I beg to move,
That this House has considered universal basic income.
It is a pleasure to serve under your chairmanship, Mr Davies. I am grateful for the opportunity to introduce this debate.
If I asked people what a universal basic income is, I would get many and varied answers. It is even referred to with different titles, as universal, unconditional, basic or citizen’s income. That is not a bad thing, because it highlights the fact that we do not have one clear-cut, complete, top-to-bottom definition. Until we do, we cannot decide if universal basic income is a solution or not, but I hope we can agree that the current welfare system has failed.
If we were all given a blank sheet of paper and asked to design a welfare system, nobody—but nobody—would come up with the system we have now. They would need thousands of sheets of paper and would end up with a mishmash of abandoned projects, badly implemented and half-hearted ideas and a system so complicated that it lets down those who need it the most. We need only look at the personal independence payment and at tax credits to see recent examples of people being punished by a system that is supposed to support them. At the same time, the current system allows those who would abuse it to do just that. The expected expenditure on UK social security and tax credits in 2016-17 is forecast to be more than £218 billion. We are spending 28% of our total public expenditure on social security, but it is still not clear whether our welfare system is helping or hindering the most vulnerable people in our society.
Inequality in the UK continues to get worse as we tinker around the edges of our welfare system. The richest 10% of households in the UK hold 45% of the nation’s wealth; by contrast, the poorest 50% own just 8.7% of that wealth. We have seen that inequality manifest itself in different ways, across gender, age and nationality. For instance, the average household in the south-east of England has almost twice the amount of wealth as the average household in Scotland.
Despite attempts to improve the current system, in-work poverty has vastly increased, with the Institute for Fiscal Studies estimating that two thirds of children living in poverty in the UK are in working families. The rapid increase in food bank usage also reflects the failure of our system. In 2008-09, the Trussell Trust issued almost 26,000 three-day emergency food supplies; by 2015-2016, that figure had grown to more than 1.1 million, with almost one in three of recipients being referred to food banks because of a delay in their benefit payment.
Unfortunately, my constituency has some of the worst rates of deprivation in Scotland. Of the thousands of cases that my office has handled, I would conservatively estimate that at least one in 10 are related to benefits. I am seeing people who are left confused and anxious by a system of mystifying complexity. It lacks compassion; it processes people as if they were mere numbers going through a machine; and its rigid inflexibility prevents people from accessing the support to which they are entitled. I believe that it leaves people feeling less and less empowered.
Sharon Wright, a senior lecturer in public policy at the University of Glasgow, has said:
“Received wisdom dictates that benefit receipt is the outcome of making ‘wrong choices’. Welfare reforms have become increasingly punitive, on the rationale that strong disincentives and coercion are required to prompt the ‘right choice’.”
As she points out, claiming benefits is not a life choice; it is the result of unforeseen circumstances in a person’s life, such as unemployment, sickness or disability. However, welfare recipients still face hostility and a strong social stigma that defines them as being workshy or lazy, or as having given up on a sense of personal responsibility. I could spend the entire debate highlighting the failings of the welfare system, but I can summarise them by simply stating that our welfare system is not working.
A universal basic income could be a solution to this problem. In the words of Malcolm Torry, the director of the Citizen’s Income Trust:
“Technology lying idle, human creativity frustrated, wealth flowing from poor to rich, and finite resources uncontrollably exploited …we are still waiting for the next new key concept. A Citizen’s Income might be just what is required.”
I congratulate the hon. Gentleman on securing this debate. He mentions the EUROMOD report by Mr Torry, and I wonder whether he saw the part of the report in which it is stated that, in order to support a universal basic income, the basic rate of income tax would have to rise to 48 pence in the pound. Can he say how on earth that is supportable in a modern economy?
As I said at the very start of my speech, there are many and varied approaches to this issue; no one has worked up the complete solution at this stage. What we are aiming for is acknowledgement of the fact that our current system is not fit for purpose, and the people of the United Kingdom should be looking for “best of breed”. If we are not prepared to take on that challenge, then we are not in the right job.
I congratulate my hon. Friend on securing this important debate. Does he agree with me that his proposal for a universal basic income has the potential to eradicate poverty, to make work pay and to ensure that all citizens can live in dignity, which does not happen today?
Absolutely. The aims of this approach are laudable ones and are not something that we, as representatives of the people, should turn our back on.
As a general definition, a universal basic income would be an unconditional basic income given to each individual irrespective of their other income. At this stage, everything else needs to be defined, including what proportion of the welfare system would be replaced by a UBI. We should be sincere in our approach to this issue by saying that its successful implementation would require a revolutionary shift in attitudes towards social security.
