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 makevotesmatter.org.uk:

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 Foter.com / CC BY

Guy Standing Talk in Prague: Transcript, Part 2

This is the second part of Professor Guy Standing’s talk at the “Of Money and Men” conference in Prague on 12th May. In this part he focuses on basic income. You can read the first part of the talk here.

“I’ve been working and lobbying for basic income since 1985. And we set up in 1986, a group of economists, philosophers – many have gone on to fame and glory, if not richness – an organisation we called BIEN. I came up with the name because it’s French and it’s nice; Basic Income European Network. But when hundreds and thousands of people started to join from around the world, we decided to change the name at our Barcelona congress in 2004. And we became BIEN, but the “E” became “Earth”. And since then, for various reasons, basic income has suddenly become mainstream. Basic income is seen by mainstream economists of high reputation now. Those same economists, 10, 15 years ago, would have written, saying it was a stupid idea. Today they understand that if we do not address the major crisis of inequality and insecurity – they go together but they’re different – we are at risk of going to a dystopia of neo-fascist authoritarianism. It’s no light-hearted matter.

And also there are philosophical reasons. I’ve just come from speaking at a big conference in Zurich because, as you may know, on June 5th there’s going to be a national referendum on whether a basic income should be introduced as a constitutional amendment in Switzerland; commit the Swiss government to move towards a basic income. What was interesting about a number of other speakers who were there; they included two plutocrats from Silicon Valley, a former US secretary of labour, a venture capitalist from New York and sundry other prominent economists and philosophers. I don’t think we’ll win the referendum, but it’s now up there in the mainstream.

And, I want to emphasise several points. First, the standard argument against basic income is that it’s unaffordable. Yet, every country spends six or seven percent on subsidies, which distort markets, which go predominantly to the corporations and to affluent groups. A basic income would cost much less than that.

Second, we spend a huge amount – we, governments – on means-tested, behaviour tested, costly welfare systems that act as a deterrent to labour. Because if you have means-testing you have poverty traps. So in those countries, I’ve just come from Denmark, there the calculations are that the poverty trap is, you have a marginal tax rate, if you go from low benefits into the sort of low-wage jobs that that the precariat can get, of 86%! That means you only get an extra 14% by going into a low-wage job of the type that’s available. In Germany it’s 85%. In Britain it’s a wonderful 80%. Can you imagine what would happen if the salariat had marginal tax rates of 80% or more? They would be – PAH! – creating havoc! Creating wonderful speeches. But the precariat has to face them. We need to overcome the poverty trap. The only way to do that is to move to a basic income as a floor.

But I want to advocate the basic income for a philosophical reason. It’s a matter of social justice. All the aspects that are instrumental, they’re important, but Thomas Paine and a very fine thinker in the early 20th century, G.D.H. Cole, put their finger on it. The way I put it is this; the wealth and income of any of us is far more to do with the efforts and achievements of our ancestors than anything you or I do ourselves. But we don’t know whose ancestors created our wealth; yours? Mine? His? So, in a sense you can see a basic income as a modest amount given to everybody as a right, as being a social dividend paid from the collective wealth.

I came to this idea when I was asked to talk in Middlesbrough, an industrial town in the north east of England, and I mention it in my book. Middlesbrough was a village in the 1820s. Then they discovered iron. And within 15 years Middlesbrough became the centre of the industrial revolution, the centre of industrial capitalism. So if you go to San Francisco, the Golden Gate Bridge was built with iron ore from Middlesbrough. If you go to Sydney Harbour, the bridge was built with iron from Middlesbrough. Today if you do to Middlesbrough you see poverty; you the precariat; you see people hanging around in the streets – no future. But you see the toffs down in the south of England who got the wealth produced by Middlesbrough. And they’re back in government; they went to Eton and Oxford, and so on. And you say that is fundamentally unfair. The wealth was created by the ancestors of those people. So for me that is the main justification.

But a basic income would also give security to people. It would also enable people to have a greater sense of control of their time. To be able to make choices about work, reproductive work. I want to spend more time caring for my elderly mother and not just doing a job pouring the tea for a boss. Are you telling me that pouring tea for a boss is more valuable than doing the caring?

It also gives us a sense of encouraging work and encouraging leisure. The only condition, which I think could be justifiable for giving, attaching to a basic income is a moral one. I say that, in fact, to encourage democracy, which is very weak at the moment, we should do what Pericles did in 450 BC, which is, he said, for participating in the life of the polis, as citizens, I – the state – will give you a basic income. He did that. He didn’t make it conditional; he gave it as a reward. And I say that anybody when they start receiving their basic income should sign a statement morally committing to voting in elections and to going to one political meeting a year.

I want to end by just mentioning this is the year of the pilots, the experiments. Some years ago I was involved in the first basic income pilots in Africa, designing it, carrying it out. Saw fantastic results. And then I got an opportunity to do three pilots, experiments, in India. When we were designing it and raising the money to do it, Sonia Gandhi let us know that she thought we were wasting a lot of money and that everybody would be lazy and drink alcohol and smoke cigarettes. I thought we were going to be blocked from doing it. But we did it. We provided over 6000 people in nine communities with a guaranteed basic income. Every man, every woman, every child; the child’s paid through the mother. For 18 months and then four more, they each had that basic income. No conditions; they could do what they liked. And we monitored it through what everybody calls a randomised control trial, comparing it with other communities where nobody got a basic income. And the results, which we published in a book, – I’ve got a few copies if anybody is interested – were remarkable. Sonia Gandhi asked us back to her house. Two cabinet ministers came out in favour once they saw the results.

First, the welfare effects. People who have a basic income improve their nutrition, particularly the children, improve their health, improve their schooling, school performance, sanitation.

Second, contrary to what people say, people worked more. And laboured more; but more work.

Income in those communities, discounting the basic income, went up. And the income inequality went down, and there was greater economic dynamism.

The third aspect was that equity improved, because people, like the disabled, this woman who we pictured and is on the front of the cover, she’s disabled, she has no legs. But people like her, when they had their basic income and her family and friends contributed part of their basic income, she was able to buy the means of production and become a seamstress, making the clothes in her village.

But the thing that really excited me, and we emphasised it, – and if anyone’s interested, I’ve written some articles on this – is the finding that the emancipatory value of the basic income is greater than the money value. Because people who have that basic income have security and they can make choices and decisions. So people managed to save and get out of bonded labour. People managed to find ways of cooperating with their neighbours and building their community.

But I’ll end with a story. I went to one village where we were doing a basic income, and when we started it we had to get everybody with a card, because they had to have their picture card so we knew who to give the basic income to until they had bank accounts. And in one village all the young women wore veils. And they didn’t want their picture taken. We said “alright, then go into a hut” and have their picture taken unseen.

When I went back to that village about six, seven months afterwards when the program had been going, I said to an Indian colleague of mine, working on the project, I said “have you noticed the change in this village?” He said “no”. “Yeah, yeah, yeah, when we came here all the women were wearing veils and now none of them are”. He said “yes”. So we called the young women, some of the young women across, and they wouldn’t, you know, young women, don’t like talking to strangers. But eventually one of them said “I’ll tell you why. Before, we had to do what the elders told us to do. Now we have a little of our own money we can make decisions ourselves.” Thank you very much.”

