These 3 words can help combat rising inequality: Universal Basic Income

The idea of a Universal Basic Income (UBI) has attracted significant press recently in the wake of proposals made by the Royal Society of the Arts and expressions of interest from the Labour party.

Despite the uptick in attention, the idea of UBI has been floated around for centuries, the clearest early incarnation being Thomas More’s Utopia (1516). The premise is simple: a state-funded income paid to every citizen of a working age (usually on a monthly basis) with no conditions attached. Each citizen receives the same amount regardless of his/her level of income or employment status.

However, UBI has never gained the kind of traction desired by More and his modern day parallels and national, unconditional welfare is limited in the modern world. Of course, there are certain welfare provisions deemed socially and politically too important to allow market forces to dictate – free access to medical treatment with the NHS being the clearest example.

As an idea, giving free money to everyone is more inherently controversial. The controversies can be boiled down to two fundamental questions:

1. Will everyone who receives the money use it wisely?
2. Why should those who have enough receive more?

This article focuses on the above two questions, as these are the fundamental, in principle objections that must first be overcome before the practical considerations of implementing a UBI can be tackled.

Will everyone who receives the money use it wisely?

The first question looks at the age-old dilemma of the extent to which the state can trust the general public. If you suddenly start giving a perennially unemployed person an extra few hundred pounds per month, the concern is that he/she spend the bulk of it on alcohol, cigarettes and other general frivolities that won’t help him/her or society in general. Of course this depends on the individual and, as is the way, you may have to accept that some will waste away what is given to them.

However, I tend to credit humanity with a bit more optimism. I believe that, given the chance, most of the general public will rise to the occasion. The extra pounds in the pocket will allow individuals and families some breathing space. As real wages continue to fall, herein lies the real beauty of the concept; the UBI gives individuals the power to choose. Governments all too often forget that individuals do not care about abstract statements on the health of the economy, as the pre- June 2016 referendum debate illustrates so painfully. What they care about is the quality of their own lives – the ability to do their daily shop, the ability to save for a house, to go on the occasional holiday. The UBI will allow individuals more freedom to do what is important to them. This should make people more satisfied with their financial situation.

Crucially, however, the UBI should not be considered as a substitute for wage-based income as businessman Tim O’Reilly has suggested. If the UBI has the effect of reducing general working hours and therefore overall output, then its negative macro impact will outweigh any positive effect it might have for individuals.

Why should those who have enough receive more?

The second question is perhaps a higher hurdle for supporters of the UBI to overcome. Why should someone who has ample amount of money be given more by the government? This is a fair critique and one that any implementing government will have to confront. The answer could be to simply not give individuals or families earning a certain income the UBI. Then, of course, the UBI would not be ‘universal’.

This would be the wrong approach though. Giving to everyone regardless of his/her pre-UBI wealth has a certain symbolic benefit that should not be underestimated. Receiving “benefits” in the modern day has a certain stigma attached to it. It differentiates the rich from poor and creates underlying social tension. The UBI would not do this; it is not a token gesture of support by the government, rather it is an inherent right, which lacks any discrimination. Of course, certain members of society may still need additional financial support from the government to have a reasonable standard of living (those classed as disabled, for example) but this is only something to consider once the UBI is a genuine option.

Adherents to the UBI cause wait with baited breath on the outcome of experiments with UBI in both Scotland and Finland to see if it can actually work in a western economy. However, it is not necessary for England to wait for the results and perhaps it should start some experiments of its own. Decades of austerity have hit society hard and falls in real wages and the standard of living for many has increased the social divide to unsustainable levels. Now is the time for the government to be bold and empower people to let them decide how to resolve their own issues. After all, with the new power and freedom that accompanies a universal increase in wealth, it becomes a bit harder for people to complain that they have been left behind.