Would it be wishful thinking to hope that that there is a silver lining to the Covid-19 cloud hanging over the world?
In this part I will discuss something that has exercised my mind for several years. the possibility of some sort of basic universal income. This is a particularly sensitive subject to politicians as it touches on the social security net and possibly has the widest divergence of views.
The need for a universal basic income has long been recognised by the IT industry where developments have always been toward automating processes and making people functions more redundant. While we all hope that the shock to the economy, from the Covid-19 crisis, is going to be short term, I fear it will be a lot longer than we think. The world needs to face a future where we do not have the ability to provide meaningful jobs for all and we should be adapting systems now, rather than waiting for the train smash.
The usual reaction I get from people, when I mention universal basic income, is ‘that is going to be far too expensive and who is going to pay?’
To an extent we attempt to do this with our social security safety net, but it is not designed to handle high levels of unemployment, nor is the taxpayer willing to pay for ‘benefits’. Our systems are both cumbersome and very bureaucratic in nature.
If we consider the question carefully we should realise, that with a few minor adjustments to the tax system, we could recoup all the amounts paid in respect of people in work, as well as those paid to people on benefits or pensions. Consider, in it’s crudest form, that we reduce the minimum wage by the amount of the basic universal income and charge a payroll tax to businesses equal to that basic universal income we would have recouped all the basic income paid barring that paid to the unemployed, therefore the question of cost should not arise, as depending on the amount it should be no greater than what we are currently spending on unemployment benefits.
An additional tax on people of a fraction of a penny in the pound paid into a fund that is isolated from the general government tax pot, would over time pay the balance. In truth the only additional cost would be payments to those who have fallen through the cracks of our current benefit and social security systems.
Administratively this would be far easier than our current systems and over time would replace social pensions and much of the state pension. If we started with a level equal to social pensions the amount paid would not allow people to live in luxury but simply be enough feed and clothe themselves. The mechanics of payment would be into a special debit card account that was only usable in designated businesses within the UK (possibly only grocery and clothing stores, but open to debate) with limited cash withdrawal or transfer facility.
People would need to physically register either once a year or every couple of years and would need to be legally citizens of the UK. While there is an aspect of ‘nanny state’ to this idea, it is right that the Government ensures that the money is used within the UK economy and for the purpose which it was granted. Possibly these cards could also have a bio-metric feature to render them invalid if stolen.
Yes I accept that there may be a small number of people who choose not to work as a result. Generally I think that these would be mothers of young children choosing to care for their children, as well as people who pursue the arts, where income tends to be less secure. Possibly it would also encourage people to start small businesses, in the knowledge that they are still going to be able to feed themselves in the initial stages where the business is not strong enough to afford a salary.
Regarding the payroll tax to the corporate sector. We could for example deem anyone who works more than 25 hours a week as a full time employee and therefore incurring a full charge. The Universal Basic Income would only be payable to UK citizens and immigrants who have lived and worked in the UK for a period long enough to qualify them for citizenship.
This idea, although still immature and open to development by better minds than my own, is simply meant to show that it is possible to incorporate ideas that are more socialist in nature into a capitalist economy without grinding everything to a halt, and without markedly changing the individual’s or corporate tax or cost burden.