The Welsh government is to trial a form of Basic Income as part of its COVID-19 recovery strategy. So how should it be designed?
A striking element of pandemic recovery planning in Wales has been the announcement of a Basic Income scheme. But what should this pilot look like – and does the suggested focus on care leavers alone need expanding?
Jonathan Rhys Williams
Just days after the Senedd election in May, Wales’ First Minister Mark Drakeford announced that his government would trial a form of Basic Income. The news captured the world’s attention; from the BBC to Humanity Forward, everyone was talking about it.
The Basic Income concept is that everyone receives a basic level of income regardless of their wealth, income or employment status. It differs from Universal Credit in that there is no means testing involved; rather, it is unconditional and universal.
The idea isn’t new, of course, having first found fame in Thomas More’s Utopia (originally published in 1516). More recently, it has been seen as a response to the rapid growth in automation (with the associated threat to jobs), and as an alternative to current welfare systems – which have come under huge pressure during the pandemic, with the poorest 20% in the UK experiencing the biggest relative drops in income.
The value of a wide-ranging pilot
Since the First Minister’s announcement, we have learned from the media and government ministers that the trial is likely to focus on care leavers. No details on when and where the trial will take place have been provided, and it is also unclear exactly who will be included: will the trial involve those who left care over the past five years, say, or only those who have left in the past 12 months?
There is no question that care leavers need more support. During my time as a trainee solicitor, I worked on claims brought on behalf of people leaving care, and I know firsthand from reading their records the incredible difficulties that led some of them into the care system. These people don’t just need extra support; they deserve it – so I fully support the decision to include care leavers in any trial, as does UBI Lab Wales (a campaigning group I co-founded to press the Welsh Government to introduce a Basic Income trial in Wales).
However, there is a danger that by only including care leavers, the results won’t provide the evidence that policymakers need to fully understand the transformative impacts the policy could have on society. This concern is shared by the rest of the Basic Income movement across the UK – although it’s important to note that there’s no such thing as a perfect trial.
If you ask five Basic Income advocates what the pilot should look like, you’re likely to get at least four different answers. That’s why we must approach this question with objectivity, and not let the perfect be the enemy of the good.
The Welsh Government is focusing its attention on care leavers because such a trial is within its gift to deliver. Were it to undertake a more wide-ranging pilot, this would need the cooperation of the Department for Work and Pensions (DWP) and HMRC, because Wales doesn’t have the devolved powers to do more by itself.
Jane Hutt, the minister responsible for delivering the trial, must be ready for a battle with the UK Government if she wants to run a substantive pilot. But if she decides to make the case to Westminster, she will have the support of a significant majority of the Welsh electorate and the 25 Members of the Senedd who backed our ‘Pledge for UBI’.
Who should be included, and for how long?
For the purposes of this blog, let’s say the incumbent UK Government is willing to provide the relevant powers over tax and welfare – not permanently; just for the trial. With these newly granted powers, this is what I think it should look like.
Firstly, the trial must include children, employed people, unemployed people and pensioners – as this is what society looks like. If we want to understand what would happen if we rolled out the policy tomorrow, we must include all demographics.
For example, how can we understand what a Basic Income would do for school performance and educational attainment if we do not include children and their parents? Wales has the worst rates of child poverty in the UK, and we know the impacts that poverty has on school performance, productivity and wellbeing. We should not miss the opportunity to learn whether Basic Income makes a difference to all these issues.
In terms of where the trial would happen, the Welsh Government should invite all 22 local authorities to submit a proposal making the case for their area to be a pilot location. In particular, I would hope councils that have consistently been in the upper half of the Welsh Index for Multiple Deprivation (WIMD) would submit a proposal.
Of all these proposals, two locations should then be selected to receive a Basic Income, and two with similar characteristics should form the control group. Doing this would enable us to understand the community effects of the Basic Income trial, such as an improvement in social cohesion and/or the emergence of new local businesses.
In terms of the number of participants, 2,000 people per location is my preference – a total of 8,000 across the four locations (so the total number in receipt of a Basic Income would be 4,000, with the other half in the control group). In addition to this, the trial should also include the approximately 600 people across Wales who have left care in the 12 months before it begins. As previously stated, giving care leavers more support is the right thing to do.
The duration of the trial should be between 18 and 24 months. While it would ideally be longer, it’s likely that the Welsh Government will want it concluded by the end of this Senedd term. This timeframe would ensure that the newly elected government does not abruptly cancel the pilot, as happened in Ontario.
A financial plan for the pilot
I’d suggest the weekly rates of Basic Income should be as follows:
- 0 to 17 years: £50
- 18 to 21 years: £80
- 22 to pension age: £140
- Pension age: current pension rate
A trial paying these amounts would cost in the region of £20 million per year. (Those who baulk at paying such a figure for a trial might look at the money wasted over the past 18 months on test, track and trace, and the cronyism displayed by the UK Government in handing out contracts during the pandemic.) All subsistence benefits would be removed and replaced with a Basic Income. Disability, carers’ and housing-related benefits would all be left intact to ensure that nobody is left worse-off.
Specifically, the benefits removed would be:
- Income Support (personal allowance)
- Income-based Jobseeker’s Allowance (personal allowance)
- Income-based Employment & Support Allowance (personal allowance)
- Child Tax Credit (family plus child element)
- State Pension
- Child Benefit
- Universal Credit (standard allowance for a single person)
- Universal Credit (first child and subsequent payments)
By scrapping these benefits, pilot participants would be freed from the conditions and sanctions imposed by the DWP – such as losing benefits for missing an appointment at the Job Centre because they have fallen ill, or because their train was late.
This kind of model would thus measure the emancipatory effects of a Basic Income. By no longer requiring people to attend these appointments, we might see that people have more time to set up their own business or find meaningful employment and build a career, rather than taking a job simply to keep the DWP off their back.
Another advantage of this model is that for those already receiving Universal Credit (standard allowance), the added cost would only be a further £61 per week to reach the proposed £140 payment. And the net cost would be further reduced because Child Benefit and State Pension is paid as a Basic Income at a slightly higher rate and at the same rate, respectively.
The benefits of this ‘ideal model’
Were this model to be rolled out tomorrow, welfare administration costs would be vastly reduced as the eligibility checks needed to receive benefits would be removed. The UK currently spends around £7 billion per year on administering welfare payments before anyone receives a penny.
Further savings would be made via the reduction in people using health services. The most consistent finding across all past Basic Income pilots is the significant improvement in physical and mental wellbeing. This could save our economy billions in the years after the policy’s introduction, while adding value by offering a fitter, healthier and more productive workforce.
People would have more money in their pockets to spend – clearly a good thing for the economy. The flow of money would be cyclical because most people on lower incomes would use their Basic Income to ensure they are properly fed and clothed, while those on higher incomes who do not need the money would be taxed, so it’s clawed back. The people who need the money use it to meet their basic needs – the clue is in the name.
This is my ideal model. I’m aware that concessions have to be made with any pilot design – but the Welsh Government should at least try to make the case to DWP and HMRC for a wide-ranging trial.
- Universal basic income: A scoping review of evidence on impacts and study characteristics (What Works Scotland)
- Would a universal basic income reduce poverty in the aftermath of Covid-19? (Economics Observatory)