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Some arguments about the UK government's welfare reform programme - ADDENDUM - On proposals for an Unconditional Basic Income.



ADDENDUM - On proposals for an Unconditional Basic Income.

By unconditional basic income I mean an income sufficient for survival in an advanced society, paid to each individual (or to children through a parent or carer) at a flat rate, without a means test and without conditionality, funded through taxation, and replacing much or all of the current welfare system. Everyone gets it, and everyone gets the same. For a representative mainstream argument and history see here. For the reasons why experience of current welfare points towards a UBI as the organisational basis for its replacement, see the whole of the rest of this long essay.

There are only a limited number of ways of organising a welfare system. At the highest level of abstraction only three organising principles have ever been adopted - means testing, insurance and universality. The story of neoliberal welfare in the UK is one of the systematic degradation - the virtual elimination for people of working age - of both national insurance based and universal benefits, with the single exception of the state retirement pension (SRP), and their replacement with means tested benefits.

It is odd therefore to find proposals for a systematic extension of universal benefits - the Unconditional Basic Income (UBI) or citizens’ income - being vilified from the left - particularly in Left Unity - as being somehow a neoliberal plot against our much loved welfare system. We have only to look around us to see what neoliberalism actually plans for welfare; and it is immediately apparent that universal benefits - again with the one huge exception of SRP - let alone a basic income - play no part in those plans.

Why Unconditional Basic Income is not the same as negative income tax

In part the confusion arises from proponents of UBI who like to emphasise support for the proposition ‘from both left and right’ - they usually then cite Milton Friedman’s support for a negative income tax as somehow relevant. In fact negative income tax and UBI are diametrically opposed. Usually the claim that they are the same thing rests on the fact that rates of UBI and income tax can always be set so as to achieve the same gross distributional effects across income levels as an NIT system. If UBI is funded solely through income tax then at a certain income level the extra income tax payable exceeds the taxpayer’s income from UBI - and that income level is functionally equivalent, it is claimed, to the point under a negative income tax system at which an individual moves from receiving a payment to paying tax.

But ALL systems involving: 1. welfare expenditure, funded by 2. taxation of income, are equivalent to NIT according to this argument. All such systems, including the existing UK welfare state, involve a transfer of goods, in cash or kind, to part of the population. And at a certain point on the income scale the income tax paid to fund that transfer exceeds the value of the goods received. What NIT and UBI have in common is that they make that point visible - nothing else.

One obfuscation here is the unstated assumption that income tax is the only form of taxation, and therefore the only possible source of funding for an unconditional basic income. In fact income tax amounts to less than a quarter of UK government tax receipts. National Insurance and corporate taxation account for about another quarter; indirect taxes like VAT and various duties make up about half. Neoliberals do not like to discuss other forms of tax because this leads unto dangerous ground like corporate tax and, above all, the taxation of wealth and property. There is no reason why we should accept that restriction when considering UBI.

There is a further, historical, source of confusion. When Friedman made his case for a negative income tax (in Capitalism and Freedom, 1962) there were a variety of proposals for some kind of guaranteed minimum income in the USA, including proposals for something like UBI. All these ideas tended to get lumped together as ‘guaranteed annual income’ proposals in the USA - with a result Friedman himself noted:

... the appearance of growing agreement - of support for a negative income tax by the right and left, by businessmen and professors, by Republicans and Democrats - is highly misleading. In large part it reflects the use of the same term to describe very different plans - from a Friedman Newsweek column, September 1968.

Quite.

In fact NIT is a proposal for a comprehensive system of means testing most fully instantiated in Universal Credit; UBI for a non-means tested, universal payment, like Child Benefit. NIT proposals are always conditional, requiring work seeking activity wherever possible (and often where not possible); UBI is unconditional. UBI promotes social solidarity in that every individual gets a payment at the same rate; NIT promotes division by creating two (readily identifiable) populations, income tax payers and negative income tax recipients, and setting their interests at odds. UBI can be funded from any source, NIT ex hypothesi is funded only from income tax. UBI is a flat rate payment; NIT is variable. NIT, in most options, is based on household incomes, thus perpetuating gender based dependency within households; UBI is individual. UBI is genuinely simple, cheap and easy to administer, like other universal, flat rate, benefits; NIT is complicated because income tax is complicated, as anyone who has had to consult the many volumes of income tax law can testify. They are not the same thing; they are opposite.

