The Basic Income Conversation is an initiative, powered by Compass, to promote the idea of a universal basic income in the UK. The report can be accessed here.
This is the report summary:
“This report examines the distributive impacts of three UBI schemes which raise the income floor to different heights and are broadly designed to provide a potential pathway to attainment of the Minimum Income Standard, MIS. The first is a starter scheme to provide an entry payment; the second an intermediate scheme and the third a full MIS payment to which increases in less generous schemes can be aimed over time. We use microsimulation of data from the Family Resources Survey to outline the static distributive impacts and costs of the schemes.
Our key finding is that a modest, fiscally neutral, scheme has the capacity to cut child poverty to an historic low, below the low point achieved in the 1970s, thus achieve more than the anti-poverty interventions of the New Labour Governments from 2000. Even a modest scheme would significantly improve the living standards and life chances of millions of people and, despite the claims made by some critics of UBI, would be both feasible and affordable. This helps to answer the central practical criticism of introducing a basic income, that the payment levels are either too small to make much difference or too generous to be affordable.”
I read the document and came away with a few thoughts. Firstly, ever so-called civilised democratic state is signatory to the UN Chart which outlines that states that have agreed too upholding the principals therein actually do something about bring about the standards setout therein with firm, committed progressive steps towards achieve the goals set. However, sadly this is far from the truth. Since the Charter was agreed, although we have seen a global rise in wealth and living standards, the rising tide has not floated all equally – in fact in real terms most states have seen a widening gap between those that have plenty and those that have less. The income of the working classes have not kept pace with inflation. What has occurred as a result is although unemployment levels have improved, the income and circumstances of those employed no longer provide the support to lift people into the middle-class. The emergence of a new form of poverty has steadily see the middle-class being replaced by the working poor. The outcome of rising costs, low wages has resulted in low levels of savings and a reduction of living standards. Employment is no longer stable as short contract, part-time and other more precaurious forms of employment have become the mainstay throughout most developed economies and even worse in developing economies. The further impact of the lowering of education standards, healthcare support and retirement savings have all worked to further destabilise societies worldwide. A very high percentage of the wealth generation continues to grow and flow towards a very small excessively wealthy portion of society – the winners in the Capitalist game. It would be common sense to promote the highest level of education as that is the bedrock for future economic growth; to foster high quality healthcare to ensure a healthy workforce; to foster and promote a culture of saving to ensure that self-reliance is enabled; to foster a well serving retirement saving so that our senior citizens do not end up living a improvised, state reliant retirement. What puzzles me is that almost every paper I have read relating to Universal Basic Income, wrestles with how UBI can be supported economically. In every study, the need for UBI is pretty clear but as in this paper its pretty clear that based on what is fiscally possible in way of taxes, that unless society as a whole is willing to be subjected to a higher percentage of their incomes being taxed – as is the case in many of the developed economies in the Nordic states, there is little if no appetite to do the same in many other European societies. Therefore UBI from the outset is trapped in a mindset of scarcity of funding – which is without merit. There is no shortage of funding – which is made very clear when developed states worldwide bailed out failing banks in the 2008 Great Recession, as well as the bailout measure introduced during the onset of the 2020 pandemic. The arguments put forward is that the bailout measures were of a short-term nature, whereas UBI is a permanent measure. The fact remains that if we do nothing to halt the decay of living standards, there can be no long-term economic prosperity – as ultimately all stable economies are build on the notion that consumers spend into the economy – in order for consumers to spend requires well paid, stable employment.
