Universal Basic Income: a sensible economic response to Covid-19

Offering a stable basic income to all, without the risk of people falling through the net has been a good idea for a long time. It’s become a compelling one in the face of the economic consequences of Covid-19

A closed corner shop: what about the people who worked here?

The idea of a Universal Basic Income is that the state pays something to everyone, regardless of circumstances. It needs to go with a changed tax system, so that the money is taken back again in tax from most people.

It means that, if people fall on hard times, they stop paying the money back in tax, rather than needing to claim benefits. This matters because there are inevitably flaws in the design of any system of benefits. People can fall through the gaps, whether those are oversights or bureaucratic errors, and face destitution. The five week delay before receiving Universal Credit is a good example. There was credible reasoning behind it, but the number of people needing help from food banks in that period shows that that reasoning was flawed. Not being sure where your food will come from or how to keep a roof over your head does real and long term harm to someone. With a Universal Basic Income, bureaucratic mistakes mean that the tax authorities get their money a little later — which does a lot less harm.

A more subtle feature of the Universal Basic Income is that technological advances are meaning that a small number of people are able to accumulate significant wealth but a worrying number are financially excluded. A conventional Socialist response to that easily turns into the politics of envy — which becomes a sense of “they shouldn’t have what I’ve not got”. That’s a polarising which tears at our sense of human connection. It risks making the wealthy fight to justify their wealth, and the wealth-less fight to take it.

At its best, a Universal Basic Income goes in another direction and recognises our interconnectedness. It avoids pejorative language around those “on benefits”, because we all receive it, and gives a more gentle way to produce a fairer society. The gentleness matters because this needn’t be a threat to the wealthy and to those who aspire to be wealthy.

There is a petition in support of this on the Parliament web site.

Connectedness and Covid-19

Covid-19 is an unusual illness. Some people have minimal symptoms. Some have a rough time, but recover reasonably quickly. The number facing death, or a spell in Intensive Care, is relatively small.

I think I am seeing two quite different narratives around this. One is that it’s absolutely right to take care of this relatively small proportion. Social distancing and accepting some economic harm are the right thing for people to do in a compassionate society to protect those people. It’s at least as much about not causing harm to others as it is about avoiding being harmed oneself.

But I have seen a less positive model, of people acting as if everyone else is a threat. There’s a big difference between seeing anyone on the street or in the supermarket as dangerous “plague carriers” and keeping our distance as a way to take care of each other. It’s the difference between something that helps us support each other and something that tears at the fabric of society.

Economic effects of Covid-19

The actual effect of Covid-19 on people’s livelihoods varies as widely as the effect of the virus on their health. There are some whose income is secure, who have little to worry about. But there are others facing very serious consequences — people who now can’t work, whose employers become insolvent and whose businesses fold. In the UK, the government has brought forward a raft of measures to help, but people will fall through the gaps.

One example is people who have become self-employed relatively recently. The government’s measures offer help to the self-employed based on the average of their earnings over the last three years. That sounds good. But it is very common for someone to save up some money, become self-employed, then see that financial cushion erode before their business develops. I spoke recently with someone in this situation — self-employed for a little over a year, with some large projects nearing completion, so they are about to invoice more than they have in the whole of the time they have been self-employed. But their clients’ income has collapsed and they now can’t pay. They are about to fall through a crack in the government’s safety net.

That anecdote is a sort-of criticism of the government’s policy. Policy has had to be created quickly and there are bound to be mistakes. In this particular example, some will justify the current policy out of fear that people will “take advantage”. That may not be so far from people whose view on benefits is coloured by exaggerated fears of “benefit fraud” (though the small number of people prosecuted, or sanctioned for bending the rules tells a different story). Right now, accidentally paying a few people more money than needed might not be so bad: although it seems unfair, they either spend that money (boosting the economy) or save it (helping banks to lend).

Universal Basic Income as the answer

Any elaborate system is going to inadvertently miss people out. There are people suffering real economic harm from staying at home, as there are real people who would suffer real medical harm if we don’t stay at home. Immediately introducing a Universal Basic Income would go a long way to recognising that our interconnectedness is economic as well as medical.

Ideally the government would already have done this — so that it could be taken into account in tax rates starting from 5 April this year — taxing those who are still earning, at the same time as helping all those who are not. But it’s not too late: this is urgent rather than impossible.

The government response to the petition for a Universal Basic Income is currently: “The Government does not believe a Universal Basic Income is the best method to tackle the extraordinary situation resulting from Covid-19, because it does not target help to those who need it most.” There are too many blind spots in their response for this to be credible.

Positive side effects of a Univeral Basic Income

Serious financial lack does enormous harm.

Those with very little money coming in are spending very little. They are on the edge of the economy. People talking dismissively of those “on benefits” are failing to realise that, enabling those people to become more economically active helps everyone.

But encounters with real financial lack scar people. The prospect of having no food or nowhere to live has long term effects. The anxiety leads people to stay in unsatisfactory jobs. It deters them from taking the risk of gaining new skills, or of moving from an industry that’s declining (but stable in the short term) to one that’s emerging, because fear makes them over-sensitive to the risks.

It’s too early to predict the economic consequences of Covid-19, but it seems more likely that it will accelerate change than that we will return to “business as before”. We’re going to need people to be willing to adapt and do new things. Scarring them with Covid-19-induced destitution is exactly the opposite of what we need.

And the numbers are interesting. Covid-19 seems to be killing somewhere between 1% and 3% of those infected. It’s absolutely right to minimise those deaths, but they are also a small proportion of the population. Those who are versatile in their work, the self-employed, and (particularly) those who have taken the leap to self-employment recently might also be a small proportion, but they also matter. If we’re facing significant economic upheaval, these people will become really important because they are the ones who are the fast adapters. It’s really important that we don’t scar them right now with real financial harm.

Spain has said it will introduce a Universal Basic Income. Finland’s experiment with it has shown that it doesn’t lead to people “not working”. It’s time for the UK to be both bold and compassionate, and do the same.

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