I congratulate the hon. Gentleman on securing this debate. Does he agree that one of the most successful universal payments that we had was child benefit? It was well targeted, it helped with the costs of raising children, it redistributed wealth between families without children and families with children, and—crucially—it was paid to women, which of course improved their children’s prospects. Does he not think that an earlier, simpler and more effective move might be to return to the days of universal child benefit, and to make that the political priority rather than a universal basic income?
I take on board the hon. Lady’s comments. My concern about that idea is that it would entail a change to just one aspect of what we are trying to achieve. It is a very important aspect of what we are trying to achieve, but it would not fulfil the requirements of everybody who relies on welfare.
I congratulate the hon. Gentleman on securing this important debate. A basic income has long been Green party policy, so I am very glad to hear him talk of it. Does he agree that as well as making the very strong case that he is making for a basic income on the grounds that our welfare system is not working, there is also a case to be made for it on the grounds that increasing automation will create a huge revolution in the way that work is done? There are estimates that by 2025 we could be losing a third of the jobs in the UK retail sector. For that reason too, we need to look outside the box and explore this idea in a lot more detail.
Yes, we are going there. I believe that it is called the “gig economy”, in which people share jobs and try to find a better work-life balance. People do not want to have to put in all those hours of work in simply to make money if it is not within them that they want to spend all that money. That chasing of the capitalist dream is hopefully something that is confined to the past.
If we genuinely want to create a more effective system of state support, we need to be prepared to address the difficult questions. Part of the challenge will be to bring together the patchwork of individuals and organisations that have expressed an interest in pushing forward the UBI agenda. Groups such as Citizen’s Basic Income Network Scotland and the Citizen’s Income Trust have helped me to outline what options are open to us in defining a basic income.
It is argued that the benefits of introducing a basic income include: reducing poverty and boosting employment; providing a safety net from which no citizen will be excluded; and creating a platform upon which all people are able to build their lives. More generally, it could be argued that a basic income would bring about increased social cohesion and mark the end of incentives that discourage work and saving.
In the time available to me today, I can only touch on the wide range of questions that will need to be answered in order to implement such a scheme. Who will be eligible for basic income? What will be the rate of payment? Over what timeframe will it be implemented? Most important, can the affordability of such a scheme be demonstrated? Having clear answers to these questions is vital, but that will not be enough; we will also need the political will to make changes.
The Irish Government published a Green Paper on a basic income as far back as 2002. It concluded that a basic income would have a substantial positive impact on the distribution of income in Ireland and would reduce poverty in a more effective way than the existing welfare system, but 14 years later the concept has not managed to evolve into a fully formed Government policy.
I thank the hon. Gentleman for giving way to me again; he is being most generous with his time. The Irish Government came up with this proposal in 2002, but 14 years later they have still not been able to implement it. Also, would he reflect on the fact that in Switzerland this idea was actually put to a referendum and two thirds of voters voted against it? Is not the real reason that these people have gone against a basic income is that they realise it destroys the incentive to work?
I am not here to speak on behalf of either the Irish Government or the Swiss Government, but there is absolutely no indication that providing somebody with a basic income removes the incentive to work. Instead, what it does is to put life choices in front of people, so that if they want to study part time, work part time or work on a farm voluntarily they will not be penalised for doing those things, and therefore it is more likely that people will be prepared to take on work at a level that suits them.
If policy makers regard the basic income idea as simply an academic or abstract economic concept, we will never see it being used to break down the worrying levels of poverty and inequality that we have in the UK. The United States, Canada, Namibia and India have all piloted basic income schemes, while Finland and the Netherlands plan on trialling limited local schemes.
Many Members will be aware that Switzerland has already held a referendum on the implementation of a basic income. Although the proposal was rejected, that shows that other nations already have a more developed understanding of the concept. The charity GiveDirectly has announced that it will launch a full basic income trial. The project will involve at least $30 million and academic support from leading researchers. The trial will fully adopt the basic income model by making regular cash payments to every resident in several villages in Kenya.
I secured this debate with the humble notion that I do not have all the answers to the questions. I hope to facilitate discussion, to debate with my parliamentary colleagues and to consult the relevant organisations about the benefits and feasibility of the basic income concept. I believe it was first proposed by Thomas Paine in his 1797 pamphlet “Agrarian Justice” as a system in which at the “age of majority” everyone would receive an equal capital grant—a “basic income” handed over by the state to each and all, no questions asked, to do what they wanted with. Could this be an idea whose time has finally come?