Guy Standing Talk in Prague: Transcript, Part 1

I recently had the privilege of attending a conference in Prague called “Of Money and Men”, where Professor Guy Standing, co-founder of the Basic Income Earth Network (BIEN), gave a talk.

This is the transcript of the first part of the talk, in which Guy discusses concepts of work, labour and leisure, globalisation, neo-liberalism and the precariat. In the second part he focuses on the topic of basic income.

“I love it when the chair doesn’t know me, that’s very good. It reminds me that I was invited last year to Silicon Valley – this opening remark has just reminded me of this – to talk about the precariat and basic income. Imagine a room with a number of billionaires in it, a lot of high-tech people, and they arranged for me to go out to Mountain View afterwards and then said “Guy, we’re going to take you to the laboratory”. And I [said] “ok”. They took me to the laboratory and they introduced me to a robot. And then they said “ask the robot to dance”. And I said “alright, ha-ha, I’ll be clever”. So I asked it to do a tai chi. And this robot, who looked like a Michelin man – you know, the tyres – did the most fantastic tai chi. And then he turned, this robot, and put his hand out like this – I presume it was a he – put his hand out like this and said “I’m going to take jobs away from the precariat”. Now what impressed me most of all about that was that he got the accent absolutely right. He said “precariat” in the right way. And I thought that was clever. And the argument, which I won’t go into, was quite amusing and illustrative of a number of points.

Now, listening to Robert (Skidelsky, the previous speaker), I thought I should change what I was going to say slightly. Because for 30 years I worked in the international labour organisation, rising to ridiculously high levels and I was always wrestling with the model of labourism of the 20th century, was always dissatisfied with it. And eventually when I resigned and went and wrote a book – which took me in effect thirty years to write – and the book was called “Work after Globalization: Building Occupational Citizenship”. And what I’d done is I went back to the ancient Greeks to look at how they conceptualised work. And the fundamental starting point for all the stuff that I’ve been writing since then, the book on the precariat and the new book on the precariat charter, which I’m going to be talking about, is that every age throughout history has had its stupidity about what is work and what is not work.

My claim is that the 20th century was the most stupid of all. Right? And there was a remark made by the man who was the butt of Keynes, Arthur Pigou, who basically said- he didn’t use the words I’m going to use – but he basically he said this; he said if he went and hired a housekeeper or a cook, a woman, national income would go up, employment would go up, economic growth would go up and the unemployment rate would go down. If he married her and she continued to do precisely the same work, national income would go down, employment would go down, economic growth would go down. He didn’t say the next bit; the politicians would be very unhappy and the unemployment rate would go up. Now you can’t get more stupid or sexist than that. Every feminist should shout every time a politician or a sociologist or anybody uses the term work when what they mean is labour.

Now when you go back to the Ancient Greeks, they had a conceptualisation which is very relevant for the 21st century and very relevant for the discourse around the precariat. I hope I’ll make that clear later. Essentially for the ancient Greeks, they had a four-fold conceptualisation. Labour was ponos, a mixture of pain and poverty. It was done by the banausoi, the metics, the slaves, the outsiders. A citizen didn’t do labour. A citizen – it was sexist in that time, of course, they meant men – did work, but work was praxis. Work was what you did with family and friends around the home, in philia, in civic friendship. It was the reproductive activity; it was the preserving-of-the-soul type of activity. In addition, people did play, recreation.  A lot of recreation. Bodily functions; you need to rest, you need recreation. But what a citizen aspired to do was maximise his time and energies to schole, which was leisure in a different way from the modern conceptualisation. It was being a public persona, being active in the polis, in the life of society. And this sense of public action went through the analysis of Aristotle all the way through to Hannah Arendt. And I urge any of you who are interested in the subject matter to look back at her great book of 1957 “The Human condition”. It’s a fantastic book. I think she was fundamentally wrong on some of the concepts, but I think that essence of her work is relevant today.

Now, the 20th century, of course, compressed leisure and play and consumption all get muddled up, as Robert has mentioned. Labour was put on a pedestal. One of the reasons why so many people still are tied to labour is that all the entitlements were linked to labour – not to work. If you were doing full-time work in the soviet system or in the welfare state system you got entitlements; pensions, unemployment benefits, disability benefits, all sorts of things that came with labour. But if you were doing work that was not labour or you were only doing part-time labour, you didn’t get those things. That’s one of the major reasons why labourism has been having such a stranglehold on our society.

Now, the next contextual point I want to make is that in the 1970s, a time when I had just got my Doctorate from Cambridge, just learned all my tools of economics, suddenly my economics became obsolescent, because the Keynesian welfare state system of closed economies suddenly collapsed. I won’t go into that subject but we had the emergence of a new Polanyian, global transformation. I’m sure all of you are familiar with the thesis of Karl Polanyi and “The Great Transformation”. A disembedded phase dominated by financial capital where the old systems of regulation and social protection and redistribution break down, or are broken down, until you get so much insecurity and so much inequality that, in his words, you have a threat of the annihilation of civilisation. He saw the welfare state in the post-war era as re-embedding the economy in society, reducing those inequalities and insecurities. It was progressive for the time but it was built around labourism. In the 1980s all of that collapsed.

And you had the emergence of what we now call neoliberalism, dominated by the likes of Friedrich Hayek, the Mont Pelerin Society, Milton Friedman and all of their atomistic perspective. And what has happened, and I’ve developed it at length in the books, is essentially you have had a commodification of everything that can be commodified, a privatisation of everything that can be privatised and a dismantling – this is the final part – a dismantling of all the institutions and mechanisms of social solidarity. Why? Because they stand against the market. They are “distortions” – as Friedman would call them – that need to be removed.

And most fundamentally, and least emphasised in the literature and in the political discourse, was the systematic dismantling of all occupational communities. The guilds, the professional and craft guilds that for hundreds and hundreds of years had shaped work and given a structure to work. You entered the profession, you were an apprentice, you learned, you became, you moved up. Suddenly that model which gave people their ethics around work and leisure, in the Greek sense, suddenly they were seen as an enemy. Milton Friedman wrote his first book with Simon Kuznets in 1945 about the need to dismantle the professions – they stand against the market. So we’ve seen in this neoliberal era a shift to licensing and a shift to state regulation of occupational life. It’s a very important part of how work and labour have been developing. But that’s not what I’m going to be talking about in the next few minutes, but it’s an important part.

What has happened since then is that there has been the emergence of what I call, and what is called, rentier capitalism. Keynes famously wrote in “The General Theory” that within the next few years there would be the euthanasia of the rentier; the euthanasia of the person who was taking rent. But since the globalisation era has taken off, he’s anything but dead. Rent income has shot up as a huge share of total income and it’s part of the story of the growing inequality enigma.

