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The Cost of a Full Basic Income for the United Kingdom Would be £67 billion per year (3.4% of GDP)

by Karl Widerquist | Sep 5, 2020 | Opinion, The Indepentarian

Originally published by Open Democracy. 14 August 2020, under the title, “Basic income could virtually eliminate poverty in the United Kingdom at a cost of £67 billion per year”

Universal Basic Income (UBI) – a policy that would provide a regular, cash income to every citizen without means test or work requirement – is surprisingly inexpensive. The United Kingdom could introduce a full UBI (one large enough to live on) for just £67 billion per year or 3.4% of Gross Domestic Product (GDP), according to a study Georg Arendt and I recently completed.

Attention to UBI in the United Kingdom has increased substantially as the Scottish Parliament discusses experimenting with it and as policymakers discuss it as a temporary measure to boost the economy during the Covid-19 outbreak. While a pilot project can examine some of the effects of UBI, this kind of study is necessary to determine how much it is likely to cost.

The cost of UBI is often exaggerated because many authors focus on its ‘gross cost’: the size of the UBI times the population. The gross cost of UBI is not a cost in any meaningful sense, because it ignores the great extent to which the new taxes people pay to support UBI are cancelled out by new money they receive in UBI. The real cost of UBI is the ‘net cost’ – the amount people receive or pay after subtracting the amount they pay themselves. The net cost of a full UBI for the UK is only about one-third its gross cost.

Our study is based on data from the 2014/15 UK Family Resource Survey. It uses microsimulation analysis from the European Union’s EUROMOD Tax-Benefit Model to subtract out the amount people pay themselves and determine the cost of a roughly poverty-level UBI of £7,706 per adult and £3,853 per child.

Key findings of the study include:

The cost of a full UBI for the United Kingdom is £67 billion per year or about 3.4% of GDP.
This figure is the net cost – the real cost – of a UBI scheme of £7,706 for adults and £3,853 for children. This assumes a 50% income tax rate for net beneficiaries integrated into the UK tax-and-benefit system in a way that ensures the majority of UK citizens benefit from the transition and no one in the bottom 20% of the distribution of income is financially harmed by the loss of programmes replaced by the UBI. Although net beneficiaries’ tax rate increases, they receive more in UBI than they pay in additional taxes.
This UBI scheme adds only 39% to the cost of the UK’s existing benefits system (not including the spending on the National Health Service), and an 8.7% increase in the UK’s total government spending (£67/£771 billion).
This UBI scheme is a net financial benefit to most households in the lower 70% of the UK income distribution, making it an effective wage subsidy (or tax cut) for millions of workers and their families.
The average benefit over the existing system for each net-beneficiary family is £4,056.
Under this scheme, the percent of UK families with incomes below the current official poverty line would drop from 16% to 4% and poverty among children and the elderly would all but disappear.
The net cost of this UBI scheme – the gross cost minus the amount people pay to themselves (£155 billion), and ignoring the costs and benefits of integrating the UBI into the existing tax and benefit system – is about one-third (35.4%) of its often-mentioned but not very meaningful gross cost (£438 billion).
Also subtracting the cost of existing programmes that can be replaced by UBI without financially harming anyone in the bottom 20% of the income distribution makes the net cost only about 15% of the programme’s gross cost.
This UBI system eliminates absolute poverty (e.g. as it is measured in the United States) from the UK.
According to a 2015 piece in the Guardian, the UK currently spends over £93 billion per year on corporate subsidies and tax breaks. If so, the UK could entirely fund a UBI by eliminating corporate subsidies and tax loopholes. No increase in individual taxes would be necessary, and the government would still have £26 billion available for corporate subsidies.
Countries with similar per capita income and similar tax-and-benefit systems should expect the cost of UBI to be a similar percentage of their GDP.

Those remaining in poverty under the scheme would be much closer to the poverty line than they are now and would have enough to get by in combination with other government payments and services. Therefore, we conclude that a UBI of this size would eliminate absolute poverty in the United Kingdom, a powerful result for less money than Parliament currently spends on corporate subsidies and tax breaks.

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Basic Income March 2020

by Lewis Small | Aug 21, 2020 | News

In conjunction with International Basic Income Week 2020 taking place on 14-20^th September, Income Movement – a US-based organisation campaigning for the passing of basic income legislation – has organised the second annual international Basic Income March on 19^th September.

The march, sponsored by Fund for Humanity, is due to take place in cities around the world and will see the largest ever organised series of events promoting Basic Income for all.

The first Basic Income March was held on October 26^th last year, when thirty Basic Income March events took place in thirty cities around the world, and a total of 10,000 people marched together for Basic Income.