On 25 May 1961, President John F. Kennedy announced before a special joint session of Congress the dramatic and ambitious goal of sending an American to the moon before the end of the decade and returning him safely. Not for one minute did he intend to design the rockets himself, and he had no ambition that I know of to be on the flight. His not unrealistic and ultimately correct proclamation was built on the premise that he knew America had the time, the money, the brain power and the will to achieve the goal. He challenged the American people to succeed and they rose to that challenge. I stand here in front of the Chamber today and I challenge all of us to work together to create a fairer welfare system—one that does not trap people in poverty, but instead acts as a platform from which the citizens of the United Kingdom can build better lives for themselves.
If Members want to take off their jackets, as I already have, they are obviously free to do so.
It is a pleasure to serve under your chairship, Mr Davies. I warmly congratulate the hon. Member for Inverclyde (Ronnie Cowan) on securing this important debate. I want to raise three particular areas that I think we should examine, given that the conditions of the 21st century demand that we investigate basic income in more detail.
First, as the hon. Gentleman powerfully set out, our social security system is no longer fit for purpose and requires fundamental reform. Through my constituency surgeries, I see at first hand just how badly the system is failing. The combined impact of bureaucratic complexity and a brutal, punitive sanctions regime that almost seems designed to humiliate those that need help the most can be absolutely catastrophic for vulnerable families and individuals. We simply cannot go on tinkering with a model of social security that was designed to meet the economic and social conditions of the 1950s. However, it is absolutely crucial that any move to a basic income protects and increases the income of the poorest and those who are unable to work on account of disability. A universal payment for all must not undermine additional help for those who need it most.
Secondly, fundamental changes to our economy and labour market are working together to make work itself increasingly precarious. Well-paid jobs on permanent contracts have dwindled, while short-term, zero-hours contracts and bogus self-employment are rife. Alongside a genuine national living wage, a basic income would provide a vital buffer against this new age of insecurity and an escape route for those caught in the trap between a complex, punitive and quite simply outdated social security system and low-paid, insecure and all too often exploitative employment.
Thirdly, a basic income would give people more control over their working, caring and personal lives. That is especially important for women, who despite the growing number of stay-at-home fathers continue to do most of the heavy lifting of child and elder care without payment, but it is also about having the opportunity to contribute more time and effort to our local communities by doing things we might simply want to do. There is far more work that needs to be done than that which is simply parcelled up into what we call jobs. We only have to look around our local communities to see railings that need painting, older people who need visiting and allotments that people would love to tend, but we cannot necessarily do many of those things—they are in some ways important economic activities—because right now we are penalised for doing so.
We must not get carried away—basic income must not be seen as some kind of panacea for all our problems, but it could play a key part in rebalancing towards more satisfying lives and a more sustainable economy. I very much welcome today’s debate, and the growing interest across the political spectrum in an idea that my party has fought for over many years. It is heartening to see the invaluable work being done by groups such as Compass, the Royal Society of Arts, the Fabians and the Institute for Public Policy Research, as well as by long-standing advocates such as the Citizen’s Income Trust. It is refreshing to hear Members from other political parties talk positively about an idea that treats people on the basis of the best in them, not the worst.
We do not have all the answers yet—of course not. Getting to a meaningful basic income from where we are now presents major challenges. I think 34 MPs signed my cross-party early-day motion, which calls on the Government to fund and commission further research into the various basic income models, looking at their feasibility and how the challenge of moving to a basic income might be met. I hope that we can build on that number and that between us we can generate universal support for an idea whose time has definitely come.
I point to the progress being made in other countries. In Finland, the coalition Government have announced a €20 million experiment that will test two or possibly three basic income models over the next two years, involving up to 180,000 citizens. Green councillors in the Dutch city of Utrecht are also planning a basic income pilot, as is the Canadian province of Ontario. In New Zealand, the opposition Labour party is actively considering basic income as a means to combat the possibility of higher structural unemployment. In a sense, the UK would just be catching up by doing its own research into this. I mentioned a whole range of different independent organisations that are doing research, but it would be most helpful if the Government commissioned some research and did some pilots of their own. A lot of the figures that we need to investigate on how best to make this a serious policy proposal are figures that the Government have but the rest of us do not. I make a plea to the Minister to look seriously at this proposal and to use some of the resources at his disposal to invest in a pilot and some more research, because I genuinely think this is an idea whose time has come.
We have had an interesting debate already this afternoon, and I warmly congratulate my hon. Friend the Member for Inverclyde (Ronnie Cowan) on stimulating discussion of whether a basic income model of social security would better meet the needs of our citizens at a time when we are facing significant demographic and economic change. He and the hon. Member for Brighton, Pavilion (Caroline Lucas) have highlighted some of the pilot schemes under way internationally, particularly those in other advanced economies, notably the Netherlands, Finland and Ontario in Canada. There is a tacit acknowledgement that all the schemes are in an early stage of development or implementation, and some have not even commenced yet; nevertheless, they offer insights into how basic income models might work in practice and how they might be adapted for a UK context.
