Basic Income has existed as a concept for centuries, lingering on the fringes of political policy, seen as a utopian dream rather than a liberal solution to a very basic problem. More so now than ever, many people in the UK lack basic economic security, stuck in unstable and low paying jobs, with little hope of rising out of the income trap caused by the labyrinth of means-tested benefits that currently exist to “help” the poorest and most vulnerable. The current system traps huge amounts of people in a low income future, with many facing marginal withdrawal rates, that is the amount of money they lose to taxes and benefits changes as their income increases, of over 70%. Many Liberal Democrats would baulk at setting an income tax band at 70% for the richest, so why are we accepting of it being at that level for the poorest? Our Constitution says that “no-one shall be enslaved by poverty”, yet at Autumn Conference 2016, we voted to trap many welfare claimants in poverty!
The benefits of a basic income have been widely researched by many groups, usually focusing on its ability to reduce the massive disincentives to work in the current system. Under my proposed system, the withdrawal rate would be whatever the basic rate of income tax is set at, in this case 20%. Opponents of basic income often cite that many people would stop working, which is at odds with the empirical evidence from various trials. A poll before the Swiss referendum on basic income suggested that only 2% of people would stop working, and evidence from the Mincome experiment suggests that the majority of this decrease would be have more time to spend with children or time to spend participating in more education or training, both of which most liberals should have no issue with.
In a related impact of basic income, many more people would have the ability to say no to a job, without having to worry about their economic situation. This increase in bargaining power would increase wages for those jobs that society deems demeaning or dangerous, helping to increase wages in those sectors. This would allow people to move to jobs that they enjoyed more, with studies suggesting that there would be significant productivity gains from a more motivated workforce.
The increase in financial stability would do a significant amount to lessen the stress of having to live paycheck to paycheck, giving the safety of budgeting knowing that you will always be given a certain amount, rather than the ever changing levels of welfare based on every changing working hours in unstable jobs. This increased financial stability would also likely to increase entrepreneurship, helping to diversify markets in more deprived areas, lowering prices and creating much needed jobs. A study in Madhya Pradesh showed a large increase in the number of startups after the scheme began.
My proposed system would give £68 a week to the parents of each child under 16, £128 a week to everyone aged over 16. This would be supplemented by a number of current benefits that would be maintained. This system has an estimated cost of £400 billion, with around half paid for with the abolition of most welfare spending and the rest paid for by tax increases.
The vast majority of the tax increases would come from abolition the personal allowance and national insurance thresholds, meaning that everyone pays income tax, although the loss of the allowances would be compensated for by the basic income. In fact, the level at which taxes start being paid, if you include the returns from basic income, is around £16,000, well above the current level. These tax changes leave out such systems as land value tax, allowing it and other taxes to be used to replace the most damaging taxes, including perhaps income tax itself.
A Basic Income would be a radical solution to a large number of problems that our society faces. As we have seen in the last election, many previously apathetic voters turned out to vote for who they believe is a radical alternative to the status quo. For the Liberal Democrats to see government again, we must return to our heritage. We were once the party of economic credibility against the protectionist Conservatives, while also proposing radical and liberal solutions to society’s ills. We must push for a credible, consistent and costed liberal economic policy and I believe Basic Income must form a key part of that.
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