This year promises even more support from sponsors and partners with 29 marches already organised in cities around the world. Find your nearest Basic Income March event or organise your own here.

More details about this year’s and last year’s marches can be found on the Basic Income March website.

A webinar hosted in India on the 7th August

by Malcolm Torry | Jul 31, 2020 | News

The organisers say this about the webinar:

The Web Lecture is being delivered by Professor Guy Standing, Professorial Research Associate, SOAS, University of London; Co-founder and Co-President, Basic Income Earth Network and Former Director of ILO’s Socio-Economic Security Programme. MS. Renana Jhabvala, Chairperson, SEWA Bharat will Moderate the Web Lecture.
A basic income system is one in which all individuals within a community receive a modest regular cash payment without conditions as a non-withdrawable economic right. It is a component of a distributive system, necessarily complemented by other public benefits and services. Drawing on recent books, this lecture will examine the ethical justifications for a quasi-universal basic income, considering the standard objections, and then argue that in an era of severe economic shocks and pandemics, in which the neo-liberal economics revolution has generated a global system of rentier capitalism, it is also a policy imperative. As such, it should be understood as a feasible, affordable base of a new income distribution system. Finally, it will consider how its economic and social effects differ from other possible policy interventions. This will draw in part from pilots done in India and Africa covering thousands of individuals in many communities. It will plead for an end of a dialogue of the deaf that has characterised much of the debate on basic income in India.

For further details, click here; and to register for the webinar, here

Le gouvernement Irlandais s’engage à tester le Revenu Universel de Base

by Lewis Small | Jul 15, 2020 | French

Par Lewis Small, 1^er Juillet 2020

Traduction par Christine Cayré

Fraichement composé, le gouvernement de la 33^ème chambre basse du parlement irlandais s’est engagé à expérimenter le Revenu de Base en Irlande pendant les cinq prochaines années. L’annonce a été faite dans le Programme de Gouvernement porté par les partis Fine Gael, Fianna Fáil et le Parti Vert. Le document énumère une longue liste d’actions que le gouvernement veut mettre en œuvre, dont l’engagement à inclure le Revenu de Base, au titre des « Mesures de lutte contre la pauvreté et pour l’inclusion sociale » –cf page 86 du document-.

[Nous allons] demander à la Commission des bas salaires d’examiner le Revenu Universel de Base, sur la base d’une étude préalable de la synthèse des expériences menées dans d’autres pays et ce pour permettre une expérimentation pendant que ce gouvernement actuel sera en fonction.

Si le plan est mené à bien, l’Irlande grossira les rangs des pays qui ont commencé à élaborer des plans concrets pour créer telle ou telle forme de Revenu de Base. Toutefois des questions ont été soulevées sur la fermeté des engagements pris et sur la manière dont ils seront concrètement déployés.

Anne Ryan, Coordinatrice associée du Revenu de Base en Irlande- l’instance nationale de promotion du Revenu de Base- a commenté :

Nous aimerions voir cette annonce comme une composante d’un engagement à mettre en œuvre un revenu de base permanent pour tous dans les cinq prochaines années.

Des expérimentations et des projets pilotes ont déjà été réalisés en Europe et dans le monde et tous ont fait la preuve de leurs effets positifs. Le choix de repartir dans un mode expérimental en Irlande pourrait ne pas être la meilleure solution, ni la meilleure utilisation du temps et des financements, étant donné qu’il est déjà avéré que le revenu de base est un élément essentiel et structurant d’une société du prendre soin et d’une économie sensée, piliers d’inclusion et d’égalité.

D’autres préoccupations ont été exprimées au sujet de la décision de nommer la Commission des Bas Salaires en tant que garante des engagements, et du risque que des affrontements politiques internes pourraient faire courir sur les expérimentations envisagées.

En réponse à une première proposition du Programme de Gouvernement, le groupe de réflexion Justice Sociale en Irlande a déclaré :

Le Programme de Gouvernement prévoit de confier à la Commission des Bas Salaires (Low Pay Commission : LPC) l’examen du Revenu Universel de Base. Les questions relatives à la définition du plancher minimum en dessous duquel le niveau de vie de ses citoyens ne devrait pas glisser vont bien au-delà des attributions du LPC. La Commission du bien-être social et de la fiscalité serait un interlocuteur bien plus approprié sur ce sujet (p. 3).

Toute décision de déplacer l’examen du Revenu de Base vers un autre organe nécessiterait un consensus entre les trois partis, et bien que Fianna Fáil et le Parti vert aient précédemment affirmé leur soutien au Revenu de Base, Fine Gael en a systématiquement rejeté l’idée.