My hon. Friend pointed out that the idea has a long pedigree, dating back to the late 18th century. I first encountered the concept of a basic income or citizen’s income models a number of years ago through the work of the late Scottish feminist economist Professor Ailsa McKay, who was particularly interested in exploring ways to close the income gap between women and men—a gap that more than 40 years after the Equal Pay Act 1970 continues to grow through the course of women’s working life and becomes most acute in old age. The idea of a citizen’s income did not have so much currency back then, but more recently there has been greater interest in a range of basic income approaches and the start of a more serious debate. Although that debate is still in its early stages, I am glad it is opening up.
As we have heard, the proponents of basic income schemes argue that giving every citizen the automatic right to an income could help tackle our growing problems of extreme poverty and destitution, streamline the complex bureaucracy of the existing benefits system and promote greater social inclusion. Those are all laudable aims, but for me one of the most attractive aspects of a basic income approach is that it would to some extent neutralise some of the toxic rhetoric that has developed around social security recently and has perpetrated divisive and damaging stereotypes about people living on low incomes. A basic income or citizen’s income would undoubtedly help us to move away from the trope of the undeserving poor and make it much harder to blame those swept away by rough economic tides for their own financial insecurity. That in itself makes it pretty appealing. When the gulf between the wealthy and the rest has not been so stark in living memory, any social security system that promotes social cohesion and a meaningful contract between the citizen and the state deserves to be explored.
None the less, I still have a lot of questions about how a basic income model would work in practice and whether it can live up to the grand claims sometimes made for it. My questions are mostly pragmatic. My biggest concern is that a minimum income could act as an income ceiling rather than a floor for large numbers of people, particularly those who are already the most economically disadvantaged and for whom the prospects of supplementary income over and beyond that are the most fragile. It would be counterproductive if those who are unable to work or have limited capability for work were to find themselves caught in a new, newly differentiated poverty trap.
I also worry that the value of a basic income could become eroded over time. We have seen, for example, how the value of the state pension has been diminished over recent decades to the extent that no one expects to live on it as a sole source of income any more. The poorest pensioners have to receive top-up pension credits to bring them up to a basic standard of living and those lucky enough to have had the opportunity to save through an occupational pension scheme depend on that income to top up their state pension. I wonder how we can avoid the risk that the value of a citizen’s income would shrink over time, entrenching poverty for those who would be most dependent on that income.
In addition, we would still face the major challenge of tackling income inequality and the widening gulf between those in secure, well paid jobs and the increasing numbers in insecure, intermittent, low-paid work. In my view, that is key to building a fairer society. A basic income could arguably smooth the fluctuations in earnings for those in precarious employment, but it would not do anything to close the earnings gap and it would mean that over time those in well-paid jobs could move even further adrift. My own sense is that a greater emphasis on reducing income inequalities in the tax and benefit system as a whole would go further towards promoting social cohesion. I will be interested to see the extent to which the basic income schemes being trialled in an international context address that point.
I am also interested in how basic income models could articulate and interact with those parts of the tax and benefit system that would still need to be based on assessment and means-testing. Most of the proposals I have seen for basic income models in the UK context exclude housing and disability benefits. Aside from state pensions, the biggest chunk of our social security budget goes on housing benefits and the level of support claimants get varies widely across the country, depending on the housing market in different areas, whether a claimant lives in private rented accommodation or social housing, and their income levels, because it is a means-tested benefit that is gradually reduced as earnings or incomes rise. Someone living in London renting in private sector accommodation and working in a minimum-wage job would receive a lot more in local housing allowance than someone in similar circumstances in my constituency for example, simply because the market rents are so much lower in my constituency. It is hard for me to see how we get away from variable rates of housing support given the huge disparities in housing costs across the UK, so we would still be left with means-testing for large numbers of people. Unless we are very careful on how withdrawal tapers are managed, a lot of people in rented accommodation could be left substantially worse off.
Similarly, there would still need to be capability assessments of some sort for those unfit for work, assuming that we recognise that sick and disabled people face extra costs and have less recourse to alternative income streams. In some cases, people will need long-term support. If one of the advantages of basic income models is that it gets away from harsh conditionality regimes and punitive sanctions, the problem for sick and disabled people is that they would still be subject to assessments and conditions even if the benefits themselves are non-means-tested.
I retain an open mind about the merits of basic income models, but until we examine specific models, it is impossible to fully assess the pros and cons or any potential unintended consequences of such substantial policy change. We need to be cautious in our approach, while looking carefully at the emerging evidence on how these models might work in practice and could be used to benefit people in the UK.