And what has happened – and I’m going through things very quickly because I want to get the context and then talk about the main subject of today – is that with the development of the neoliberal model you’ve had a globalisation, a global labour market that’s emerged, in which, overnight historically speaking, the world’s labour supply has quadrupled. We have an extra two billion people who are part of the open labour market. All of those two billion, who’ve become part of that global labour market, were habituated to receive and live on an income that in the 1980s was about one fiftieth of what a British or German or American worker would have expected as the norm. We can quibble with the figures, but a huge difference. And what’s been happening is a slow, slow convergence as the global market system develops. But we’ve got a long way to go. There’s been huge downward pressure on our wages, and our wages in the US, in France, in Germany, in Britain, and you go about, Scandinavia where I’ve just been, have been stagnating for three decades! Thirty years! That’s an extraordinary fact, a stylised fact. Anybody who says work is the best route out of poverty should be encouraged to take up sewage cleaning or something like that because they don’t know anything about how labour markets work.

Now, what’s happened there is, in fact, that we have seen a class fragmentation taking place. Issues of class have not gone away. It’s fundamentally important to see what is happening through the prism, through the eyes of a new class structure being superimposed on old class structures.

What we’ve got is a plutocracy of oligarchs – disgustingly affluent – all gaining their vast incomes from rent in various forms, from intellectual property, more intellectual property, patents, all that stuff.

A long way below them you’ve got an elite trying to get to the plutocracy, serving the plutocracy, getting a lot of rent themselves.

Below them is what when I was at university we were told was going to become the vast majority of everywhere, what I call the salariat; people who have long-term employment, contracts, employment security, access to pensions, paid holidays, more paid holidays, paid maternity leave, paid paternity leave, you name it. All those non-wage benefits that give people in the salariat security. But there’s something that worries the salariat. I get a lot of emails from people who say “well, I’m in the salariat”. I got one from a BBC producer recently who had interviewed me or had me on a program. He said “I don’t want you to say, but I’m part of the salariat but I’m very worried because my sons and daughters are not”. That’s worrying a lot of people in the salariat.

Alongside the salariat you have a lot of what I call proficians; people who don’t want employment security – they’re much too clever for that. They know it all. They have the means of production over their shoulder or in their pockets, all their gadgets. A lot of them were in that audience in Silicon Valley so they recognise themselves when I talked about it. They only have one problem: they labour and work with such that intensity they risk burn-out at age approximately 27 and a half, thereabouts. They suddenly just can’t keep it up. But you know the types. Robert was mentioning airports; you see a lot of them in airports.

Below them is the old proletariat. Now, you in Eastern Europe – I’ve lived in Hungary and worked in this region in the early 90s – you know more about the proletariat than most. The old proletariat was habituated to accept a life of stable, full-time labour, labour, labour… until they dropped dead. We saw a lot of that. But the welfare state and the labour laws and the collective bargaining system were built for the proletariat. And it’s shrinking everywhere.

And it’s below that you get the precariat. The precariat can be defined in class terms. And it’s extraordinary that since I wrote the books I’ve been asked to talk about it in well over 350 places in 35 countries. It’s a global phenomenon. I get thousands of emails from people who say “that’s me you’re talking about”. The precariat consists of people who are being habituated to accept and internalise a life of unstable labour. All casual, all these new statuses: zero-hour contracts, internships. And the new one is crowd labour. Within the next five years, one in every three labour transactions will be done online. The very concept of employment is going to look like a minority phenomenon. Huge numbers are entering the crowd labour pool and, again, many are expected to have their own means of production. And they’re being super-exploited. Highly insecure, doing tasks, bits-and-pieces lives.

But more importantly, conceptually, is that people in the precariat have to do an enormous amount of work for labour that doesn’t get counted as labour or work. It’s not in our statistics, it’s not in our political rhetoric, but if you are in the precariat you know you have to do a lot of work that’s not for work. You have to apply for numerous jobs. I receive emails from people who’ve had to apply to thousands of jobs. Think how much time that’s using. You think its leisure?  It’s work. They have to wait around, they have to queue. They have to retrain because the last lot of retraining was no bloody good! Excuse me. You have to queue for some behaviour test from some bureaucrat, etc. Anybody in the precariat knows that. So you suffer from what I call the precariatised mind. You don’t what’s the best way to use your time. “Do I do a bit more of this, a bit more of that? A bit more of that? A bit more of that? Oh dear, I’ve done the wrong thing”. You’re living in stress. That’s why the artists are so interested in these issues, right?

In addition, this is the first time in history when the amodal level of education is higher than the modal level of labour they’re expected to do. It creates a lot of status frustration.

The second dimension is that this is actually the first major class which is having to rely almost entirely on money wages. It doesn’t get pensions, paid holidays, paid this, paid that or anything. But these wages are falling and are more volatile than they’ve ever been. So people in the precariat are living on the edge of unsustainable debt. One accident, one mistake, one loss of friendship; you can join the lumpen proletariat out on the street. A reality.

The third dimension, and this is why the second book, the subtitle, which all the translators have written – it’s been translated into 15 languages – and every single one writes to me said “will you please explain this one word?” The subtitle is “From denizens to citizens”

And the concept of a denizen was a medieval concept in Britain, which referred to someone who, when they came to a town, was given a more limited range of rights than the citizens of the town. And this is the first time in history when millions of people are being converted from citizens into denizens. Not just migrants and refugees, but people who, the precariat, who are losing all the five major rights. They’re losing cultural rights because they cannot belong to a community of their choice that gives them solidarity. They’re losing civil rights because they can’t get access to justice, they can’t afford it, and they don’t have due process. They’re losing social rights because instead of universal rights to state benefits they’re means-tested, behaviour-tested, all of these nasty tests. And sanctioned! That’s losing rights. And they’re losing economic rights because they cannot practise what they’re qualified to do. And finally – and this is why it’s a dangerous class – they’re losing political rights because in the political spectrum they do not see parties or politicians representing their needs and aspirations. The precariat is today’s dangerous class because it rejects the old social democracy, it rejects neoliberalism, but there’s a vacuum.

Part of the precariat are falling out of old working class communities, the proletariat. Their father and mother may have had occupations of some status. They were dockers, mineworkers, ship builders. So they had a status. They don’t have that. They don’t have that feeling that they belong. Now this group, because they don’t have a lot of education are listening to the sirens of neo-fascist populists, playing on their fears and insecurities. Donald Trump loves them. Donald Trump recently said, among his numerous idiotic statements, that the little-educated people love me. I wonder why.

But essentially, that is a dangerous trend, because the larger the number of people in this part of the precariat, the more likely we’re going to see a neo-fascist political movement. It’s coming – it’s come – it’s coming.

The second part of the precariat are the migrants, the Roma, the disabled, who don’t have a sense of home and they keep their heads down. Every now and then the strains get too great because they have no security.

The third part are the people who go to university, go to college. They were promised a future career. They were promised an occupation. They were promised to become a professional. And they come out knowing they’ve bought a lottery ticket that’s worth less and less and it’s costing more and more. They don’t have a future at the moment. They won’t follow the Trumps, they won’t vote for Marine Le Pen next year, or Viktor Orbán in Hungary. But they’re looking for a progressive politics and they don’t see it.

