Trialling Universal Basic Income

Over the last two years Green councillors Gavin Corbett and Allan Young have been part of a 4-council partnership looking at how Universal Basic Income might work in Scotland. With the final draft report published today, they argue for Scotland to take the next step.

Universal Basic Income (UBI) has been a core Green policy for as long as there has been Green policy. It is an unconditional, non-withdrawable income for every individual. It is a minimum payment, sufficient to meet basic needs; paid to everyone, based on rights of residency and irrespective of other sources of income. It would replace most benefits, tax allowances and credits, although in most models some other benefits remain, such as those related to housing or disability.

Over the last 4 or 5 years, as yet another big welfare reform policy – Universal Credit – has floundered, there has been growing interest in UBI. That is in response to a social security system which seems ever-more bewildering to navigate and, at times, designed to crush dignity. Add to that increasing concern about the gig economy and automation in workplaces and the space for new ways of offering income security has opened up. Over the last few months, of course, the coronavirus crisis has made that space a chasm, with a shock to the economy and job security greater than any for generations.

The Scottish feasibility project, begun in 2017, was charged with looking at the feasibility of a UBI trial in Scotland. It has involved 4 councils – Glasgow, Edinburgh, North Ayrshire and Fife. The draft final report published today (11 June) recommends that a trial of UBI go ahead over a period of 3 years, following a year’s set up time and with the following features:

• The pilot should be in 2 areas – one receiving low level payment (roughly current benefit levels) and the other receiving high level (based on Joseph Rowntree Foundation Minimum Income benchmarks). To illustrate what that would mean: for a single adult over 25 but under pension age that would be £73.10 pw at low level and £213.59 at high level. Neither are proposed as options as to what an actual UBI would be set at: the purposes of a trial is to test sufficiently different levels of payment to be able to measure variable impacts.
• Most benefits and state pension would be suspended but not housing, disability and some caring benefits. Tax would be payable on income above personal allowance level. There is a “no detriment” principle which means that no household would be worse off.
• The net cost of the pilot would be £186m over three years, plus evaluation costs.

The report highlights many potential benefits of the policy, in relation to tackling poverty and inequality, improving wellbeing and offering support for volunteering, caring and education and training. Surveys generally show public support for UBI, and that was before the system shock of coronavirus. While some potential impacts of UBI can be inferred or modelled from existing evidence, that has major limitations: which, of course, is the main argument for a trial.

But the report is challenging too. Although its main purpose was to assess the feasibility of a UBI trial rather than UBI per se, the Fraser of Allander Institute was commissioned to lead a team on modelling the economic impact of full UBI roll out. The team estimates the net cost at £7.2 billion on the lower level and £38.3 billion at higher level. It then goes on to model what the impact would be if all that cost were placed on income tax. The combined effect of transfer of money and higher taxes is potentially very significant. At the higher level, poverty generally and child poverty, specifically, is all but wiped out. The impact at lower level is more modest although still significant against a backdrop of rising poverty.

The FoA modelling involves some hefty numbers so will inevitably attract attention. However, it’s important to be aware of just how limited modelling is. Firstly, we have virtually no good evidence on the behaviour impacts of UBI (hence the case for a trial). Secondly, the two levels of UBI suggested are not proposed as actual options, rather sufficiently different in size to be able to detect difference in impact. Thirdly, in practice, the introduction of UBI would be part of a package of tax reform which looked at, say, land tax, other forms of wealth tax and tax avoidance, rather than simply all being borne by income tax. Fourthly while impact on poverty is undoubtedly the litmus test of any policy of this scale, it is not the only outcome: impacts on caring, wellbeing and community cohesion are critical too. The FoA modelling is the start of a debate, not the end of it.

Of course, that is also in the context of past and present financial decisions with hefty numbers too. At the peak of the last crash, in late 2009, government support for failing banks topped £955 billion. Right now, airlines and car manufacturers have been given over £3 billion in support with more to follow, no doubt. Hefty numbers are still political choices.

And, finally, it wouldn’t be Scotland if there wasn’t a “powers” dimension. Such a radical and far-reaching policy as UBI cannot be taken forward unilaterally. The report stresses the importance of public support for the principles lying behind UBI. An engaged third sector and research community is vital. But most of all, there needs to be commitment from local government, Scottish Government and UK Government. The councils have demonstrated their interest by being involved in the feasibility exercise since 2017; the Scottish Government too by funding it, and more recently backed by the First Minister. The UK Government has been more cagey, although its backing for the legal and technical adjustments to tax and benefits is key. So there is an opportunity here for the UK Government. It should follow through with its claim that Scotland can flourish within a UK context by supporting a trial within Scotland that would have valuable lessons throughout the UK and put itself on the front-foot at a time when bold government is most needed. That’s the path we urge.

There is a lot to contemplate in such a comprehensive and challenging report. But let’s see Scotland commit now to take the next step in leading the world on this most radical of ideas.

Gavin Corbett is a Green councillor in Edinburgh and Allan Young is a Green councillor in Glasgow. Both sat on the Councillor Advisory Group for the project.