As ever, it is a pleasure to serve under your chairmanship, Mr Davies. I start by congratulating the hon. Member for Inverclyde (Ronnie Cowan) on securing this debate, which is most welcome and timely. The contributions that we have heard demonstrate that we are in absolute agreement that our current social security system is not fit for purpose. It is not delivering for claimants, who frankly deserve better, in a whole range of different ways. The Minister and I have exchanged views on that in many debates in the past; the detail is there for everybody to review.
Like the hon. Member for Banff and Buchan (Dr Whiteford), I am open-minded on this issue. I want to see the evidence, and it is very early days yet. We know that the current social security system is not delivering, in particular for people in work on low incomes, who might also go from in-work to out-of-work and back into work. The system is not flexible enough. The rapidly changing labour market is not currently catered for by our social security system. The Bank of England’s chief economist, for example, suggests that 15 million jobs are at risk of automation. These are huge changes, which have been growing over the last 20 years or so. Whether or not those jobs will be replaced by new sectors, we have seen a massive change in the labour market, with zero-hour contracts and insecure, low-paid work—our social security system is just not dealing with that. It is not fit for purpose in today’s labour market and there are huge ramifications for how we adapt and develop our social security system to ensure it can properly respond to the rapidly changing circumstances that workers face, and provide them with the necessary security to build happy and fulfilling working lives.
In the light of those great challenges, the Government’s ongoing failure to implement the universal credit programme is of serious concern, and questions about that were again raised last week. Universal credit was meant to attempt to address some of the challenges around flexible working. Unfortunately, because of the way it has been pared back in recent years, as well as the difficulties with implementation—at great public expense—that has just not happened.
Would my hon. Friend accept by contrast that Labour’s working tax credit, after initial teething problems, was very effective in reaching low-paid workers, lifting families out of poverty, making work pay and responding to changing work circumstances?
Absolutely. My hon. Friend has, as ever, hit the nail on the head. I am proud of Labour’s record of lifting nearly 1 million children out of poverty as a result of that policy. It is one of which we should be justifiably proud.
We need to respond to the rapidly changing labour market. The Government’s failure to deliver on the heavily diminished universal credit project has led to considerable problems and it is right that we look at the alternatives out there.
There are, of course, different views on what universal basic income is. At its simplest, it is about all of us having a non-contributory, unconditional lump sum, which would be available to all citizens regardless of means. I would like to explore both the positives and negatives. We have already heard some of the positive arguments, such as its simplicity and the way in which it may lift people out of poverty. Currently, there is very poor take-up of income-related benefits across the country. A mere half of those entitled to income-based jobseeker’s allowance are claiming their entitlement. That might have something to do with the current Government’s sanction regime, but it is undoubtedly affecting the numbers of people experiencing poverty in the UK, which now stands at 13 million people. By offering a simple, single sum to all, UBI may go some way to tackling the poverty that so many of our citizens are facing.
In replacing our complex system of universal contributory and means-tested support with a single, simple mechanism, UBI would also allow for a greater simplification of social security administration, with subsequent savings to the Department’s budget. Again, we really need to look at that.
Secondly—this is a really important point—by offering support to everyone regardless of their circumstances, UBI could go a long way to ensuring that the British public retain trust in the social security system. Over the last six years, we have seen the complete erosion of the social security system and the denigration of claimants. Some of the language that has been used—not by the Minister but by some of his colleagues—is frankly shameful.
The recent Fabian Society report, “For Us All”, demonstrated that the Government give as much tax support to people on high incomes through the shadow welfare of tax reliefs as they do to the poorest in our society. It has been suggested that if we were to replace the Government’s tax reliefs for the wealthy with a single universal payment, the reality that social expenditure benefits us all would be much clearer. It would get us away from the Government’s divisive rhetoric of strivers and skivers. Fundamentally, Labour believes that we should value our social security system, which, like our NHS, is based on the principles of inclusion, support and security for all, should any one of us become sick or disabled, or fall on hard times.
Let me focus on some of the concerns. Alongside those arguments in support of UBI, it is clear that tension could arise between its simplicity and its adequacy in supporting people with vastly differing needs and circumstances, which the hon. Member for Banff and Buchan described. A flat rate could not possibly provide the additional costs associated with disability—approximately an additional £500 a month—which are one of the causes of disabled people being twice as likely to be living in poverty. The Government, with their swingeing cuts, have not recognised that. To allow for variations in need, UBI would need to be supplemented with additional top-ups, increasing its expense and complexity, which is where we get to some of the issues discussed earlier.
