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The time for a Universal Basic Income is ripe

by
05 June 2020

This minimum for every citizen should be introduced for a year, as part of a post-Covid recovery plan, argues Eve Poole

THE Archbishop of Canterbury launched his “war on Wonga” in 2013, as a campaign against house­hold debt. In 2008, debt had reached 147 per cent of household disposable income. Hovering just under 130 per cent since then, in 2019 it stood at 126.8 per cent. According to the Financial Conduct Authority, 12 per cent of UK adults (5.9 million people) have no savings and invest­ments at all. Of those in the most vulnerable financial category, 3.7 million could only cover living ex­­penses for a week if they lost their main source of income.

And this was before the coronavirus hit. By May, the Citizens Advice Bureau reported that six million people had already fallen behind on a household bill because of the virus. Well-meaning “pay­ment holidays” defer payments, they don’t cancel them, which means that they still mount up, requiring re­­sched­­uling or renegotiation to avoid default when the holiday ends.

These are not the feckless debts of a bling generation: they are cost-of-living debts. Thanks to the gig eco­nomy, Wonga’s customers were al­­ready using loans to finance them.

In 2014, the Competition and Markets Authority found that the average payday loan was £260, lent over 30 days. Some loans were used to finance living costs, but most were used for emergencies such as the repair of cars, boilers, and white goods. The other main use was sea­sonal, particularly for Christmas presents, or for school uniform and shoes for a new term. Very few were for frivolous expenditure, such as a last-minute holiday or luxury item. This suggests that a cushion of just £300 in savings would enable most households to avoid emergency loans.

 

BUT, looking forward to a post-Covid, post-Brexit Britain, the future looks bleak for the financially vu­ln­er­able. Even the less vulnerable may now be cautious about post-lockdown spending, just when the economy most needs a boost.

So, my proposal is for the UK gov­­­­­ernment to introduce a year of Universal Basic Income (UBI), which would provide both cushion and spending power. Those who do not need it should be invited to do­­nate it to a charity of their choos­ing, because charities in the UK are suf­fer­ing unprecedented falls in in­­come, and many are set to close.

Professor Guy Standing defines UBI as “a modest amount of money paid unconditionally to individuals on a regular basis, intended to be paid to all, regardless of age, gender, marital status, work status, and work history”.

Many countries around the world are experimenting with it. Since 1982, residents in Alaska have been paid an annual Permanent Fund Dividend, funded by profits from the state’s oil industry. Last year, the payment amounted to £1300 per cit­izen. The recent UBI pilot in Finland awarded 2000 unemployed people with an income of about £500 per month. Researchers found that “the basic income recipients were more satisfied with their lives and experi­enced less mental strain than the control group. They also had a more positive perception of their eco­nomic welfare.”

Modelling by the RSA in Scotland found that, in Fife, a basic income of £2400 a year would reduce relative household poverty by 8.5 per cent and halve destitution. A basic in­­­come of £4800 a year would reduce relative household poverty by 33 per cent and end destitution completely. Foodbanks would become a thing of the past.

Dr Malcolm Torry argues that UBI could be permanently funded by a five-per-cent rise in in­­come tax, while the New Economics Founda­tion proposes scrapping the tax-free personal allowance to fi­­n­ance it. Others have argued that it could largely be financed by the re­inven­tion of the current benefits system.

My more modest proposal is to introduce UBI for one year only, as part of the Covid-19 recovery plan, both for its short-term effects and to test it rigorously as an option for the future. It might also be used to model a separate “gap-year” product in the tradition of National Service, giving everyone the right to a year off, to use for volunteering and cit­izen­ship, or to retrain or reskill for the future.

 

OPPOSITION to UBI tends to focus on two main issues. One is moral hazard, the other its political irre­versibility. The latter argues for a very clear Covid-related one-year pro­­­­­gramme to permit a political U-turn should the experiment not work. The former is harder to dis­lodge. It argues that citizens would abuse the system and that it would drive dependency and idleness.

As a Christian, I shiver at this allusion to the “undeserving poor” of the 1834 Poor Law. Getting rid of this law was one of the reasons that Archbishop William Temple fought so hard for the Welfare State, greet­ing Beveridge’s report as “the first time anyone had set out to embody the whole spirit of the Christian ethic in an Act of Parliament”. This movement also created our beloved NHS. If the C of E champions the launch of a ther­apeutic year of UBI, perhaps this could be its own William Temple moment.


Dr Eve Poole is the Third Church Estates Commissioner. She writes in a personal capacity.

A longer version of this article can be read here

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