Le Dr Seán Healy, PDG de Social Justice en Irlande – qui promeut le Revenu de Base en Irlande depuis 35 ans – a ajouté:

Il faut veiller à ce que cette initiative ne soit pas abandonnée en raison de l’opposition d’un seul parti politique, alors qu’une majorité du gouvernement est prête à lui donner toutes ses chances. En 2002, le Gouvernement irlandais a publié un livre vert sur le Revenu de Base qui était relativement positif – il est impératif que nous ne répétions pas les erreurs du passé pour que cette proposition soit examinée de manière équitable.

La manière dont les engagements du Programme de Gouvernement vont se matérialiser dépend beaucoup de l’examen des propositions et de la forme que prendra l’expérimentation. L’accent doit être mis sur la garantie que tout se déroule dans un esprit positif, sous la houlette de personnes qui ont un intérêt sincère à faire advenir le Revenu de Base.

On peut lire l’article en anglais ici.

Namibia – UBI success and institutional failure

by Gery Petrova | Jul 14, 2020 | News, Opinion

1. Namibia – country background

A South West African state with a troublesome colonial history, Namibia has a population of around 2,5 million people and is one of the least populated countries in Africa due to its extremely dry climate. The country is rich in natural resources like – diamonds (annual value of mined diamonds around 1 billion US dollars)¹ , uranium (4th largest producer in the world), gold, zinc, copper ². Other important industries are fishing, agriculture and tourism.

Unfortunately for the majority of the Namibian people the benefits from an abundant national wealth are not equally distributed. Namibia ranks as one of the most unequal places on the planet where 50% of the population live on less than 5.50 USD per day ³ and in 2017 27% ⁴were living below the poverty line. A place where people have not enough food to sustain their nutritional needs.

On top of poverty, hunger and the impact of climate change contributing to suffering, there are some additional challenges:

Unemployment rate 2018 – 33.4% where female joblessness is prevalent ⁵
HIV/AIDS epidemic – number one cause of death ⁶
Gender inequality and violence against women and children ⁸
Child forced labour and child trafficking ⁷

Children are trafficked within Namibia for forced labor in agriculture, cattle herding, domestic work, and commercial sexual exploitation. San children are particularly vulnerable to forced labor on farms or in homes. ⁷

The list goes on.

2. The Universal Basic Income Pilot Project in Namibia ⁹

In the context of the socio-economic situation described above The Basic Income Grant Coalition comprised of citizens’ organisations (the Council of Churches, the National Union of Namibian Workers, the National NGO Forum, the Namibian Network of AIDS Service Organisations, the Legal Assistance Centre, and The Labour, Resource and Research Institute) funded and ran a pilot project the purpose of which was to trial and study the application of Universal Basic Income in Namibia.

From January 2008 to December 2009 every resident of Otjivero – Omitara (about 1,000 people) received a monthly allowance of (N$80 = USD 4.5 ) which was paid regularly until March 2012.

The research had the following results:

social cohesion – the community established an 18-member committee to advise members on how to spend their allowance wisely
it attracted migrants who could benefit from the favourable environment. More sharing meant that the value of the monthly allowance dropped from N$89 (USD 5) per month in January 2008 to N$67 (USD 4) in November 2008
poverty dropped by 39% among residents who were sharing with migrants and 60% in cases where the allowance was spent only by the resident
income-generating activities like brick-making, baking of bread and dress-making jumped 15% and a local market was created as people had a bigger purchasing power
by November 2008 child malnutrition decreased 32%
people with HIV could afford better food and medication
school drop-out rate fell to almost 0%
healthcare became more accessible to residents as they could afford it
crime fell by 42%
the basic income grant empowered women and made them more secure as they did not have to engage in transactional sex services

In conclusion, the pilot project had a dramatic overall positive effect on the selected community. The Basic Income Grant Coalition calculated that the cost for nationwide implementation of unconditional universal basic income for all would be N$ 1.2 – 1.6 billion (USD 71 – 95 million) per year, equivalent to 2.2 – 3% of Namibia’s GDP (2019 – 12.37 USD Billion) ¹⁰

In short, UBI in Namibia was and is feasible. The missing component then and now remains the lack of political will to apply the project on a national level.

3. Government response regarding the pandemic crisis in Namibia

Following from the brief summary of state of affairs in Namibia and an example of a possible solution to the human suffering caused by institutional inadequacy and economic logic that produces inequality, I will now list the measures that the Namibian government has taken to tackle the health/economic crisis triggered by COVID-19.

1. Emergency Income Grant ¹¹ – one off payment of N$750 (USD 45) for people experiencing financial difficulties caused by COVID. The government allowance should cover 749 000 people in need and will cost the government N$562 million (USD 34 million).

