Much has been made of the mistakes in the roll out of universal credit. Though this certainly represents a step forward from the current system of welfare, might a better solution be to move to a universal basic income?
The universal basic income is a very simple idea. It goes like this. Instead of having means tested welfare payments administered by a bureaucrat, we simply gave every citizen a basic income. From Milton Friedman to Stephen Hawking to Thomas Paine to Sir Thomas More to Martin Luther King it is an idea which commands support from a diverse range of prominent thinkers. It is an idea which also commands support across the political spectrum (albeit for sometimes very different reasons).
I first came across the idea of a universal basic income a few years ago when the Swiss decided to have a referendum on it. I must admit my first thoughts were initially dismissive. My two main objections were “How the hell is this going to be paid for?” and “Surely this would destroy the incentive to work”. Over the years I have given this much thought and come to believe that this could potentially be a radical improvement on the system we currently have.
The first objection how is this going to be paid for? Is an easy one to overcome. One of the key points of the universal basic income is that it is intended to replace all current government administered forms of welfare. To me this includes unemployment benefits, housing benefits, child tax credits and the state pension, as well benefits which are not handed out in cash form like healthcare and education.
We see from the table for the U.K. governments 2015/16 budget that if we combine, welfare, heath, the state pension, education and administration you get around five hundred billion pounds. Now given that you would likely give this only to adults, you are looking at a total population of around fifty million people (I have included everyone twenty and above in this estimate, in reality I would argue it should be administered for those twenty five and above, encouraging people to stay with their parents if they cannot afford to move out). Dividing five hundred billion by fifty million you get the figure of ten thousand pounds per year. Eminently then we can afford a basic income.
The second objection around incentives to work does not hold on closer examination either. Given that this would be a universal benefit work will always pay. A far cry from the current mess we are in. Combine this with the emergence of the gig economy, people will be able to choose hours that suit them, topping up their income as they please. This then would be a policy which would overwhelmingly improve the lives of those at the bottom end of the income scale.
I suppose this leads me to why I am so attracted to the idea. It is a policy which will liberate us from the state. The state wastes huge sums trying to work out who is entitled to what. Trying (and failing) to ensure that people do not abuse the system. Where benefits are delivered not in cash, the state runs services in a way that is completely inefficient. By just simply handing out the cash you can leave all services to the free market allowing for competition and the driving up of productivity.
Giving the power of choice back to the individual would have a profound effect. Think about it. Imagine if we all had a choice as to which healthcare provider we used and which schools we sent our children to, rather than having schools allocated by local councils and healthcare delivered by a state monopoly. Would standards not then rise? Would these institutions not then have huge incentives to improve?
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