Universal basic income only goes so far – free public services are essential too | Alfie Stirling | Opinion

Almost 37 years ago to the day, during the fiery aftermath of an early Margaret Thatcher budget, the prime minister was allegedly challenged to name just two economists who endorsed her agenda of cutting public spending in the midst of recession – a prescription that was otherwise sending waves through orthodox academic thinking. “Alan Walters, and Professor Patrick Minford,” she is said to have replied – before later remarking, “thank goodness they didn’t ask for three.”

The importance of those 1980s budgets feels a far cry from the subdued status of last week’s spring statement. But make no mistake, just as it was in the early 1980s, significant and structural economic reform is once again discernible on the UK’s political breeze – albeit currently blowing harder outside government than within.

The past week is a case in point. Either side of the spring statement, and among the Brexit-dominated bulletins, news about radical domestic policy ideas still managed to cut through. In fact, it punctuated the debate twice, with two seemingly similar but nonetheless differing proposals. If a future prime minister is ever inclined to deliver the most redistributive overhaul of the UK’s tax and welfare system since world war two, they would be able to pass the “name two economists” test on the strength of the past nine days alone.

The two stories pertain to two thinktank reports. The first, published by the organisation I work for, the New Economics Foundation (NEF), set out the case to replace the personal allowance of income tax with a weekly national allowance. The new allowance would be made up of a £48 cash transfer to most adults – in or out of work – equal to the annual value of tax that would otherwise be paid on the first £12,500 of income, alongside a restoration of child benefit to its 2010-11 real-terms value.

The second intervention, a report from the Compass thinktank, set out a confident roadmap to a “basic income for all”. The plans would replace child benefit and the state pension with even larger payments made to every woman, man and child to be funded by increases in both income tax and employee national insurance contributions, in addition to removing the personal allowance as well.

Both pieces of work represent a proactive response to nearly a decade of cuts leading to rising poverty and a threadbare safety net; and a reaction to a collective failure on the mainstream left to set the agenda on social security design in the wake of the harm being caused by the rollout of universal credit.

But these two proposals also represent quite different directions of travel. For once, the semantics are important. NEF’s proposal, the weekly national allowance, is not a universal basic income, nor is it intended to be a first step towards one. This is because it deliberately avoids meeting three main tests.

First, it is not sufficient to deliver a basic level of need. The level paid out to individuals is given by the existing value of tax savings from the personal allowance – namely £2,500 per year. The question we asked was whether an existing and costly handout that currently disproportionately enriches the better-off could be drastically improved upon. Second, the weekly national allowance is not universal. Child benefit would still be tapered away for incomes above £50,000. Meanwhile, the new weekly payment would also be gradually reduced for incomes above £100,000, mirroring the withdrawal of the personal allowance in the present tax system. And the third difference is the most important. The weekly national allowance does not represent a significant trade-off with a programme of radically expanded public service provision.

Improving livelihoods through free transport, childcare, internet and housing would likely be more efficient and longer-lasting when compared pound-for-pound with handing out more cash. It would also represent a deeper reversal to the existing trend of monetisation and privatisation in the provision of public goods.

Ideally, the question would not be one of either/or. But to the extent that tax and spending is constrained either economically or politically, eventual trade-offs are unavoidable. By limiting itself to funds that are effectively already handed out to the vast majority of voters, the weekly national allowance would recycle resources that are politically unlikely to ever be available to pay for services.

By contrast, Compass’s proposals require further tax rises worth more than £80bn per year – about 60% more than all the tax rises combined in the 2017 Labour manifesto – and which, assuming they can be successfully fought for, might be used to pool and collectivise wealth in other ways too. Compass’s choice is not necessarily the wrong one, and it should be welcomed as a valuable contribution to the debate, but it represents a markedly different choice nonetheless, and should be regarded as such.

Thatcher’s witticism all those years ago is likely to be at least partially apocryphal. But its message is accurate – the neoliberal revolution was one of heroic isolationism from broad-based debate, either with experts or society at large. It is by engaging in the widest possible debate today that the left can avoid making the same mistakes themselves, when and if their turn comes in power.

Alfie Stirling is head of economics at the New Economics Foundation, and co-author of the report Nothing Personal: Replacing the Personal Tax Allowance with a Weekly National Allowance

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