My final substantial concern is the cost. A recent report by the Joseph Rowntree Foundation suggested that realising the policy would require not only an increase in income but a considerable shift in the general public’s understanding and knowledge of what and whom a social security system is there for. We know from the British social attitudes survey’s time-series analysis that although superficially there are peaks and troughs of support, when people understand what the system is for, whom it is for and the circumstances in which people make claims, they are a lot more supportive of it, so we need to inform people and extend their understanding.
I welcome this debate and I again thank the hon. Member for Inverclyde for securing it. I look forward to further exploring the strengths of UBI, but we must make informed decisions and evidence-based policy.
It is a great pleasure to serve under your chairmanship, as always, Mr Davies. I would like to join the congratulations to the hon. Member for Inverclyde (Ronnie Cowan) on securing this important debate. I thank everybody from all parts of the House who contributed to it. I was particularly interested in the speech of the hon. Member for Oldham West and Saddleworth—
I am so sorry.
I think she confirmed that the official Opposition are considering a universal basic income. We already knew that the Scottish National party will look into it further after their conference, and we now know that the official Opposition also see some benefits in it.
I think the Minister is running away with himself. I said it would be useful to explore it. That is not how he characterised it.
I am grateful for the clarification.
A universal basic income or similar systems that guarantee a minimum income to all have been debated and discussed at some length across the world. This debate has been stimulating and important, and discussing UBI and similar concepts, such as the negative income tax, which was a popular subject for academic debate before UBI, is an engaging activity. Any system that promises protection and, to quote the recent report from the Joseph Rowntree Foundation and Compass,
“freedom of choice for individuals between work and leisure”
is bound to sound appealing. It is difficult to argue with a utopian system that enables individuals to choose whether to work or to engage in leisure activities, alongside all the other valuable things that people do, such as voluntary work and caring.
However, as the Compass report suggested, the big issue with UBI is not whether it is desirable but whether it feasible. Would it be affordable, and could it be introduced in a way that prevented losses among the poorest sections in society? The hon. Member for Inverclyde said we should not turn our back on laudable aims. I could not agree more, but laudable aims are not enough. When Jack Kennedy said he wanted to put a man on the moon, he knew that just willing it would not make it happen. It had to be technically feasible.
The Citizen’s Income Trust, which the hon. Gentleman cited, and the RSA claim to have developed cost-neutral models for a scheme, but less highlighted is the fact that they could do so only by collecting huge amounts of additional tax. I can confirm that that is not everybody’s definition of cost-neutral. As the JRF and Compass report found, the additional tax revenue required to deliver a sustainable UBI would be as much as £160 billion. Such a system is clearly unaffordable, even if we assume that the introduction of a UBI would not affect individual behaviour in the labour market and that nobody would give up paid work as a result of its introduction. That assumption, of course, goes against common sense. It goes against trials that have happened in other countries, which have been referred to, and the principles of this Government and all recent Governments that I know of.
I have got the Compass figures in front of me. The report says that the net cost of the hybrid model that Compass proposes would be about £8 billion a year. That is a significant sum, to be sure, but it is not impossible if we are talking about a revolution in the way that work is organised. The problem with many of the contributions this afternoon is that it has been assumed that we go on as we are now and suddenly graft a citizens’ income on top of it. I think the way work is going to look in the future will be very different; therefore we need to look at bolder ideas.
I think the hon. Lady has the relevant page in front of her; I do not, but I have it nearby. From memory, if she casts her eye about three lines further up above the £8.2 billion figure, she will find another figure for what the impact on income tax will be. That is where the total effect, which is so much greater, is laid out.
I am spoilt for choice. I give way to the hon. Member for Oldham East and Saddleworth.
I am interested that the Minister is picking on one model. We need to be clear that there is a range of different models. He needs to clarify that in his remarks.
I am more than happy to clarify that the report looks at five models. There are three different proposals that might be called pure UBI models, which would deliver different levels of universal income; then there are two hybrid or adjusted models. The one that the hon. Member for Brighton, Pavilion (Caroline Lucas) referred to was, I believe, model No. 5, so it was the second of the adjusted models. The other ones are more expensive. The pure UBI models are more expensive than that one.
As we have heard here and in the main Chamber on a number of occasions, when the money is required, it is found, whether it is to renovate this place or Buckingham palace, or to spend on the vanity project that is High Speed 2 or on Trident nuclear missiles. The money is there; it is just a question of which box we want to put it into.
I do not know where to go with that. I am not sure that it is true that the money is there; in fact, I am confident that it is not. In this country, the only way in which we raise money for public expenditure is through taxation on individuals, companies and other activities.
