During the past few years, increasing employment insecurity has fuelled growing interest in the idea of a Basic Income (also known as a Universal Basic Income, a Citizen’s Income, or a Citizen’s Basic Income): an unconditional income for every individual. The coronavirus crisis, which worsened both employment and income, intensifies that interest in Basic Income yet further.
Debate about social policy needs high quality research, using the best available tools. The Institute for Social and Economic Research (ISER) at the University of Essex manages EUROMOD, of which the UK section is now called UKMOD. This is a microsimulation programme into which are coded all of the country’s tax and benefits regulations, and through which we pass data from the Family Resources Survey (FRS) in order to generate a variety of statistics about poverty, inequality, and so on, and from the output files of which we can calculate such information as household disposable incomes, the numbers of households on different benefits, and so on. We can code new policies into the programme, alter existing taxes and benefits, and then run the programme again to generate a new set of statistics. We can then compare the two sets of statistics to discover what would really happen if the policy changes were to be implemented.
ISER has just published new microsimulation research on an illustrative Recovery Basic Income for the United Kingdom, and for a subsequent permanent revenue-neutral Basic Income scheme. The working paper shows that an immediate Emergency Basic Income would not be administratively feasible, because the UK does not currently possess the necessary administrative infrastructure. However, once the required administrative infrastructure was in place, a Recovery Basic Income scheme, with a working age adult Basic Income of £196.59 per week would be feasible. (£196.59 per week is half of the couple rate given by the Loughborough University/Joseph Rowntree Foundation Minimum Income Standards.)
However, such a Recovery Basic income would be affordable for only a short period of time.
The research shows that the percentage of households on means-tested benefits would fall from 29% to only 19%. This is not a large drop considering the size of the Recovery Basic Income. It reveals the extent to which the UK relies on means-testing to support household incomes. The research also shows that the Recovery Basic Income would reduce child poverty by 59%, working age adult poverty by 66%, and economically active working age adults in poverty by 87%.
We also describe a permanent Basic Income scheme that would be both feasible and useful once the coronavirus crisis had abated.
To calculate the permanent Basic Income, we first set feasibility criteria that included such features as revenue neutrality, minimal changes to the current tax and benefits system, and more. We then tested multiple illustrative Basic Income schemes until we found one that obeyed the criteria.
We found that an illustrative scheme that obeys the criteria has a working age Basic Income of £60 per week for working age adults, with lower amounts for younger adults, a £30 per week unconditional addition to the Basic State Pension, and an increase in Child Benefit of £10 per week. In this illustrative scheme, the Income Tax Personal Allowance is reduced to £4,000 per annum, and employee National Insurance Contributions are charged at 12% across all of the earnings range except for earned income below a smaller Primary Earnings Threshold. A household’s Basic Income is taken into account in the same way as other income when means-tested benefits are calculated. The net cost of the scheme is £26m per annum, and so effectively zero. This would remove one tenth of the households currently on means-tested benefits from means-testing, and the total cost of means-tested benefits would fall by 30%. The Gini coefficient would fall by one tenth, child poverty would fall by a quarter, and other poverty indices would fall by similar amounts. This relatively modest Basic Income scheme would be feasible to implement once the required infrastructure was in place. It would provide a secure layer of income for every household and individual, and it would have useful social and economic effects.
We also show that it would not necessarily be more feasible to implement a Basic Income scheme once Universal Credit was fully rolled out, so there would be no need to wait for that to happen.
Our work provides just one example of a Recovery Basic Income and of a feasible permanent Basic Income to follow it. In the context of the lively debate about Basic Income, alternative illustrative schemes will no doubt emerge. What is essential is that the best possible research methods should be employed to evaluate them.
Note: This article gives the views of the authors, and not the position of the Social Policy Blog, nor of the London School of Economics.