Government must reject this road to socialism

Linda J. Dodson

Over the last few centuries, many thinkers have been attracted to the idea of introducing a Universal Basic Income (UBI) – an arrangement under which the state regularly sends an amount of money to all citizens without them having to meet any test of need. The proposal’s appeal lies in its simplicity, low cost of administration and apparent fairness.

Interest in this idea has burgeoned over the past few years, driven by a growing fear that in future, although robots and AI will make our economy much more productive, millions of people will be unable to find any sort of employment. There is therefore a danger of mass poverty in an age of abundance.

In my recent book The AI Economy, I explained why I am not persuaded by either the likelihood of this nightmare vision being realised or the suitability of a UBI to address the consequent problems if it were. I stand by those arguments. But the coronavirus crisis potentially provides a new source of support for UBI. Last week more than 100 opposition MPs and peers proposed that the Government should introduce a UBI of £50 per week in order to counter the economic impact of the virus. Forget abundance. Now it is a matter of relieving poverty and boosting demand in times of scarcity. Do they have a point?

The proposal is not entirely daft. The American government is making one-off payments of $1,200 (£970) to every adult and an additional $500 per child. And one-off payments of about $1,000 per person have been announced in Japan and Hong Kong.

Such payments can be seen as the equivalent of one-off tax reductions but with the benefit appearing pretty much immediately and falling equally on (almost) all citizens alike, including those at the bottom of the pile who do not pay any tax. This measure is simple and, since most people benefit, it is politically appealing and may be quickly agreed. It is useful in countries that do not have extensive welfare systems. So what about introducing a similar measure here, whether as a one-off or a regular payment?

Let us be clear. There is no argument about whether it is right for governments to give financial assistance during these extraordinary times. The issue is about the form of such assistance.

Before the coronavirus, the main arguments against a UBI were that one, it would potentially undermine the incentive to work, and arouse widespread resentment on the part of those in society who did still work; two, to give any meaningful benefit to recipients, it would need to be set at such a rate that there would be a huge rise in public expenditure which would have to be financed by taxation, impeding the efficiency of the economy and reducing output; and three, if the UBI replaced other benefits at no extra cost to the Exchequer then the recipients of existing benefits would be worse off.

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