Now this leads me to the last part, because I’ve written a book called “The Precariat Charter”. It stemmed from a discussion I had with Noam Chomsky. Noam Chomsky contacted me and wanted to endorse the first book and say nice things. And it made me think that 2015, last year, was the 800th anniversary of the founding document of our constitution. It only became the Magna Carta in 1217 but The Magna Carta can be interpreted as the first class-based set of demands made against the state. That’s what it was. And I said to myself, on the 800th anniversary, what would a precariat Magna Carta look like? And how would it differ from a proletariat Magna Carta had there been one in 1950? Now it’s an interesting exercise – you have to have a certain amount of conceit to try it –but I’m sure the charter that you would write, any of you, from the perspective of seeing the precariat, would differ in certain respects. My charter has 29 articles, which is modest by comparison with the Magna Carta which has 63. And, essentially, it is about saying how do we revive the enlightenment, revive a sense of future that the neoliberals deny use because they’re only interested in consumption and labour. And you go back to some of the great spirits of our subject matter. My most fond intellectual mentor is William Morris. And William Morris in the late 19th century espoused the values of work, of creativity, of ontological development, of developing oneself through one’s work and leisure. The mingling of the two. Treating the others as necessary but not as fundamental. The idea of strengthening the values of work and enabling us in a situation, a context, to be in control.

So I asked “what would the precariat want to see redistributed?” Because every vision of a good society believes in the redistribution of something. The old proletariat wanted the redistribution of the means of production. If I talk to a precariat meeting about that, they’ll all laugh and go for the nearest bar to drink some strong drink. Right? But what are the assets that the precariat aspire to have redistributed? The first is security. Contrary to that (addressing Lukáš Kovanda, the first speaker at the conference, who had opposed basic income), and I appreciate where you’re coming from, security is what gives us the possibility of developing ourselves. There’s a lot of good psychological research recently, for example, that people who have security, their IQs, their short-term intellectual capacities, go up. If they lose that security it goes down in a big way. So security needs to be redistributed because it’s the most unequal thing of the moment. If you’re up here in the salariat or the elite you have total security. If you’re down in the precariat you have none. So we need a strategy to give people basic security. Not total security- that induces other things – but basic security.

The second asset – that every time I mention it in a precariat group, got a lot of nods – the second key asset is time, control over time; a sense in which I can decide on how to allocate my time.

The third, which is very crucial and is underestimated, is quality space. The whole neoliberal dystopia that’s unfolding believes in the privatisation, the commodification of the commons. Taking away the commons. Privatising it. Urban, rural, social, education commons; unless they make profits they don’t have value so we privatise them. There are large parts of London and other cities today, which have been privatised and we don’t have the rights to use them. That’s only an example. We need a strategy for the reviving and recapturing the commons.

The fourth asset – again the precariat understand this – is we need a strategy for the decommodification of education. Education has been turned into an industry to churn out human capital. I’m an economist so I know wat these things mean, but it’s an alienating concept. The education system was meant to liberate us. The education system is meant to prepare us for philia, for civics, for involvement in society as citizens, to participate in what the Greeks called thorubus, the creative activities. Call it work, call it leisure, but it’s what we need as public citizens. We need a strategy to decommodify education because at the moment the elite are still getting their lovely education with philosophy, art, creativity, philosophy, history. The precariat is being prepared for the labour market. The alienated nature of it – I’m stressing it because I want to stress the tendencies – is very strong.

And finally we need a strategy for the redistribution of capital.

Now that leads not to the charter because I don’t have time to go through it, but I want to lend my remarks on basic income…”

You can read the second part of the transcript here.

Is Basic Income Possible in the World’s Poorest Countries?

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Basic income is increasingly becoming big news. Just this month, New Zealand’s opposition Labour Party announced that it was considering a basic income to reduce bureaucracy and to help the population cope with insecure work and structural unemployment. Meanwhile, the Canadian province of Ontario and the Finnish government have lead the way forward with plans to conduct basic income pilot projects and experiments. In June this year Switzerland is set to become the first country to hold a referendum on the idea. And in the UK, shadow Chancellor John McDonnell has stated that the Labour Party could look into basic income in the near future.

The benefits for these nations are clear: an unconditional, universal basic income would greatly simplify the existing welfare state, ensuring that nobody can slip through the social security net while also removing welfare traps that act as a disincentive to finding paid employment. Furthermore, the extra financial stability given to citizens could do wonders in terms of mental health, reducing crime and bringing about a more innovative and entrepreneurial society.

But what about the world’s poorest countries where there may not be a welfare state to begin with? Could they afford to grant every one of their citizens a regular, unconditional payment?

Some developing countries have already experimented with cash transfer programs. These generally involve means-tested grants, given to the country’s poorest families, with certain conditions attached (such as children’s school attendance). Such programs include Brazil’s Bolsa Familia, which provides cash grants to around 13 million families and contributed to a fall in the poverty rate from 8.8% to 3.6% in 10 years.

Although cash transfers have been successful in reducing poverty, several problems have been identified, similar to those associated with the welfare state in more developed nations. The programs typically involve high levels of bureaucracy and administrative costs due to mean-testing.  In some cases, people who should be receiving the grants erroneously miss out, while some people receive them when not intended. There are often poverty traps because a person may not be entitled to the cash transfer if they take on a certain amount of paid employment, meaning there is a disincentive to work. Finally, being a recipient of such transfers can be stigmatising and induce a feeling of shame.

Converting these programs into a universal basic income would deal with these issues. It would remove a large amount of the bureaucracy and administrative costs; nobody who truly needs the grant would be excluded; all poverty traps would be removed, since taking on paid employment would always be worthwhile; and there would be no stigma attached to receiving a basic income as it is given to everybody.

It may be surprising to many people that one country taking a serious look at this approach is the southern African nation of Namibia. A proposal for a Basic Income Grant, with the aim of “eradicating poverty in Namibia by the year 2025”, is due to be submitted to the Namibian government soon for discussion and approval.

A pilot was conducted in 2008-09 in the village of Otjivero, in which a total of 930 residents received an unconditional 100 Namibian dollars a month (equivalent to around $13 or 9 euros). The results were impressive. The level of food poverty fell from 76% to 37% and the amount of children being underweight dropped from 42% to 10%. More people began to make use of the local clinic and HIV sufferers could suddenly afford to get treatment. There was an improvement in school attendance, with non-attendance for financial reasons falling by 42%. Furthermore, there was an increase in economic activity, contrary to the expectations of more wealthy neighbours. The proportion of people engaged in economic activities rose from 44% to 55% with people starting their own businesses such as brick making and baking bread. Other positive outcomes included a reduction in household debt, improved social relations, better cleanliness and personal hygiene, and a considerable fall in economic crime.

The pilot was funded by contributions from various basic income supporters in Namibia as well as by individuals, churches and other organisations in other countries. However, it has been suggested that Namibia could actually afford to implement a modest basic income across the entire country, costing around 3% of GDP, with slight increases in VAT and income tax or by introducing a levy on the country’s natural resources.