Everyone watching the debate will be interested if the Minister can tell us which of those initiatives that my hon. Friend the Member for Inverclyde (Ronnie Cowan) cited cannot be afforded by the UK Government?
One of the main things that I am in the Chamber to say is that a universal basic income has a number of drawbacks, one of which is the great cost attached. If I may, I will now continue through my remarks.
The Government’s approach to welfare has been about recognising the value and importance of work, making work pay and supporting people into work, while protecting the most vulnerable. A universal basic income goes against every aspect of that approach. Indeed, it would put at risk the huge progress that we have made over the past six years in transforming lives through the power of work. Employment is at a record high. As we announced this morning, there are now 31.77 million people in work.
I hope that the Minister, in his analysis of the Government’s track record in relation to paid work, will also address the rise of in-work poverty under this and the previous coalition Government?
If the hon. Lady will bear with me, the claimant count is close to its lowest for 40 years, unemployment is at the lowest rate for 10 years and pay is rising. Our reforms are working. Why would we put all that at risk by implementing a blunt policy of financial handouts that does not treat people as individual human beings, with their own different ambitions and aspirations? UBI would also make no allowance for those with additional needs—a pure UBI system has no additional payments for those with disabilities or variations in housing costs, as the hon. Member for Banff and Buchan (Dr Whiteford) highlighted. Our reforms are about supporting people to reach their full potential, treating them as individual human beings and giving them the opportunity to get on.
Universal credit lies at the heart of the Government’s commitment to reform the welfare state, as the Opposition spokesperson, the hon. Member for Oldham East and Saddleworth, rightly identified. We want a welfare state that is fairer and more affordable, tackling poverty and welfare dependency, while supporting the most vulnerable households. The Government believe that work is the best route out of poverty, which universal credit supports by supporting people into work and by making work, and more work, pay. Together with the rise in the personal tax allowance, investment in childcare and the national living wage, our reforms are ensuring that support goes to those who need it most. There is additional help to cope with essential living costs, such as housing and childcare, and we will ensure that being in work will always pay.
Universal credit is already changing people’s lives for the better. Claimants are moving into work more quickly and staying in work longer than under the legacy system. For every 100 people who would have found employment under the old jobseeker’s allowance system, 113 universal credit claimants will have moved into a job.
There is so much in that sentence, and the preceding ones, that I do not know what to pick on first. The increase in wages is slowing down, according to today’s figures. Also, will the Minister explain why millions of people will be affected by the cuts in work allowances for UC under the Welfare Reform and Work Act 2016? In effect, they will get a £2,000-plus a year cut.
According to this morning’s figures, we still have good wage growth in this country, and at a time when we have low levels of inflation, so real wage growth is also close to 2%. The hon. Lady mentioned universal credit, which is a massive reform to the welfare and social security system, with the smooth taper rate taking away the cliff-edge points at 16, 24 and 30 hours a week. Those are important developments in supporting people into work and up the hour scale.
Some of the extra things we are doing include childcare, with the 30 hours for three and four-year-olds, the tax-free childcare and the increase under universal credit relative to tax credits from 70% to 85% of eligible childcare costs. Those are all critical things that the Government have been doing to reform welfare, and to help people into work and to develop in work.
Our high employment rate shows that an active welfare system that helps people into work, rather than only handing out money to everyone in the same way, is the right approach. Compare that to a system of universal basic income. I have already mentioned the report from Compass and the JRF, which shows that UBI would be prohibitively expensive. The report also shows that UBI would create too many losers among the poorest families and dramatically increase the number of children living in poverty—a point confirmed through modelling even by the Citizen’s Income Trust. UBI would dramatically increase inequality, because it does not account for individual needs and circumstances.
Some, such as the RSA, in what was a reasonable line to develop, suggest introducing adjustments—some such points have been made in the debate—and maintaining additional means-tested benefits alongside a UBI to fix that inherent flaw. The problem, however, is that the more we adjust to counteract the inequalities inherent in a UBI system, the closer we come to something that begins to resemble universal credit.
Universal credit is far more than simply a system of giving out money. It incentivises claimants to move off benefits and it provides tailored support to help people find work and increase their earnings. In contrast to UC, a UBI allows for no work-based conditions on payment to encourage that or to increase incentivisation, and for no complementing support to help people make the most of their potential.
Even the most modest of UBI systems would necessitate higher taxes, as I was discussing just now with the hon. Member for Brighton, Pavilion. Those increased taxes would be combined with the erosion of the tax-free allowance. At the same time, it would cause a significant decrease in the motivation to work among citizens, with unforeseen consequences for the national economy.
