately, at all levels of politics and society, the strength of the proposal is also its weakness. Its vague, normative nature has attracted interest, but the lack of clarity around how it would work concretely and how it would affect the income of the majority of Swiss people has undercut any chance of success. Current indicators suggest it will be roundly rejected. The always out-on-a-limb Greens are the only political party to announce support. A recent opinion poll found that 72 per cent of the population were opposed to the measure.

The amount of air-time and attention it has received will nevertheless be perceived as a success by proponents. The broad nature of the proposal and the sometimes flamboyant campaign (last week they unveiled the largest campaign poster in history in Geneva (see above); the Guinness Book of Records was on hand) highlighted that their major goal was not to meticulously rewrite Swiss legislation but to kickstart the debate on their terms. The first rule of negotiation theory is to bid high. That the direct democracy system here allows for such radical proposals (whether progressive or lamentable, like some previous votes on immigration) is a boon for the international efforts to raise awareness of this future reordering of welfare.

As referendum season continues elsewhere in Europe, there may be a lesson for campaign strategists. Emotive issues are sure to attract commentary and vocal support, but the silent majority is more pragmatic than they are often given credit. It is one thing to aim for Marx’s vision of an economic system allowing us to “hunt in the morning, fish in the afternoon, rear cattle in the evening, and criticise after dinner”: voters want to know how the hunting rights and fish quotas would operate before signing up. 

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Universal Credit takes £3,700 from single working parents - it's time to call a halt

The shadow work and pensions secretary on the latest analysis of a controversial benefit. 

Labour is calling for the roll out of Universal Credit (UC) to be halted as new data shows that while wages are failing to keep up with inflation, cuts to in-work social security support have meant most net incomes have flat-lined in real terms and in some cases worsened, with women and people from ethnic minority communities most likely to be worst affected.

Analysis I commissioned from the House of Commons Library shows that real wages are stagnating and in-work support is contracting for both private and public sector workers. 

Private sector workers like Kellie, a cleaner at Manchester airport, who is married and has a four year old daughter. She told me how by going back to work after the birth of her daughter resulted in her losing in-work tax credits, which made her day-to-day living costs even more difficult to handle. 

Her child tax credits fail to even cover food or pack lunches for her daughter and as a result she has to survive on a very tight weekly budget just to ensure her daughter can eat properly. 

This is the everyday reality for too many people in communities across the UK. People like Kellie who have to make difficult and stressful choices that are having lasting implications on the whole family. 

Eventually Kellie will be transferred onto UC. She told me how she is dreading the transition onto UC, as she is barely managing to get by on tax credits. The stories she hears about having to wait up to 10 weeks before you receive payment and the failure of payments to match tax credits are causing her real concern.

UC is meant to streamline social security support,  and bring together payments for several benefits including tax credits and housing benefit. But it has been plagued by problems in the areas it has been trialled, not least because of the fact claimants must wait six weeks before the first payment. An increased use of food banks has been observed, along with debt, rent arrears, and even homelessness.

The latest evidence came from Citizens Advice in July. The charity surveyed 800 people who sought help with universal credit in pilot areas, and found that 39 per cent were waiting more than six weeks to receive their first payment and 57 per cent were having to borrow money to get by during that time.

Our analysis confirms Universal Credit is just not fit for purpose. It looks at different types of households and income groups, all working full time. It shows single parents with dependent children are hit particularly hard, receiving up to £3,100 a year less than they received with tax credits - a massive hit on any family budget.

A single teacher with two children working full time, for example, who is a new claimant to UC will, in real terms, be around £3,700 a year worse off in 2018-19 compared to 2011-12.

Or take a single parent of two who is working in the NHS on full-time average earnings for the public sector, and is a new tax credit claimant. They will be more than £2,000 a year worse off in real-terms in 2018-19 compared to 2011-12. 

Equality analysis published in response to a Freedom of Information request also revealed that predicted cuts to Universal Credit work allowances introduced in 2016 would fall most heavily on women and ethnic minorities. And yet the government still went ahead with them.

It is shocking that most people on low and middle incomes are no better off than they were five years ago, and in some cases they are worse off. The government’s cuts to in-work support of both tax credits and Universal Credit are having a dramatic, long lasting effect on people’s lives, on top of stagnating wages and rising prices. 

It’s no wonder we are seeing record levels of in-work poverty. This now stands at a shocking 7.4 million people.

Our analyses make clear that the government’s abject failure on living standards will get dramatically worse if UC is rolled out in its current form.

This exactly why I am calling for the roll out to be stopped while urgent reform and redesign of UC is undertaken. In its current form UC is not fit for purpose. We need to ensure that work always pays and that hardworking families are properly supported. 

Labour will transform and redesign UC, ending six-week delays in payment, and creating a fair society for the many, not the few. 

Debbie Abrahams is shadow work and pensions secretary.