Universal Basic Income
employment and fluctuating cost of living. Taking on work can also mean a loss of benefits; this benefits trap can act as a deterrent to working.
From a social point of view, it can be argued that UBI is beneficial for health and well-being. The poorest members of our population have to navigate a complex system of means-tested benefits. People often do not know what they are entitled to or how to claim. This can mean that people fall through the cracks and end up in poverty. Providing a guaranteed income could reduce the consequences of poverty, such as homelessness and medical problems (e.g. type 2 diabetes). Further, people claiming benefits may feel a stigma when claiming money from the government, as well as stress arising from uncertainty about how much they are going to receive now and in the future; governments can change benefit criteria when they see fit. UBI would contribute to mental wellbeing by removing the stigma and stress. Another benefit of a UBI could be that it would enable people to take on roles which are not paid but which are beneficial to society, for example carers or parents who wish to stay at home to raise children.
What are the arguments against UBI?
The main argument put forward against UBI is the cost. Central government currently funds those in society with the lowest incomes. A UBI would provide money to everyone and the extra money would have to come from somewhere. The likely way to fund a UBI would be to increase taxes. Although benefits would reduce (or even be removed altogether) there would still need to be significant tax increases. Higher taxes could disincentivize earners at both ends of the spectrum. They might, for example, encourage high earners to relocate outside of the UK where less of their income would be taken by the government. In an article in Money Week , Simon Wilson considered the proposed English trials. 5 He worked out that if the UK Government were to pay people a UBI of £1600m per month to all UK adults, the amount being paid to the individuals in the trial, the cost would be almost £1 trillion, which is almost the entire budget of the UK Government. Even if UBI replaced all working-age welfare, the state pension and income tax allowance, it would still involve a net cost of £600 billion. The tax hikes which would be required to fund this would be unacceptable to the population, as would be the reduction in funding of other essential services, such as education and healthcare. The linked argument to the above discussion of cost is that, in order to make it affordable, it is likely that the UBI would need to be set at a low rate which, rather than reducing inequality as proponents argue, would actually increase inequality. Another common argument against UBI is that it might mean that more people would choose not to work, preferring to manage on the amount the government provides without conditions attached. Current benefits are only paid to those who are actively seeking work (as long as they are capable of working). This could have the effect of reducing the workforce and consequently reducing the tax paid to the government. There is some evidence supporting this idea. Following the furlough scheme introduced during the pandemic, under which the Government was paying the wages of millions of people, a large number of people, in the region of 600,000, never went back to paid work. If people are being paid to do nothing, how would we incentivize them to go back into jobs, especially menial work or unpleasant jobs?
5 Wilson (note 2).
182
Made with FlippingBook - PDF hosting