When chancellor Rishi Sunak vowed to “balance the books” in his virtual Conservative Conference speech on Monday, the tone was one of reassurance.
The reality, however, is more menacing. Balancing the books in a post-pandemic world will mean a lot more than robbing Peter to pay Paul. From tax rises to austerity, the path back to financial strength is likely to be a brutal one.
Meanwhile, as Britain’s small businesses grappled with the realities of a new, less generous furlough scheme, and millions of self-employed tried to work out how to get by on a further support payment of just 20 per cent of income, the Resolution Foundation thinktank warned a staggering six million families will find themselves worse off if the government pushes ahead with its plan to reverse a rise in Universal Credit and tax credits come April.
It’s a grim picture. But is there another way?
Paying the way
Given the protest, brutality and inequality which has dominated our days and minds of late, one could be forgiven for thinking that polarity is inevitable. But since lockdown landed in March, forces from both the left and right have been quietly coming together in unity over the need for welfare reform and, more specifically, in support of a Universal Basic Income.
While the concept of UBI has long been mooted as a panacea to income inequality, the reality of its introduction has generally been dismissed as an impossible expense. Paying everyone in the country a guaranteed income floor, without any form of means testing – are you mad?
But disasters have a way of changing thinking. In late September, Leeds became the biggest UK city to call for a UBI trial, following Sheffield, Liverpool, Hull, Belfast and Norwich. Then, last week, the Liberal Democrats voted in favour of campaigning for a national UBI, with leader Ed Davey declaring “we need a system which prioritises social and economic resilience for individuals and for our country.”
So, where did this seemingly sudden focus come from?
A move towards equity
The murmurs began, as left-leaning murmurs are wont to do, in Scotland. Back at the start of April, as the population was coming to terms with the seriousness of the Coronavirus crisis, Nicola Sturgeon started the ball rolling, calling the introduction of UBI “the right thing to do.”
“I’ve long been an advocate of serious explorations of UBI,” the Scottish First Minister revealed. “The fundamental disruption that we’re living through right now in the economy makes that an even stronger case.”
Next into the fray came Reform Scotland, which took things a step further by not only backing the idea but adding hard figures into the mix. The public policy institute suggested that adults across the UK could be paid a set amount of £5,200 each per year, with children receiving £2,600 each, in order to stave off the worst excesses of the financial turmoil to come. That money would not be means tested. It would not be subject to employment promises, to good behaviour, or to minimum tax contributions. Unlike in the case of Universal Credit, the much-maligned single payment benefit system that has been quickly unravelling under the pressure of the COVID crisis, with UBI, universal means universal.
Siobhan Mathers, Reform Scotland
“It is a logical and necessary consequence of Coronavirus,” insists Reform Scotland board member Siobhan Mathers. “A basic income would provide some financial certainty to the many people who have been thrown into a sudden and catastrophic loss of employment or reduced hours.
“People are suffering from the pandemic because they are doing the right thing by the government. Now the government must do the right thing by the people.”
It sounds impossible, doesn’t it? Not so, argues Reform Scotland. With tax increases, the removal of the personal threshold and the scrapping of most means-tested benefits, it says, the total cost of the scheme would come in at £12.4 billion across the UK in its first year. Does that sound a lot? The furlough scheme, back when it was paying 80 per cent of employees salaries, was costing in excess of £14 billion a month.
Yes, you read that right.
Devolution in agreement
With Nicola Sturgeon admitting there was little appetite for discussion of the issue on a UK level, in late April, the devolved nations started to peruse the same hymn sheet. Wales entered the chorus, with the country’s Future Generations Commissioner, Sophie Howe, insisting, “Universal Basic Income – something that might have seemed far-fetched only a few months ago – has now become an urgent need.
“UBI is a very real solution to helping people out of poverty and aiding the economy, while reducing society’s gaping inequalities which have grown deeper during this crisis.”
Howe pointed towards the example of Finland, which earlier this year announced the results of its two-year Universal Basic Income study, where 2,000 unemployed people aged 25 to 57 were given an unconditional, non-means-tested €560 per month.
The study found people were happier, had greater trust in others and higher levels of confidence in the future. They also worked slightly more than those on unemployment benefits.
While the progressive think tank, Compass, had organised a letter back in April from more than 100 opposition MPs championing the concept, the percolating discussion of UBI reached a critical mass in summer, thanks to the intervention of Stephen Davies. The head of education at the free-market Institute of Economic Affairs, and a man the Conservatives tend to listen to, he waded into the debate to say he too believed the time had come for an open debate on the subject.
It then emerged that UBI had been considered, but discounted, by Boris Johnson before the formation of the furlough and SEISS schemes that excluded an estimated three million people.
An end to benefits
Of course, the problem with the various forms of furlough scheme so far used is not just that millions have fallen through the cracks. It is also that those very same people have found themselves on the breadline awaiting Universal Credit payments that, if they live with a working partner or have saved conscientiously, they may well not be entitled to.
Universal Credit itself, now at crisis point due to massively increased demand, has never really done the job it was supposed to in simplifying the benefits system and making work pay. The way in which it is paid has also angered women’s rights groups, who say the system is rife for exploitation by financial abusers who use the one bank account, one household demand to withhold income from their partners.
In this picture, what’s interesting about UBI is that it holds genuine appeal for the right as well as the left, reducing state-intervention and cutting the exorbitant costs of means testing. For proponents such as Reform Scotland, meanwhile, the benefits are clearer than ever as we look towards an immediate future in which a growing number of adults find themselves willing, but unable, to work.
By ensuring that those who are out of work have the money to meet their own basic needs, proponants say, UBI opens up a new world of opportunity. Those who find themselves unemployed in a recession can turn their attentions to re-training, further education or volunteering, safe in the knowledge they can keep their lights on. Meanwhile, all but the very richest workers would also find themselves better off under UBI, despite the move to higher taxation.
This is the picture Lib Dem leader Ed Davey painted last week, when he addressed delegates at the party’s virtual conference. “Trials of UBI have suggested it can improve mental health, financial wellbeing, and boost people’s confidence,” he proclaimed.
“It can properly value carers and caring for the first time and in practice can be a huge boost to the incomes of many women in particular. It can act as a second safety net for those in difficulty, for the most marginalised who fall through the current complicated system.
“We never know what’s around the corner. Coronavirus has shown us just how fragile our system is, and how easily it can fail people. From shielding people from another global crisis to rewarding informal caring, we need a system which prioritises social and economic resiliencefor individuals and for our country.
UBI, he concluded, “is a huge step towards the fairer society we, as liberals, should champion. I couldn’t be prouder that so many Liberal Democrats today voted to fix our broken system.”
Now, the question is whether Rishi Sunak, and his precariously unbalanced books, were listening…