Should We Give Every UK Citizen a Basic Income Instead of Benefits?

We spoke to the economics expert advising the Finnish government on their plans to give every citizen 800 euros a month.

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Dec 8 2015, 11:40am

(Photo by Adam Barnett)

Finland is looking to scrap individual welfare benefits and replace them with a universal basic income available to all Finns, regardless of how much they earn.

Although the details haven't been ironed out yet, a pilot scheme would see Finns receive a payout of 550 euros (£396) per month (while still receiving some other benefits). If the pilot is a success and the scheme is rolled out nationwide, Finns would receive 800 (£576) euros a month tax-free, replacing the range of other benefits they receive at present.

Here in the UK, a basic income was proposed by the Green Party in their 2015 General Election Manifesto, with the claim that it would save the UK £163million annually in terms of welfare payouts.

Before you start planning your move to Finland to be showered in free cash, however, it's worth pointing out that the basic income proposal will be officially prepared by the government by November 2016, so it's still some way off, according toFinnish press reports.

Although socially liberal, Finland has struggled economically in recent years, with rising unemployment and limited growth. While this may seem counterintuitive, some economists argue that giving everyone a basic income – regardless of need – would actually save the taxpayer money in the long term.

VICE spoke to Professor Guy Standing, an expert in labour economics at the University of London. Co-founder of the Basic Income Earth Network, he's been advising the Finnish Government on their proposals.

VICE: Hi Professor Standing. Why do people want basic incomes? Surely we should only give people benefits if they're in need?
Professor Guy Standing: What you're describing is means-testing, and evidence shows it's a weak system. You have to measure someone's income, check it, and all sorts of errors creep in. For example, people don't know what to count as their income, or their income last week might be different from their average of the last three months.

Who would benefit most from the introduction of a basic income?
Firstly, the people who traditionally are disadvantaged by mean-testing, because they don't know how to operate the system. So vulnerable people; those with addiction problems, or migrants. Secondly, the precariat class. These are the people that existing social welfare policies fail to reach. They're in and out of casual jobs, their incomes fluctuate all the time, and by moving towards a basic income you provide them some degree of certainty.

If you give everyone free money, won't everyone just stay at home watching whatever the Finnish version of Jeremy Kyle is all day?
Evidence suggests basic incomes increase the incentive to work. When you have means-testing, and you only receive benefits if you're on a low income, then when you improve that income through extra work you end up losing out. So people end up stuck in a poverty trap.

When you have a basic income, you remove the poverty trap effect and you incentivise people to earn more income, because they get to keep the extra money.

Aside from saving money from the welfare bill, what are the other benefits?
An Indian trial found benefits such as reduced healthcare costs, because people had access to better nutrition. When you shift more income to low income groups, they spend it on basic goods and services that stimulate economic growth. So you increase tax-paying revenue.

Isn't it weird to give people on high incomes state funding they don't need?
It's easier for the Government to give everyone the money universally, rather than trying to work out who's poor and not poor, and then tax the money back from higher earners, who'll be paying a higher tax rate in any case.

What are the down sides?
Well, there is always an upfront cost to introducing major welfare reforms. In this case, when you introduce an integrated tax benefit system, there are certain costs involved with the electronic administration of such a system. Another argument I've heard in the past – particularly from trade unions – is that if people have a basic income they wouldn't lobby employers to raise wages.

How likely is it that we'll see other countries move to introduce a basic income, like Finland?
If you'd asked me ten years ago, I'd have said the costs of transition would have made it difficult, particularly in larger countries like the USA. However nowadays the costs are less. We know there have been trials in Africa and India, and there are talks about doing pilots in Canada. And there have already been pilots taking place in Utrecht, in the Netherlands.

There's been a remarkable change in recent years in terms of countries putting basic income proposals on the table in a legislative sense. The hope is that introducing basic incomes will have an emancipatory effect: helping more people to feel in control of their lives than ever before.

Thanks Guy!

@thedalstonyears

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