Unconditional Basic Income is neither a panacea nor a neoliberal plot

Advocates for UBI often make sweeping claims for it and, as we have seen, can be muddled about what is and what is not an unconditional basic income (to be fair there are plenty of more nuanced contributions as well, for instance here). But the strongest motive behind UBI campaigns today, and what is now giving them impetus in the UK, is the experience of claiming benefits and, especially, sanctions. The state should not have the ability to deprive anyone of a basic income - simple as that.

This motive chimes in with the history of the demand. UBI is often presented as a proposal by off-beat economists and long-sighted futurologists, and sometimes it is. However it is also a demand that has emerged wherever claimants have got themselves organised - a demand that reflects the experience of claiming benefit. From Huey "Share the Wealth" programme of 1934 on the far left of the Democratic Party, to Italian autonomist feminists demanding wages for housework, UK claimants unions and Japanese “Blue Grass” disability activists (“living itself is work”) it has been very much a demand at the margins of the mainstream labour movement and socialist organisations; but then one could equally say the labour movement and socialist organisations have been marginal to the experiences of claimants, disabled people and housewives.

Context is all though. A basic income within a neoliberal economy where every conceivable transaction is monetised is not the same proposition as a basic income in an economy where the realm of free goods is being systematically expanded. A basic income funded by taxes on wealth and land value has a different class basis to basic income funded by indirect taxes like VAT. A basic income without a minimum wage risks being just an employer subsidy. A basic income that does not include an additional disability payment is an attack on disabled people. A basic income without an attached right to adequate housing is useless in the UK.

Above all the rate of basic income is critical. Too low a basic income becomes merely an employer subsidy; it needs to do what it says and mean that significant numbers of people do not, immediately, have to take any work on offer, so that workers’ position in the employment market is strengthened. Too high and it threatens expansion of the universal, free services that should accompany it. A basic income of £2,500 a year funded by a VAT increase is a (completely hypothetical) neoliberal attack on the poor. A basic income of £3,500 a year, funded from income tax (which was the UK Green Party offering at the last election) is feeble and misses many of the possible advantages of UBI. A basic income of £12,500 a year is an invitation to recoup the income through increased prices, rents and charges.

UBI then is a proposal for the architecture of fiscal transfer systems. It is the best system architecture available because it is simple and transparent and reduces or eliminates dependency and stigma. It has the potential to be an advance over the current UK welfare system but whether that potential can be realised depends entirely on the political aims with which it is brought about and the class content of what is achieved.

Getting an Unconditional Basic Income is not going to be easy

Many of the arguments advanced here - against means testing, for universality - point towards an unconditional basic income as a significant feature in any counter-movement to the Coalition government’s ‘welfare reform’. It matches the reality of work today and points forward to new ways of organising human labour power. It requires, at the least, a significant reconstruction of the state and removes some of its, more quotidian, repressive power. It is an option, in short, for a liberatory welfare.

But only an option. It is not the case that any version at all of UBI is going to be an improvement and socialists need to be involved in the debate on this, stressing the need to expand the realm of free goods - universal benefits in kind rather than in cash. One possibility for ameliorating fuel poverty for instance is to have a free basic allowance with charges for usage above that level increasing sharply at the top levels - reversing the current position where you pay more per unit, the less you use. And why can’t buses be made free to everyone, not just pensioners?

But having a bright idea is not enough to enforce social change. To get close to an unconditional basic income scheme worth having is going to involve a prolonged social struggle - because any version of UBI that is simply delivered to us by the rich will be one that is in their interests and therefore not worth having. What social struggle? - the struggle against welfare reform. The demand for UBI needs to be rooted in the fight against ATOS and the work capability assessment, in the resistance to Jobcentre sanctions and workfare, in opposition to the bedroom tax. UBI should aim to become the common sense of all these oppositional movements.