Monthly Archives: August 2016

Labour Should Commit to a Basic Income Pilot

This week it was revealed that the troubled families scheme, launched by David Cameron in 2012, has had “no discernible impact” on employment, truancy and adult and child offending. The scheme was initiated following the 2011 riots with the aim of “turning around” troubled families. However, an unpublished Whitehall report suggests that it has badly failed in its mission. The scheme has so far targeted 120,000 families around the country at a cost of £400 million, with a further £900 million due to be spent on another 400,000 families by 2020, meaning around £2500 will have been spent per family.

This money could instead have been spent on trialling basic income, and likely with better outcomes. The total cost of £1.3 billion would have easily funded a reasonably large-scale basic income pilot. For the same amount, 156,250 individuals could be given an unconditional weekly payment of £80 for two whole years. And if the pilot was designed to temporarily scrap job seekers allowance and perhaps reduce in-work benefits in the trial area, the pilot could even cost less than this or be widened in scale.

Shadow chancellor John McDonnell has already shown an interest in a universal basic income, and I believe a pilot is the sort of idea that the Labour Party should be looking at for the next general election, whenever is and whoever their leader may be. The party could use a pilot to test what impact a basic income would have on things like employment, mental and physical health, school performance, crime, entrepreneurship and private debt.

Some ardent supporters of basic income might say “oh but we’ve had successful pilots around the world already, let’s just get on with it and implement basic income for real”. However, it could be political suicide for the Labour Party to commit to a basic income before the public has had a real chance to acquaint themselves with the idea and be convinced. I would worry that the British public would reject basic income – just like the Swiss did in June – if they don’t have the opportunity to see it in action first. As Jeremy Corbyn has said, a basic income would be “a major, major change in social policy”. A pilot could provide us with further evidence that basic income really is the way forward and move us a step closer to its implementation.

So why not find a town or region with a higher than average unemployment rate in, say, the north of England, and try giving all working-age individuals a no-strings-attached £80 a week for a couple of years and see what happens? After all, it can’t go worse than the failed troubled families scheme.


How to Fund Basic Income in the UK Part 4: Sovereign Wealth Funds and Dividends

In a Reddit AMA session a couple of years ago, co-founder of the Basic Income Earth Network (BIEN) Professor Guy Standing stated that the “best way to fund a basic income is through establishment of sovereign capital funds”, otherwise known as sovereign wealth funds (SWF).

These funds are typically used by countries with great oil wealth in order to preserve some of this wealth for future generations when the oil eventually runs out. The funds are invested around the world to grow them over time. Norway’s SWF – currently worth around $847 billion (£647.6 bn) – is the largest in the world.

The SWF that people with an interest in basic income are most likely to be familiar with is the Alaskan Permanent Fund. Since 1977, the state of Alaska has been putting at least 25% of its oil revenue into the fund. The money is then invested, and the profits generated are distributed equally to every resident of Alaska in the form of an annual dividend. Last year’s dividend, at $2072, was the largest paid out so far.

The Alaskan dividend system has been a great success, enabling citizens to save and reduce their levels of debt, while helping the state to reduce inequality and poverty. Although it is obviously not a full basic income (i.e. enough to live on), it is the closest we have to an example of a basic income in the sense that it is a regular, unconditional payment made to all citizens.

Unfortunately, the UK squandered a great opportunity to set up a similar SWF in the 1980s using revenue from North Sea oil. Instead, as Stewart Lansley explains in an LSE blog post, “the proceeds were used to cut taxes and boost consumption – now widely recognised as a huge historic policy error”.

Writing in the Guardian, Guy Standing says that the UK must not make this mistake again by allowing a few elites to benefit from fracking rather than the many. Despite his opposition to fracking “for environmental and safety reasons”, he argues that “if fracking is to go ahead… then the people of this country should be the primary beneficiaries and decision-makers, not a plutocracy and a few multinational corporations.” Standing proposes the establishment of a “democratically governed national fracking fund”, created by renting areas of drilling to companies through public tender. The proceeds would then be “invested in ecological and socially desirable investments”, with dividends paid out in a similar way to the Alaskan Permanent Fund.

There are several other possible ways to create an SWF. One would be to reverse the trend of privatising publically-held assets. In the afore-mentioned blog post, Stewart Lansley outlines how and why this should be done:

In the last year alone, over £30bn of publicly owned assets from Eurostar to RBS have been sold. Next in line are to be the Land Registry and the remaining shares in Lloyds Bank previously bailed out with taxpayers’ money.

