UK Labour Party considering universal basic income as part of its new economic policy
John McDonnell, shadow finance minister, announced during a talk at the London School of Economics on Tuesday night that the Labour Party would not rule out unconditional pay for all members of society.
Labour Party leader Jeremy Corbyn had previously expressed interest in the idea of a “guaranteed social wage” during the party’s leadership contest in August/September 2015, but noted that there were issues that had to be worked through.
Green Party MP Caroline Lucas has also called on the government to explore the possibility of paying all citizens a flat, unconditional income—to offer genuine social security to everyone and dispense with the bureaucracy of the current welfare system.
Opponents argue that a universal basic income removes the incentive to work and benefits the “undeserving.” Concerns have also been raised that it could create inflation, as prices and rents are increased to take advantage of higher incomes.
UK think tank the Royal Society for the encouragement of Arts, Manufactures and Commerce has proposed a system of universal income in the UK that would give a basic amount to fit, working-age people—£3,692 for all qualifying citizens between the ages of 25 and 65, or £308 per month—that it believes would still give those qualifying a strong incentive to work.
In his IZA World of Labor article investigating whether an unconditional basic income is a viable alternative to other social welfare measures, Ugo Colombino concludes that there is enough evidence to suggest this is so. He observes that “[u]nconditional basic income appears to be an especially sound approach for redistributing the gains from automation and globalization, by building an efficient and transparent buffer against global volatility and systemic risks, generating positive incentives, and avoiding recurrent risks of falling into poverty.”
Colombino warns, however, of the potential costs of such a policy (relative to the costs of means-tested policies) and the distortions that might be introduced by raising taxes to cover those costs. He recommends investigating alternatives to progressive income taxation, e.g. a flat tax, wealth tax, consumption taxes, or environmental taxes. He also notes that there may be room to combine unconditional and conditional benefits: “cash transfers conditional on recipients taking certain education or health steps might represent an interesting and less extreme version of unconditional basic income.”