As it is clear that there is little appetite to expand taxes, as increasing taxes is a direct drain on economic growth (proven incorrect in Scandinavian states) – it become pretty clear that a more creative approach is needed to support those in poorly paid work. There is a need to relook/revise the current Capitalist system in order to spread the benefits of rising wealth to those that are subjected to lowering living standards. This relates to how wealth is managed and how capital flows within an economic system. In the current system more wealth is generated via indirect investment (rents, patents, stock market trades and currency manipulation) that via fixed capital investment (factories, employment and manufacture). There result is a high concentration of capital flowing in a tight circle within the globalised capital non-fixed highly liquid investments. The result is that the idea of wealth trickling down to the balance of society is just about non-existent. As economies are highly globalise it is much easier for super wealthy to dodge tax nets. The result is that the state has had a much larger percentage of the burden to support those in society that are the losers in the Capitalist game – those poorly paid and working within unsecured employment. So there need is to redirect capital flows so that there is more access to capital by those outside of the high-end capital markets. How can capital flows be redirected without disrupting economic growth at the top end? How do we afford funding UBI if higher taxes cannot be raised due to resistance? The solution is pretty straight forward – create an alternative mandatory security, unconnected with standard economic activity, which is 100% guaranteed secure and offers higher levels of long-term smooth predictable returns than the market cannot deliver. Mandate by law that a large percentage of pension funds, life insurance and asset insurance funds be channeled into the newly formed securities. How do we guarantee that the funds invested are secure. Gold continues to play a very important role within the investment community as well as within National Reserve Funds – more Central Banks are holding gold as a means of long-term security. The problem with gold is that it is freely traded and subject to demand/supply as well as the level of confidence. Economic confidence is currently at a lower ebb therefore gold is trading higher; as soon as sentiment turns positive the value drops and investment drops in gold. The solution I propose is that an agreement is reached by all participating states to by decree remove gold from the market. The mechanisms to achieve this are already in place. Once gold is removed from trade we have two main groups holding gold – Central banks and private individuals. Much of gold above ground is in the hands of private individuals but a significant quantity is in the hands of Treasuries. The idea is to motivate or legislate private individuals to join their gold holdings into a Global Gold Securities Reserve. Once this step is reached, gold held within the Global Gold Securities Reserve is then revalued to a much greater value per troy ounce. This process is overseen by the Bank of International Settlements (BIS), the World Bank as well as the IMF (all being UN Charter Institutions). Gold held is utilised to serve as a guarantee underpinning a newly created Global Security – essentially creating what I term as a “Wealth Sink”. BIS is currently working towards creating a centrally controlled Central Bank Digital Currency (CBDC). Gold held in the Global Gold Securities Reserve could be use to back and guarantee a BIS CBDC. As the value of gold so held in trust could be infinitely increased in value – as its is not subject to supply/demand/sentiment factors. Private holders of gold who return their gold reserves to the Global Gold Securities Reserve receive a long-term life-time dividend that will exceed the returns had they been subject to normal market forces – as the value of gold is fixed and guaranteed to escalate into the future. Legislation mandated by participation states require that all pension funds, insurance funds and savings funds be secured by investing a portion to be determined. Instead of taxing super wealthy individuals, participating states mandate that a percentage of their annual income must be invested into BIS Gold Backed Securities. In return they receive a guaranteed dividend and the guarantee that they never lose their wealth. Each participating state which loans their gold (states do not forfeit ownership of their gold reserves) to the Global Gold Securities Reserve, receives gold backed BIS CBDC coupons which they utilise to underpin and fund long-term UBI ands other agreed benefits such a free education and subsidised high quality healthcare including a 100% guaranteed pension. Essentially every state should be included at some level in this global scheme. The main focus of the scheme is to support and fund social security so that such benefits do not drain or stress the workings of normal economic activity. As stated, all the mechanisms are already in place. All that is required is the political will and global cooperation. Such a global scheme could fundamentally change the highly skewed Capitalist system currently in place to the benefit of all within society. Providing 100% guaranteed UBI according to each states needs, free or highly subsidised education at all levels, as well as highly subsidised health care. Markets will be cleaned up and become more stable as there is a balancing mechanism put in place that no commercial market could achieve. Finally gold would be made to work towards the welfare and benefit of all humanity. Both the rich and those not so rich could loom to the future with much more confidence.
Michael van Wyk, that was very insightful. Thanks a lot.
I hope you will consider letting your ideas reach a wider audience than only those that can be reached from here (if you haven’t done so already).
Hi Peter, thanks to you for shining lift on this report, and thanks to the authors for doing the work. It’s a good read and UBI in my no brain is a no-brainer.
In the current cost of living crisis, with strikes and ratcheting up of pay demands and costs, would anyone consider a follow up report titled
Tackling Inflation: the power of a universal basic income?
The premise being inflation is often seen as a side effect of a UBI. However if workers pensioners and others get UBI they may be less inclined to strike for higher wages, so the inflation ratchet of increased wages increased costs and wages rising sector by sector would be dampened.
I’m sure much more would come out in the research.
And maybe the research would find me wrong.
I’m hoping I’m right