The government claims that such sales help pay down the deficit, but it makes little sense to use long term capital assets to finance a temporary revenue gap. Sales offer a one-off windfall – the family silver can’t be sold again. This will mean the permanent loss of collectively owned public assets, many highly profitable, built up over many decades, and the end of a stream of income delivered over time. In recent years, for example, the land registry has achieved annual surpluses of up to £100m, thus delivering regular dividends to the government…

Imagine the shape of the British economy today if, instead of the £200bn worth of successive sell-offs since the mid-1980s, public assets had then been pooled into a protected public ownership fund. With the revenue paid back into the fund – and only an agreed proportion of it spent – it would have grown to represent a significant part of the economy, providing a powerful balance to the entrenchment of private capital.

In a paper that would later be published as a chapter in his book “Exporting the Alaska Model: Adapting the Permanent Fund Dividend for Reform around the World (Exploring the Basic Income Guarantee)”, researcher Gary Flomehoft explores numerous revenue streams that could be used to establish SWFs or provide straight-up dividends. He shows that the Alaska model can be applied even in states and countries without vast reserves of oil, explaining that “SWFs can be based on other valuable resources such as copper (Chile), diamonds (Botswana), or even phosphates (Kiribati)”. Furthermore, he argues that even a resource-poor state like Vermont in the U.S. could harness its common assets to provide dividends of at least $1,972 to its citizens:

One might get the mistaken impression that only oil or resource-rich states can afford such a fund and dividend. Every state or country has substantial untapped revenue available because many natural resources and social common assets have been given away by government to private businesses. Businesses then sell them back to the public capturing not only the value they add with their effort, but also the scarcity value or economic rent of the assets given to them by public authorities.”

In his paper, Flomenhoft looks at various revenue streams such as land value and a carbon tax, licenses for logging, hunting and fishing, as well as fees for companies extracting groundwater and minerals or using publically funded resources such as the broadcast spectrum or the Internet (see also Peter Barnes’ excellent website There’s no reason why these ideas couldn’t be looked into in the UK too.

Other options not explored in Flomenhoft’s paper include using Thomas Piketty’s idea of a wealth tax to establish an SWF, as suggested here by blogger Matt Bruenig, or Robert Reich’s proposal of sharing out profits from patents and trademarks.

In conclusion, we are certainly not short of common assets that can be rented out to the benefit of all citizens rather than a few individuals. By applying the Alaska model to the UK, we too could preserve the value of limited resources for future generations, while also reducing inequality and poverty today.

See also:

How to Fund Basic Income in the UK

How to Fund Basic Income in the UK Part 2: Land Value Tax

How to Fund Basic Income in the UK Part 3: Carbon Tax and Dividend

Photo credit: marianne muegenburg cothern via / CC BY-SA

The UK and U.S. are desperately in Need of Electoral Reform

It’s interesting how British politics often finds itself reflected in the U.S.: from the emergence of the populist, right-wing politics of Farage and Trump to the virtually simultaneous rise of left-wingers Jeremy Corbyn and Bernie Sanders who have both amassed a large and passionate following but are unwanted by their respective parties.

Observing British and American politics, an issue that I think is becoming increasingly important on both sides of the pond and urgently needs far more attention than it is getting is electoral reform.

The problems with the UK’s first-past-the-post (FPTP) electoral system were blatantly clear after the 2015 general election. FPTP enabled the Conservatives to form a majority government with just 36.9% of the national vote. A combined total of around 5 million people votes for UKIP and the Green Party yielded just a single MP for each party, while the SNP needed only 25,972 votes per elected MP. Furthermore, an MP in Northern Ireland managed to win his seat with a record low share of the vote of just 24.5%.

There is another big reason why reform is urgently needed now: the Labour Party is tearing itself apart at the seams but cannot afford to split under FPTP. While the various wings of the party are involved in bitter fighting, the party’s standing in the polls is disastrous, and the lack of a united front would hand an easy victory to the Conservatives in a general election.

It seems doubtful that the party will be able to unite with members and the PLP pulling in different directions. Labour rebels are already planning to create a separate party if Corbyn wins the leadership contest, as is expected. However, without electoral reform such a split would be a disaster for all involved. If Labour were worried about the Greens splitting the left vote before the 2015 election, imagine what would happen to a freshly carved up Labour Party. The two newly formed parties would be obliterated in a general election, allowing the Tories to rule indefinitely at a time when the country desperately needs an effective opposition, something even David Cameron acknowledged during his final outing at PMQs.