In a way, one advantage that countries without an established social safety net have in introducing basic income is that even a small amount of cash would be an improvement on what is currently provided. As the example of the Namibian pilot shows, even a very moderate amount can make a huge difference, especially to the rural poor.

Namibia is far from being the poorest country in the world though. That unfortunate title belongs to the Democratic Republic of Congo, where citizens have an average income of just $394.25 a year and 71.3% of the population lives below the poverty line. A basic income would clearly make a big difference to people living on only slightly more than a dollar a day. So could a basic income be funded even there?

One solution would be to convert foreign development aid into a basic income. The problems associated with foreign aid are well documented. Money donated by wealthy nations all too often falls into the hands of corrupt local leaders and officials. For example, in 2009 Bakili Muluzi, the former president of Malawi, was charged with stealing £7.7 million in aid money. Worse still, the former president of Zaire – now known as the Democratic Republic of Congo – reportedly stole around £5 BILLION – yes, billion –  in aid money donated by the IMF between 1965 and 1997.

Another complaint is that the allocation of aid involves large amounts of bureaucracy and wasted expenditure, which diverts funds away from the people who really need them. For example, in 2011, the UK’s Department for International Development (DfID) spent almost £500 million on consultants. Furthermore, the department has pledged to invest around £735 million over the next few years in the CDC Group, an organisation that focuses on private sector investments in Africa and South Asia. According to Alex Scrivener, a policy officer at advocacy group Global Justice Now, this group has “a track record of ploughing money into dubious ‘aid’ projects like the Garden City luxury housing and shopping complex in Kenya and a luxury hotel in Lagos, Nigeria, which costs $400 a night to stay in.”

Other grants awarded by DfID include £6 million to the University of Cape Town to investigate mental health issues in southern Africa and £3.9 million to the American group Search for Common Ground to “support the electoral cycle in Sierra Leone”.  While both are likely worthy causes, this money could surely be used more effectively and transparently by eradicating poverty directly in the form of a basic income.

For example, the Democratic Republic of Congo, the world’s poorest country, receives $2.859 billion in international development aid a year. If this aid was distributed in the form a basic income, rather than through other bureaucratic projects, it would be enough to provide every citizen with a monthly payment of $3.53. Although this may not sound like much, considering that a huge proportion of the population lives on less than a dollar a day, even a few extra dollars a month could make a significant difference.

Another major recipient of international aid is the Ivory Coast. Corruption and a lack of transparency are a big problem in this country, meaning that foreign aid often doesn’t reach the around 42% of the population living below the poverty line.  The country receives over $2.6 billion a year in aid, which, if converted into an annual basic income, would amount to almost $130 for each of the country’s 20.3 million citizens.

To eliminate corruption and ensure greater transparency, the payment of a basic income in such countries could be overseen by an international organisation. It could even be administered using mobile banking, as is already being done by one organisation called GiveDirectly, which provides direct, unconditional cash transfers to some of the poorest families in Uganda and Kenya. A Huffington Post article explains the organisation’s approach:

Once GiveDirectly has selected a village based on publicly-available poverty data, it uses an ingeniously simple method to identify who will receive money: it enrolls households who live in homes built with thatched roofs and mud floors (as opposed to corrugated metal roofs or concrete floors). The use of organic materials is a reliable indicator of severe poverty — easy for members of the community to understand, and for GiveDirectly’s staff to audit… 

The money is then delivered electronically. Recipients typically receive an SMS alert and then collect cash from a nearby mobile money agent. (If they are among a dwindling minority in Africa that doesn’t have a mobile phone or SIM card, GiveDirectly helps them buy one using a portion of the cash transfer.)”

Payments are made using mobile phone banking to reduce the potential for corruption and also to make use of the fact that a person living in sub-Saharan Africa is 60 times more likely to have access to mobile banking than a European.

At a time of austerity in many western countries, people more than ever want to know that aid money is being spent effectively and efficiently. According to GiveDirectly, for every $100 dollars it receives in donations, $91 reaches the poor. Using their method to fund basic income programs would ensure greater transparency and put more of the money directly into the hands of those who need it most instead of it being wasted on consultants.

Another option that may be available to some developing nations is the elimination of subsidies. This was the approach that was taken in a pilot in rural India in which participants were given the option of substituting food subsidies for monthly cash payments of 200 rupees.

India’s subsidy program has been criticised by the Citizens Income Trust as being incredibly inefficient and wasteful:

Altogether, subsidies eat up 7% of GDP. They do not work. The system is wasteful, inefficient, market-distorting, regressive and deeply corrupt. Rajiv Gandhi famously said that 85% of subsidised food did not reach the poor. The Deputy Chair of the Planning Commission said in 2009 that only 16% of it reached them. Others have estimated that for every Rupee spent 72% is lost in transit.”

It has been suggested that, if India were to remove its myriad of subsidy programs for things like food, energy and fertilisers, it could provide every individual with a basic income of 200 rupees per month – an amount which the pilot project showed could have very positive effects.

Lastly, we should look at the amount of tax avoided in developing countries. According to Oxfam, multinational corporations managed to avoid paying $11 billion in taxes to African countries in 2010. Just last year, a Guardian article stated that Africa loses over $50bn a year in “illicit financial outflows as governments and multinational companies engage in fraudulent schemes aimed at avoiding tax payments to some of the world’s poorest countries”. This amounts to $45 a year for every single person in Africa. If it could somehow be tapped into, this money would clearly go some way to helping fund a universal basic income in the countries worst affected by corporate tax avoidance.

So could basic income be implemented in the world’s poorest countries? Well, it certainly isn’t impossible. If international aid could be converted into a basic income then even the world’s poorest country, the Democratic Republic of Congo, could fund a very modest basic income. For other developing nations there is the option of replacing conditional, means-tested cash transfers and subsidies with unconditional, universal payments, or possibly increasing certain taxes like income tax and VAT. Reform of global tax rules, enabling poor countries to collect the tax revenue they are owed, would also be a great help.

However, it will also require governments and aid organisations acknowledging that the idea of basic income works and that removing paternalistic conditions, eradicating means-testing and simply giving money to everybody is the best way to eradicate poverty. Convincing them of this will not be easy, but if it can be achieved then basic income really could become the key to eradicating poverty and giving dignity to people around the world.

Photo credit: United Nations Photo via Foter.com / CC BY-NC-ND

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

In addition to income tax and a land value tax, a third possible way to fund a basic income or citizen’s dividend is a carbon tax. Environmental group the Citizens Climate Lobby provides this graphic to demonstrate how this could work:

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The idea would be to impose a tax on carbon at the point of extraction, which would raise prices along the supply chain. However, the revenue collected would be pooled together and redistributed among the population, thus compensating consumers for the increase in prices.

The increase in the prices of carbon-intensive products and services would reflect the true cost of carbon emissions on society and the environment:

For decades now, we’ve been tinkering around the edges of the core issue, which is that we’re not taking responsibility for the true costs of fossil fuels” explains activist Camila Thorndike in an interview with non-profit YES! Magazine. “This is a classic case of market failure. Right now it’s obvious that the costs of climate change are astronomical—in the form of hurricanes and wildfires and lost productivity—yet we still don’t have a price on carbon. Energy prices are basically lies right now because we know that clean energy is the most economical and healthful decision, but it doesn’t pencil out because polluting forms of energy are artificially cheap. We need a price on carbon to ensure that prices reflect honest information.”