Trials of UBI have been mentioned in the report and in the debate today, such as those in the 1970s in the USA and Canada. The results showed that 5% of primary earners moved out of work, and an even greater number among secondary earners. The recent report that we have been discussing highlighted those results, but called that a small drop. From the perspective of a Government who have had to work hard with business—to have the entire economy working hard—to increase the employment rate by 4.3% over the past six years, that does not sound like a small drop to me.
Whereas at first sight a UBI seems attractive, as more scrutiny is given to the idea, the less attractive it becomes. As recently as June of this year, the concept of a universal income was formally rejected by Switzerland, as hon. Members know, with nearly 77% of people opposing the plan in a referendum.
I will briefly address some of the particular points made by hon. Members during the course of the debate. The hon. Member for Inverclyde suggested that our existing system has been driving up inequality, but 300,000 fewer households than in 2010 are now in relative low income. The evidence is clear about the role of work in helping families, and children living in those families, out of poverty. The evidence is strongest about where it is possible to move into work—[Interruption.]
Order. There has been some sedentary commentary, but we have until 17.38, so if people want to ask to make an intervention, please do—obviously, it is for the Minister to allow.
Will the Minister give way?
Three out of four people in low-paid work are still in low-paid work 10 years on. How is the system helping them?
Helping people on relatively low incomes to increase their incomes by moving up the hours scale or the earnings scale is of course an objective that the hon. Lady and I share. That is why we have made the childcare reforms that I alluded to and brought in the national living wage, which will affect people who were previously on the national minimum wage but will also have a ripple effect on pay grades immediately above that. The critical thing, which we come back to time and again, is that universal credit will reform the system, in which there are certain cut-off points on the hours scale, to ensure that there is as smooth as possible a transition through work.
The hon. Member for Brighton, Pavilion talked about less secure employment. It is certainly true that today’s labour market differs in several ways from the labour market of the 1960s and 1970s. Several factors are at play, including the long-term shift to the service sector and the fact that people are living longer. Yes, it is also true that people are much less likely to stay in a job or work for one employer or even in one sector for their entire careers, but it is important to note that three-quarters of the increase in employment since 2010 has been in full-time work. Only around 14% of people in part-time work would prefer to be working full time, although obviously we want to increase the opportunities for them.
Relatively few people in the economy rely on zero-hours contracts, which give people on average around 25 hours of work per week. We know from surveys that most people on zero-hours contracts are not seeking to increase their hours. Although those types of contracts clearly are not even close to being suitable for everyone, there are some people for whom they work. A lot of people on zero-hours contracts are students or people coming back into the labour market, and such contracts can be a good way in. It is absolutely right for the Government to have banned exclusivity clauses that prevent people from taking up other work.
Will the Minister give way?
Will the hon. Gentleman forgive me if I press on? The extremely important point of technological change was raised, and that needs to be debated in the House and elsewhere. Some proponents of a universal basic income cite the inevitable changes in the world of work, driven by technological advance and artificial intelligence, which they believe will make many jobs obsolete and increase unemployment. That argument has a long pedigree, which goes back beyond the spinning jenny, and I do not at all belittle the importance of that discussion or the implications of structural change. We must of course be sensitive to such possibilities, but time and again over the decades, as technological change has removed the need for one type of work, it has created another.
In conclusion, although a universal basic income may appear to be desirable at first glance, any practical implementation would, I am afraid, be unaffordable. Because UBI does not properly take into account individual needs, it would markedly increase inequality. Universal credit is the right system for the United Kingdom. This responsible Government are implementing a system that encourages work, supports the most vulnerable and is affordable.
I invite Ronnie Cowan to wind up the debate, for a couple of minutes.
Thank you very much—and it is pronounced Cow-an, as in cow, as in “moo”.
I thank the Minister, the hon. Members for Oldham East and Saddleworth (Debbie Abrahams) and for Brighton, Pavilion (Caroline Lucas), and my hon. Friend the Member for Banff and Buchan (Dr Whiteford) for their contributions. I also thank the Members who interceded and kept the debate going, which is an important part of the process: the hon. Member for Stretford and Urmston (Kate Green), my hon. Friend the Member for Caithness, Sutherland and Easter Ross (Dr Monaghan) and the hon. Member for Solihull (Julian Knight), who is no longer in his chair—he adopted the seagull strategy of fly in, make a lot of noise and leave.
I am disappointed that the Minister seems so intransigent in his support for the current system. It concerns me slightly that he is so happy with the status quo. I end with a quote from Noam Chomsky, who said:
“Optimism is a strategy for making a better future. Because unless you believe that the future can be better, you are unlikely to step up and take responsibility for making it so.”
I ask the Government to take responsibility.
Motion lapsed, and sitting adjourned without Question put (Standing Order No. 10(14)).