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19 May 2021

The three tests of Wales’ universal basic income pilot

A successful UBI scheme has to pass three tests: adequacy, fairness and longevity.

By Stephen Bush

The Welsh government is seeking to run a universal basic income (UBI) pilot. The proposal faces a number of serious hurdles: welfare spending is a reserved competence (that is to say, it is controlled by Westminster, not the Senedd) and a successful programme may be beyond the financial capabilities of the devolved Labour administration. However, it’s a good opportunity to ask some relevant questions, namely, what would a useful UBI pilot look like?

The first priority is to make sure a good universal basic income scheme is trialled, and any successful UBI scheme has to pass three tests: adequacy, conditionality and fairness. 

It has to provide an adequate amount of money for people to live on, and thanks to the work of the Citizens Advice Bureau we know that’s around £11,500 per annum for an adult without dependents. Many UBI pilots fall at this basic hurdle: they offer far smaller amounts of money. These schemes tend not to tell us very much, other than that direct unconditional cash transfers are a good way of combating poverty (as we already knew). 

They don’t allow us to stress test any of the claims about why a basic income is preferable to other forms of state support because they aren’t generous enough to give people greater freedom and control over their jobs, to encourage people to pursue ambitious artistic or business objectives, or any of the other claimed benefits that may accrue from a basic income scheme. (I’m not saying these claims are false or true: I’m just saying that we can’t test them unless we provide an adequate UBI.)

Now, of course, there is a low political argument, which is that it is easier to win political consent for a UBI of £80 a month than it is to win political consent for increasing Universal Credit by a similar amount. I am sceptical of this for two reasons. 

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The first is that, as the Conservative government’s difficulties in seeking to reverse the £20-a-week increase in Universal Credit have shown, after a decade of spending restraint the opposition is able to move public opinion when it argues explicitly for a change of approach. I don’t think that political parties need to back UBI just to increase the generosity of state provision. But if I’m wrong, there’s still no point in having a UBI “trial” for this type of scheme: if your political objective is simply to increase the generosity of the British welfare state by stealth, just propose an £80-a-month UBI and be done with it. You don’t need to “test” the effects of a policy you aren’t really committed to.

But if you want to test the impact of a genuine basic income, you need to meet that £11,500 figure (or, probably, around £9,500 in most of Wales, but let’s run with the UK-wide figure for ease of reference).

Yet you also have to avoid embedding greater unfairness in British society. While many complaints about universal benefits are, I think, misplaced, because there are either knock-on effects for the whole of society (it’s in my interests as a childless person to subsidise and encourage other people to have children, and a universal child benefit is one good way to do that) or because the amounts are quite small (the extra £80 that child benefit gave to people earning over £50,000 was not going to result in huge economic advantages for households earning above that amount).

With a genuine basic income, however, you really are providing amounts of money that are life-changing for pretty much anyone, regardless of how much they earn, and the problem with giving someone earning £80,000, £90,000 or £100,000 a year an extra £11,500 annually is that they will use that to entrench their economic and social advantages, whether via school fees, property purchases or whatever else you care to name.

So for your basic income scheme to meet both those criteria, you need to ensure an income floor of around £11,500 and make sure you are clawing back all or most of it via the tax system as people progress up the income scale. There are any number of good and interesting arguments about how much to claw back – you might want, for instance, to ensure that everyone receives £100 regardless of where they sit in the income distribution. Or you might want the UBI scheme to sit there as an alternative to unemployment benefit: a kind of permanent furlough scheme that protects incomes in the event of a crash but which some people receive nothing from. 

Whatever you decide, these are the tests your UBI scheme needs to pass to be worthwhile. But the test itself also needs to pass another: longevity. One possible benefit of UBI is that people will feel able to say no to bad jobs and working conditions and to take risks in pursuing their ambitions and goals owing to the safety net that an unconditional UBI provides. 

But, of course, if you know that at the end of a year or two years you are going to be shunted from UBI back to Universal Credit, with all its conditionality and other hard limits, you are not going to behave as you would if you were actually receiving UBI. (Again, I’m not making a claim either way about whether these benefits actually exist, I’m just saying that we can’t reasonably assess them without a prolonged pilot.) 

And those tests – adequacy, fairness and longevity – are the three that any UBI pilot has to pass, and which should apply to Wales’ pilot and any others that appear in future.

[see also: This is the moment for Universal Basic Income – here’s how it could work]

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