Distributing all revenue from the tax to citizens as a dividend ensures that the impact on consumers, particularly on poorer households, would be minimal. At the same time, people would be incentivised to use fewer carbon-intensive products and instead purchase relatively cheaper, cleaner alternatives in order to save money and maximise their profit from the dividend.

The dividend would ensure that consumers do not lose their purchasing power, meaning that the tax wouldn’t harm the economy. A study conducted on behalf of the Citizens Climate Lobby showed that a carbon tax and dividend would actually add 2.8 million jobs to the American economy while reducing carbon emissions 52% below 1990 levels over a period of 20 years.

In the UK, an LSE study concluded that a carbon tax of £20 a tonne would have “little impact” on consumers, raising prices by only 0.9%. However, the authors of the report argue that the impact could be even lower since the carbon tax would “incentivise green behaviour change, drive business innovation, and provide the Treasury with revenues that it could recycle back into the economy”. £20 could therefore be a starting price for carbon that rises over time to encourage innovation and further cuts in emissions as businesses and consumers adjust to the new tax.

Amid criticism that the European Union’s cap-and-trade scheme has failed to achieve the desired results, a carbon tax and dividend could provide a simpler, more effective solution to support the transition to a low-carbon economy. It could also be a great way to introduce the UK to the idea of a universal, unconditional payment to all citizens, similar to a basic income.

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 4: Sovereign Wealth Funds and Dividends

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

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In my last post, I explored how to fund a basic income in the UK using existing welfare spending and various changes to the income tax system. According to my calculations, these changes would result in a basic income of £4550 per person of working age.

I also mentioned a few additional or alternative sources of funding basic income. This post will look at the potential of one of those ideas: a land value tax.

A land value tax (LVT) is a tax on the rental value of a piece of a land, paid by the owner. Essentially, LVT is a form of rent that the owner is willing to pay to occupy a piece of land. It is not a tax on the buildings on a property, rather just on the value of the land itself.

For a brief overview of LVT see Dominic Frisby’s video below:

LVT has several advantages other forms of taxation. For one, it is much harder to avoid, since it is impossible to hide land.

LVT would help to reduce the UK’s level of inequality in terms of land ownership. For example, it has been shown that Scotland has “the most concentrated pattern of private land ownership in the developed world” with just 432 landowners accounting for half of all privately owned land. Also, a study by Country Life magazine reported that 36,000 people own half of Britain’s rural land. LVT would make it less profitable to hold on to land that is not being used, therefore freeing it up for someone who does want to use it.

Furthermore, the value of land is created by everyone in the community. For example, new businesses that provide jobs and services increase the desirability of an area and raise land values, resulting in an unearned windfall for landowners. The presence of residents with money to spend creates demand in an area, further contributing to land values.

Public investment also raises land prices. LVT would enable the government to recapture some of the public money that is spent on infrastructure. In a 2007 blog post, Labour’s now shadow chancellor John McDonnell gave the following example:

…land values in East London have risen due to the Olympics, yet it is the investment of public money that has enabled the Olympics to take place and for land values to rise. A tax on land values will return some of this unearned wealth to the community

Carol Wilcox, secretary of Labour Land Campaign, adds to this in her article “Why a land tax should be at the top of Labour’s agenda”:

By valuing land regularly and collecting the rent, LVT creates a positive cycle of public investment => increased land values => increased LVT revenues => increased public investment.

Winston Churchill was also a supporter of LVT. The policy was included in the 1909/1910 People’s Budget that he championed along with Chancellor David Lloyd George. Unfortunately, the budget was rejected by the House of Lords, due to the fact that many of the lords were landowners.

“Roads are made, streets are made, railway services are improved… water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still… To not one of these improvements does the land monopolist as a land monopolist contribute, and yet by every one of them the value of his land is sensibly enhanced.”

Winston Churchill

LVT would encourage the more efficient use of urban land and encourage more compact cities, as Frank de Jong from Earthsharing Canada demonstrates in this brilliant video:

It is often argued that a problem with basic income is that landlords would simply increase rents to absorb the extra money given to people. This is similar to the idea that housing benefit does not help renters, rather only benefits the property owner.

An article on progress.org about Finland’s plans to implement basic income describes this:

By decreasing the current transfer payments and providing all persons with a guaranteed income, the basic income would at first increase land rent even more, as people could afford to bid higher for housing, and tax-free enterprise would bid more for commercial land. If the basic income is not paid from land rent, much of that income will be captured by landowners.

The article argues that increasing other taxes to pay for a basic income would stifle economic activity and suggests land value tax as the way forward:

Higher value-added and income taxes would impose a greater burden on labor and enterprise, when the unemployment rate of Finland is already ten percent…

The way to implement basic income without stifling employment and growth is to tap a source that does not flee, shrink, or hide when paid. That source is land rent.”

In the case of the UK, one potential barrier to using LVT to fund a basic income, besides convincing the public of the necessity of either, is that many LVT supporters would want to replace other existing taxes first before considering funding a basic income. In the UK there seem to be three main taxes that are candidates for replacement: stamp duty, council tax and business rates.

Firstly, stamp duty has been criticised as having “a strong claim to be Britain’s worst tax”. LVT supporter Joe Sarling explains the problem with it:

Stamp duty… is a levy placed upon the buyer through the transaction and not the seller (who has arguably benefited from uplift in values without their own development). We shouldn’t want to discourage transactions – a higher number of transactions will mean households can move freely and make most efficient use of the stock available.

Council tax is viewed as a regressive tax, based on outdated property valuations from the 1990s.George Monbiot has written about the inadequacies of council tax in the Guardian:

The most expensive flat in that favourite central London haunt of the international super-rich, One Hyde Park, cost £135m. The owner pays £1,369 in council tax, or 0.001% of its value. Last year the Independent revealed that the Sultan of Brunei pays only £32 a month more for his pleasure dome in Kensington Palace Gardens than some of the poorest people in the same London borough.

According to Andy Wightman’s report “A Land Value Tax for England”, if LVT were implemented 83% of English households would pay less than they currently do in council tax.

Lastly, business rates have been described as being the “single biggest threat to the survival of retail businesses on the high street”. Business rates are defined here as “a tax levied on non-residential properties, including shops, offices, warehouses and factories. Firms pay a proportion of the officially estimated market rent (‘rateable value’) of properties they occupy”. Abolishing or reducing business rates would likely encourage economic activity and potentially see Britain’s high streets flourish.

In “A Land Value Tax for England”, Andy Wightman discusses the perverse incentives created by business rates:

Another effect of business rates in practice arises from the treatment of unused or undeveloped land, on which business rates are levied at reduced or zero rates. This provides a clear and perverse incentive to use land inefficiently. Indeed, this has led to a rash of garish press headlines about property-owners demolishing property in order to avoid business rates… If empty or unused property is taxed at a lower rate than property being used, then a tax disincentive to use it is created. An LVT avoids these problems.