Under a proportional system, Labour would be able to split and start taking the fight to the Tories. As Josiah Mortimer explains in his article “Let’s Face It: Labour Wouldn’t Be in This Mess If We Had PR” in the Huffington Post, switching to a proportional system would have several benefits for the various factions that currently make up the Labour Party:

The simple fact is, under a PR system, none of this would need to happen: the ‘coup’ plots and the constant tug-of-wars, the unpredictable see-sawing one way or another. A centrist/social democratic party could elect who they wanted, while a new left-wing party could emerge. They could work alongside each other, and be perfectly content with their leaders. The quality of leadership might also go up on both sides, with less of a ‘fortress mentality’ that comes from trying to hold on to the reigns for as long as possible in the face of a possible unseating from another faction… Leadership contests would no longer be the same skewed, bitter ideological struggles – there would be broad agreement on ideological positioning.

Some Labour MPs, such as Clive Lewis and Jonathon Reynolds, have argued in favour of PR. However, it seems unlikely that Labour leader Jeremy Corbyn will join them in supporting full PR. When asked about PR in an interview with Owen Jones, he gave the following answer:

The caveat for everything to do with electoral reform, as far as I’m concerned, is maintaining the constituency link. Where you go away from constituency link of a member of parliament to a constituency then I think you end up with a more remote form of politics. Beyond that, top up lists, Additional Member System or, perhaps better, a democratically elected upper chamber, which would be proportionally represented, are ways forward on this.”

The Additional Member System (AMS) that Corbyn mentions has been suggested as way to have a more proportional system, while retaining the constituency link. It is already used for the Scottish Parliament, Welsh Assembly and London Assembly and is also used for general elections in Ireland in combination with a Single Transferable Vote system. 


How AMS solves the constituency link issue is explained on the website

Many MPs who are opposed to PR claim that it would inevitably damage the link between them and their constituents, whose interests they represent. In reality, there are a number of systems of PR that keep or even improve this link. The Additional Member System (AMS) maintains the present principle of one-MP-to-one-constituency, while using top-up lists to ensure that the share of seats a party wins matches the share of the vote the people give them.

One problem I can see with implementing this system though is that it would require either a large increase in the number of MPs – something that I cannot imagine the British public wanting – or a redrawing of constituency boundaries to make them much bigger, thus halving the number of local MPs. In any case, ways to make the electoral system more proportional ought to be discussed further in the UK.

Meanwhile, in the U.S., the attempt to carry Bernie Sanders to victory in the Democratic primaries has failed, and progressives are looking around for alternatives, with many considering Green Party candidate Jill Stein.

However, if they vote with their conscience and refuse to fall in line behind the “lesser of two evils”, they risk forever being held responsible for handing the White House to the Republicans, much like Ralph Nader is routinely blamed for costing Al Gore the presidency in 2000. The threat of splitting the vote has effectively left Americans having to choose between the two most unpopular and least trusted presidential candidates in history.

There is clearly an appetite for alternative voices, with interest growing in the Green Party and the Libertarian Party, but under the current system these parties will struggle to even achieve the 15% required to take part in the debates, let alone produce a winning candidate.

The only candidate who seems to be addressing these issues at all is Jill Stein. In a recent interview with the Intercept she said the following:

[T]he two-party system is the worst-case scenario. In my view, the worst horror of all is a political system that tells us we have to choose between two lethal options, and that’s what we have to fight and we shouldn’t be manipulated into thinking it’s one or the other of these villains out there, one or the other evil.

There’s a readily available solution right now: ranked-choice voting, which would take the fear out of voting and would ensure that people can vote for their values as their first choice, and their pragmatic choice, whatever that is, as their number two. That would actually enable us to move forward in a good way and bring our values back to democracy.

If we really care about democracy we should looking at alternative solutions like PR and ranked-choice voting to enable a wider range of opinions, rather than narrowing down the debate. Moreover, a more proportional system would finally enable the dysfunctional parties that force together unhappy bedfellows like Sanders and Clinton and Corbyn and Blair to break apart and put everybody out their misery. We need to end our “lesser-of-two-evil”-thinking and finally start making our representatives actually representative of what we want. Changing the way we vote for our politicians is the only way we can make this happen.

Photo credit: vige via / CC BY