Some concern regarding the stimulus: ¹²

the sum is insufficient to sustain an ongoing lockdown and future economic inactivity
the grant is conditional – employed persons and people who already receive social benefits do not qualify being supported by this policy
to obtain the one off payment citizens must own a mobile phone and an ID number

The EIG is a self-nomination process. Therefore applicants are required to have, or make use of an active cell phone number, and a valid Namibian ID number.

Applicants must SMS their name and ‘EIG’ to 141222 to start the registration process, or dial *141*222#. After the approval of the application by the ministry, applicants will receive a token from the bank they have selected in the application process. ¹²

there is a considerable distrust among the population about potential problems with the distribution system and application process
the policy is not universal, it does not cover every single Namibian which means it fails to act as an emergency safety net for all

2. Tax-related measures:¹³

repayment of overdue VAT to companies, N$3 billion (these are funds the government already owes to VAT paying enterprises)
payment of overdue invoices for goods and services provided to the government – N$800 million
Tax-back loan scheme for tax registered and tax paying (PAYE) employees and self-employed affected by the pandemic.
Extended deadline for filing taxes. Mandatory payment date remains the same.

These measures are very far from a policy supporting the business community given the implications of the crisis.

3. Employment-related measures ¹⁴

3.1. Subsidy for employers in the construction, tourism and aviation sectors. Workers will receive 17% of their wage for 3 months.

3.2. Employers who are benefiting from measures should not be firing any of their workers or reducing their salaries with more than 50%

3.3. The programme will benefit 7,900 employers employing 65,420 employees. The budget amounts to N$150 million (USD 8 million) which is approximately 25% of the total wage bill.

3.4. Grants for workers affected by COVID-19. These are conditional application based stimulus that has the potential to help 56,000 to 117,000 applicants.

3.5. Government and business owners will be allowed to negotiate a temporary 20% drop in salaries.

How these measures can be interpreted:

insufficient funding of affected workers
conditions and administrative obstacles for receiving help
potential to undermine workers income for a long period of time
the policy does not cover all workers in Namibia

4. The Economic stimulus measures which will be administered by banks consist in: ¹⁵

4.1. Tax-back loan scheme for businesses and individuals

4.2. Agricultural and non-agricultural and small business loan programmes

Here the government enables the banks to make businesses dependent on loans which creates more instability by increasing debt in society. Hardly an adequate solution for the needs of business owners, workers and their families.

5. Water subsidy equal to N$10 million. This will enable water points to be kept open without people needing to use water cards.

Probably the bare minimum a state can do to prevent riots and social breakdown.

There is a general concern about administration and distribution of emergency funds based on past and present experiences. In a report called COVID-19 Emergency Procurement ¹⁶ by Frederico Links the author outlines issues with transparency on spending by government institutions which raises doubts about how much of the already unsatisfactory help will reach people at the bottom of the income chain.

Another report Analysis – Namibia’s National Budget 2020/21 ¹⁷ comments on potential problems with the financial stability of Namibia and its economic future which has direct implications on the wellbeing of the Namibian people.

In conclusion, based on the information above:

Emergency spending to alleviate poverty and tackle social and economic inequalities was and is needed regardless of COVID-19.
The ongoing crisis requires working solutions based on unconditional, regular distribution of wealth for all Namibian people in order to sustain their individual sovereignty, dignity and human rights permanently.
The measures announced by the government are inadequate, insufficient and cruel as they don’t meet the needs of the population.
Basic Unconditional Income, proven by the BIG pilot project, is feasible and has the potential to create social cohesion, improve the local economy and bring back trust in existing institutions and political leadership.
To achieve the above the citizens of Namibia have the opportunity to unite and stand behind a clear demand for the implementation of Basic Unconditional Income for all.
All people have the right to determine their present and future. An unconditional basic income is what will enable them to fulfil their fundamental human rights.

Sources:

1 https://www.kimberleyprocess.com/en/namibia-0

2 https://assets.kpmg/content/dam/kpmg/pdf/2014/09/namibia-mining-guide.pdf

3 https://www.macrotrends.net/countries/NAM/namibia/poverty-rate

4 https://www.macrotrends.net/countries/NAM/namibia/hunger-statistics

5 https://tradingeconomics.com/namibia/unemployment-rate

6 https://www.cdc.gov/globalhealth/countries/namibia/pdf/namibia_factsheet.pdf

7 https://www.dol.gov/agencies/ilab/resources/reports/child-labor/namibia

8 https://evaw-global-database.unwomen.org/en/countries/africa/namibia

9 https://tradingeconomics.com/namibia/gdp

10 http://www.bignam.org/BIG_pilot.html

10 https://www.centreforpublicimpact.org/case-study/basic-income-grant-big-namibia/