Current figures show that these three taxes generate £62 billion in revenue.

It is difficult to determine how high the LVT would need to be to cover these taxes since there are no accurate valuations of land values. However, in various reports (A Land Value Tax for England, A Land Value Tax for Scotland and A Land Value Tax for Northern Ireland), Andy Wightman has estimated a total rental value of £125.1 billion (likely an underestimate considering this excludes Wales and only includes residential land in Northern Ireland).

Wightman’s reports use figures from the 2011/12 financial year to calculate the amount that would need to be raised by LVT to replace council tax, business rates and stamp duty. Together, revenue from council tax and business rates in England has risen by approximately 8% since then. If we assume that land values have risen at the same rate then we can calculate a rental value of £135.045 billion for land in the UK.

Therefore, to replace the £62 billion raised from these taxes, an LVT of 45.91% on rental values would be required.

If an LVT could be successfully implemented at this rate to replace these taxes, then it could eventually be increased to fund a dividend awarded to all citizens. In an interview in 1885, Henry George, the economist credited with popularising the idea of land value taxation, stated “I hold that land belongs equally to all, that land values arise from the presence of all, and should be shared among all.” If land belongs equally to all, then it seems only fair that all citizens should see a return from land values in the form of a citizens’ dividend.

Any additional revenue that is used to fund a citizens’ dividend could be divided among the UK population and added to the basic income of around £4550 that I calculated in my previous post (alternatively, of course, it could be used to reduce the proportion of the basic income raised through income tax). However, the rate of LVT would need to be significantly higher than 45.91% to achieve a meaningful amount.

For example, an additional 4.09% to bring the LVT up to 50% would generate just over £5.5 billion, equating to a dividend of only £85.63 per person. As this is an annual amount, this is clearly not very significant.

However, if the rate could be raised to 100% of the rental value, the potential revenue could rise to over £73 billion or approximately £1,130 for every person in the UK.

An alternative to a dividend is the idea of a “basic rental income” to replace housing benefits, as proposed by think tank the RSA. This is explained in their fascinating report “Creative citizen, creative state”:

The third option which the RSA proposes for further exploration is the introduction of a ‘Basic Rental Income’. The Basic Rental Income would not be income-contingent and therefore does not have the same disincentive or perverse incentive (e.g. family break-up) effects as housing benefit and council tax credit. A Basic Rental Income based upon local market conditions (and this would vary from year to year) would be granted to every individual who rented rather than owned a property…

A Basic Rental Income would have cost implications. The source of funding for additional cost should be those who have gained the most from increases in housing equity…

The introduction of a land value tax or similar to fund any shortfall in the Basic Rental Income is therefore justified on the basis of gains received by a few from the institutions of society and its collective action failures rather than through the individual’s endeavour.

This “basic rental income” would represent a transfer of wealth from landowners to renters. Some 10 million households rent privately or are in social housing in the UK. If current spending on housing benefit (nearly £26.4 billion) were added to an LVT of 50% to 100% on land rents, a potential basic rental income of between around £3,190 and £9,940 could be provided to each of these households.

The introduction of LVT would result in improved productivity and increased economic activity brought about by abolishing the other taxes and the gradual redistribution of wealth from landowners to the rest of the population. This in turn would increase land values. Therefore, even if the LVT used to fund a citizens’ dividend or a basic rental income was set at a low level, it could grow as a nominal amount over time.

A land value tax to reduce other less progressive taxes ought to be implemented to increase prosperity and revive Britain’s high streets. Once that is achieved, the potential for a citizens’ dividend or basic rental income funded by land rents should certainly be explored.

See also:

How to Fund Basic Income in the UK

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

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

How to Fund Basic Income in the UK

In December last year, Business Insider UK published an article titled “Here’s how much we’d all get if the UK dumped its welfare state and introduced a universal basic income scheme instead”.

The article explored the idea of replacing the entire welfare state with an unconditional universal basic income (UBI) by dividing the current welfare budget of £251 billion among the whole UK population of 64.5 million people. The result was an annual basic income of £3,891 per person.

However, numerous essential elements and complexities of a basic income scheme as well as several options to increase the level of the UBI were completely overlooked by the author.

I believe that a UBI of around £4550 per person is possible, even while retaining some necessary parts of the current welfare budget. In this post I will attempt to explain how this can be done.

Firstly, I will look at the types of existing welfare that should be retained:

Disability benefits

The government currently spends slightly over £37.5 billion on “Incapacity, disability & injury benefits”. People with disabilities clearly require additional support and it would be grossly unfair to simply take the budget targeted to their needs and divide it among the rest of the population. I will therefore deduct this amount from the overall welfare budget and keep it separate from the UBI.

Housing benefit

Housing benefit is another area of the welfare budget that is probably best dealt with separately. Current spending on housing benefit amounts to just under £26.4 billion. This amount will also be deducted from the initial budget for UBI.

Pensions

The government includes state and public sector pensions in its welfare budget. I believe that the idea of a basic income won’t get anywhere if it upsets pensioners by taking their state pensions and dividing them up among the rest of the population.

Therefore, the over £104.4 billion that the government spends on pensions will be retained and deducted from the overall budget that is to be converted into UBI.

Deducting these amounts from the initial budget of £251bn leaves us with £82.635 billion to share among the population. However, now that pensioners are excluded, the number of people receiving the UBI can be reduced to 52,188,000.

This results in an annual UBI of just £1586.01 per person.

However, now that we’ve considered the parts of the welfare state that would be retained, we can begin to explore some possible savings and sources of additional revenue that can be used to enlarge the budget for a basic income:

Prisoners

I believe that prisoners should probably be excluded from receiving a basic income. Payments of UBI would be stopped for the duration of their prison sentence and would resume upon their release. According to the latest figures, the prison population of the UK is 85,641.

Assuming this figure stays fairly constant, this would mean the portion of the population receiving UBI can be further lowered to 52,102,359 people.

Additional revenue from efficiency savings

Since UBI would replace most of the existing complex welfare system, consisting of job seekers allowance, working tax credits, Universal Credit and other means-tested benefits, it would be much simpler and cheaper to administer than the current system. Basic income would significantly reduce the level of bureaucracy associated with means-tested benefits.

For example, the complexity of Universal Credit requires a sophisticated computer system with a budget of at least £637m. In 2013 the government wrote off £34 million worth of work on the IT project. All of this would be avoided with basic income.

For these reasons, when the Green Party included UBI in its detailed proposal before the 2015 general election, it assumed administrative savings of £8 billion.

UBI instead of student grants

Rather than administering means-tested grants to students from low-income families, it could be much simpler to give all students a basic income to help them pay for living costs during further education.

An article on the BBC website explains the present situation:

“Currently, students from families with annual incomes of £25,000 or less get the full grant of £3,387 a year. More than half a million students in England receive a maintenance grant from the taxpayer, worth in total £1.57bn a year.”

This money is spent by the Department for Business and is not included in the welfare budge so it can be added to the total welfare budget to be administered as UBI.

