Universal basic income and what it may look like

[porkpiesinthepark]

I've been thinking for a while about the criticism of UBI and I think it's due to people not being able to imagine the government trying to 'match' peoples wages. In my opinion, it never will but there will be alternatives to what we have now, which will be able to offer something better.

So say the UBI is £1000 a month for a single person.
We could change the housing market to allow much more public housing with rents set at an affordable level, much more stability, no private landlords and the option to customise/ change your home. Let's face it, home ownership is out of reach for the majority at present. I don't find people are dying to own their own homes but desperate to be out of the instability of the private rental market, out of parents houses, out of house shares etc. If you could offer the next best thing to owning your own house, I think people would go for it.
There would be much more community linked to people having extra time due to not working or not working as many hours. Now, not having enough to do in the day is bad but most people have these huge dreams for retirement and this would just allow them to do some of these things now instead. Also more volunteering, looking after elderly relatives etc.
I don't think that private car ownership would be a thing. There would be a big system like Uber who you could call rides on. There would be a cheaper option, say if ten people wanted to go to the city centre at the same time, they would have to walk to a hub and then the van would pick everyone up, like public transport but based on demand. It would be a status symbol to be able to call a car out just for you.
I think a lot more people would wfh getting the cost of transport and childcare down. Schools might even go remote, as there wouldn't be both parents working and so in theory they could help facilitate the lessons. Then teachers would have small classes of Sen kids like mine, key workers and vulnerable children. Kids would interact with others through volunteering groups with parents, or just playing out as there would be less cars and more parents around to keep an eye on them.
People will either hate this vision as it's so different to what we have now. Or they will like some parts. But what we have now can't continue.

Yes. There'd have to be some kind of incentive to work I guess

I think the incentive to work would be... more money, and the hard work jobs would have to have added benefits for people to want to do them.

The job market would swing very heavily in the workers favour!

The instant inflation would take care of both the possibility of people thinking it would be enough to live on and it being a disincentive to work.

Rent being UBI + two grand instead of LHA + £300 would sort it. As that's what would happen - everybody, landlords, childcare providers, shops, manufacturers, house vendors, would want their part of the so called UBI.

I am not a tax expert, or an economist, so I can't really answer that question, other than to say that for it to be a way to tackle poverty, it would have to require some restructuring of tax. How that works depends on what the level of a basic income would be.

At the moment, people on Universal Credit who are earning have an effective marginal tax rate of 55%, which also seems unfair to me. Nobody else pays income tax at that rate, but we expect it of the poorest.

Purely in the interests of pedantry, that last sentence isn't quite true because people in England who earn between 100,000 and 125,000 have an effective income tax rate of 60% (more if you include childcare allowances).

Obviously that doesn't make the problems with the benefit system OK - people at that higher end are infinitely more able to adjust.

Many thanks for your contributions Julia. I'll watch the outcomes with interest.

My personal view is that full UBI couldn't work in the UK without massive Singapore style intervention in the housing market, but I hope there are lessons to be learned from these experiments about how to improve the benefits system.

I think it is purposefully misleading to talk about tapers within UC as some sort of effective tax rate. The BBC do the same thing about the child benefit taper.

Reduction in benefits received is not the same as paying tax. The difference matters.

People who work and qualify for UC receive a reduced amount of UC when they earn more. They pay the standard rates of tax and NI on their earned income that exceeds the personal allowance and still receive some UC on top.

People who earn £100k receive no benefit payments at all, and a higher rate of tax.

Indeed, if you applied the logic about tapers of UC and CB as some kind of pseudo-tax to high earners, then their ‘effective rate of tax’ would be even higher. Even more so if you start accounting for all the other things they’re not entitled to but UC claimants not in work are.

Insisting that receiving less in benefits because you earn more is somehow a kind of tax but not accounting for the zero entitlement to benefits higher earners have feels a lot like twisting things to fit your narrative. It’s the difference between taking things from you (increased tax) vs giving you less (reduced benefits).

Which actually distracts from sensible discussion about tax and welfare payments.

Apologies if I have used the wrong words. As I said before, I am not a tax expert. However I was only using the phrase in the same way I have seen it used in other places. The effect, to me, seems comparable. For every £1 earned, a person on UC gets to keep 45p. See, for example, this article on the BBC website.
www.bbc.co.uk/news/58870012

This is rhetoric rather than fact from the bbc though.

it’s not that for every £1 earned, someone gets to ‘keep’ 55p of it. The calculation of their benefit entitlement is reduced by 45p - which means the government gives them less than previously because they earn more. That’s a big difference.

The full rate of UC isn’t a universal entitlement or basic part of everyone’s income. If it were then the reasonable comparison by the bbc would mean the higher earners ‘effective tax rates’ should also account for them not receiving any UC at all or any CB in some cases( their taper rate for the part of their salary that is comparable to the UC claimants is 100% effectively).

But it doesn’t do that because it doesn’t fit the rhetoric of ‘unfairness’ around UC calculations. And doing so exposes the problem with the logic being applied to the personas with salaries low enough to qualify for UC.

You can actually get yourself in a situation where your effective marginal rate of tax is more than 100%, if you're using the marriage tax allowance, as that has no taper at all, you just lose it once you're over the threshold.