Withdrawal of the personal tax allowance

Like most UBI proposals, the Green Party’s plans also included abolishing the personal tax allowance. This is the level of income that someone can earn before they start paying income tax. Currently, this is set at £10,600 and the benefits of it start to be withdrawn when someone’s income exceeds £100,000.

Looking at the government’s estimated income tax figures for 2015-16, we can see roughly the number of tax payers who would be affected by removing this allowance.

In 2015-16, the basic rate of tax (20% on income between £10,600 and £42,385) will be paid by an estimated 24 million people. Abolishing the personal tax allowance and introducing a tax rate of 20% on this group’s first £10,600 of income would mean that anyone earning at least £10,600 would pay an extra £2120 in income tax. This would bring in approximately £50.88 billion.

This doesn’t include anyone whose earnings are below the personal tax allowance threshold. The additional revenue from taxing this group’s income at a rate of 20% has been estimated at around £6.8 billion.

Things get more complicated when we look at the next tax bracket (the higher rate of 40% paid on income between £42,385 and £150,000), since the portion of people with incomes over £100,000 already start to lose the benefit of the personal allowance, with those on incomes of £121,200 having lost the full benefit.

However, if we guess that at least 60% of the 4.65 million people in this bracket are earning less than £100,000, it is possible to estimate a further £5.9 billion in additional revenue.

National Insurance

At the moment, no National Insurance contributions are paid on income below £112 per week. In its UBI proposal the Green Party proposed bringing in extra revenue by scrapping the thresholds for National Insurance contributions:

“- Removing the primary threshold for National Insurance contributions. HMRC estimates that this would raise £21.6 billion in 2013–14. Uprating for inflation to 2015 adds about 4%, so say £22 billion. – Removing the secondary threshold for National Insurance contributions. HMRC says this contributes £25.7 billion in 2013–14, so we assume £26 billion for 2015.”

Their changes to National Insurance would mean that anyone earning £10,600 (the level of the personal tax allowance) would pay an additional £699 in NI contributions.

Using the figures for 2013-14, we have a total of £47.3 billion extra revenue from abolishing the NI thresholds.

Quick summary

Taking a quick look at the amounts that we have deducted and added to the original budget so far, we get the following:

Initial budget £251,000,000,000
Disability benefits -£37,537,000,000
Housing benefit -£26,386,000,000
Pensions -£104,442,000,000
Efficiency savings +£8,000,000,000
Abolition of student grants +£1,570,000,000
National insurance +£47,300,000,000
Abolition of personal tax allowance +£63,594,800,000
 
Total £203,099,800,000

This isn’t the final amount though, as there are still other adjustments that can be made to increase the figure:£203,099,800,000 / 52,102,359 = £3898.09 per person.If we divide this figure by the total population minus pensioners (as pensions are kept separate here) and prisoners we get an annual UBI of:

£203,099,800,000 / 52,102,359 = £3898.09 per person.

This isn’t the final amount though, as there are still other adjustments that can be made to increase the figure:

Reduced amount for children

Next we can set a lower rate of UBI for children. The previously calculated amount of £3898.09 can be treated as the average rate of UBI for children and adults. If we decide to set the annual UBI for children at, say, £3000 then the difference can be added to the adult UBI.

The Business Insider article gave a figure of 15 million children in the UK so I will use that number too. Consequently, a child UBI of £3000 means that nearly £13.5 billion can be added to the budget for the adult UBI, giving an adult UBI of £4261.18 per year.

Taxing away the UBI of people with sufficient income

A common criticism of basic income is that it gives money to people who are already wealthy (“welfare for the rich”). In his article “The Water Room Analogy”, basic income advocate Scott Santens explains that, for the sake of efficiency, it actually does make sense to give a basic income to even the richest people.

However, a crucial point is that their basic income should be paid back in the form of tax so that they aren’t net beneficiaries of a UBI. The tax system would need to be designed so that a special marginal rate kicks in at a certain point so that the UBI is gradually paid back as a person’s income rises beyond a certain level.

This is necessary to ensure that the UBI can be as targeted towards people with low incomes as possible.

For example, we might decide that anyone with an earned income of over £20,000 no longer really needs the full amount of the UBI anymore. Such people could be taxed an extra 10p on every pound they earn over £20,000 until they have paid back the full amount of the UBI.

So:

Someone earning £30,000 would pay back an extra £1000 of whatever basic income they receive. Someone earning £40,000 would pay back an extra £2000 of their UBI and someone earning £50,000 would pay back £3000, etc.

As soon as someone’s income becomes high enough to have paid back their UBI, any further income they earn would be taxed at the usual rate. At what point this occurs would of course depend on the level of the basic income.

If we assume that the people in the highest income tax bracket (income over £150,000) will always be able to pay the UBI back in tax, no matter what level it is set at, then they can be excluded from the calculations as they effectively don’t receive a basic income.

In 2015/16 an estimated 322,000 people will be in this bracket. This means the number of working-age adults receiving UBI can be lowered to 36,780,359, saving around £1.37 billion.

Next, we can look at people paying the higher rate of tax (income between £42,385 and £150,000). Everyone in this tax bracket earns at least £42,385 and would pay an extra 10% tax on all income above £20,000 until their UBI is paid back.

Since they have already paid an additional £2120 (due to the loss of their personal tax allowance) and an extra £699 in National Insurance, they now only have £1,479.48 of their UBI to pay back. This will already be achieved by the time their income reaches £34,794.80.

Everybody in this tax bracket paying back the rest of their UBI would bring in around an extra £6.88 billion.

Finally, anyone currently paying the basic rate of tax (£10,600 to £42,385) and earning above £20,000 will start paying the additional 10% tax rate.

There are likely to be 24 million people in this tax bracket in 2015/16. We can make a conservative guess that 3 million of those will earn £20,000 or more, paying perhaps an average of £800 of their UBI back because of the extra 10% tax. This would, at the very least, bring in £2.4 billion that can be ploughed straight back into the basic income budget.

Conclusion

These last changes to the tax system would result in a final annual adult UBI of £4550.78, or £87.52 per week.

In addition to this, there would be a child UBI of £3000, and the current budgets for housing benefit, state pensions and disability benefits would remain untouched.

This would mean that, for example, a family of 2 adults with 2 children would receive a basic income of just over £15,000 between them, as well as any housing benefit or disability benefits that they may be entitled to.

Many will say that this level of UBI is still insufficient as it not enough to comfortably live on. However, for the person with mental health problems who has had their benefits sanctioned, the person about to be evicted from their home, the worker on an unstable zero-hours contract, the self-employed tradesman whose income fluctuates wildly from month-to-month, or the single-mother who is too ashamed to admit to her daughter that she claims benefits, an unconditional £87 a week could offer a real lifeline and greater dignity.

For anyone who feels that the amount calculated here is not enough, there are other additional/alternative sources of revenue that can be examined such as a land value tax, carbon tax or an Alaskan-style dividend that is linked to a nationalised industry.

The main point, however, is that an annual basic income of at least £4500 per person can easily be funded on the basis of existing welfare spending and adjustments to the current tax system. It’s just a question of there being the political will to do so.

See also:

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

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