John Mcdonnell, the Shadow Chancellor, is giving a series of talks with high profile left wing economists and thinkers. At his talk on Tuesday, where among other things, he completely misunderstood Googles tax arrangements and mentioned Hayek of all people, he spoke of a universal basic income, the idea all citizens should get an amount to live off and that be that.
I know it is fashionable to have a go at the loss making Indy, but God Almighty this article was thrown together 5 minutes before closing time. There is no actual link to his exact quote, there is nothing of what a Labour policy would look like, and although it is believable because of what they were discussing, you could put “considering” after pretty much anything anyone has said. For instance, Jonathon is “considering” suicide after reading the Independent.
Anyway, since the McDonnell quote offers a way into discussing basic incomes, lets do that. The amount referenced by the Independent comes from the Royal Society for the encouragement of Arts, Manufactures and Commerce, which floated a figure of £3, 692 a year or £71 a week for people aged 25-65. This is also what an ASI report found, the difference being that they called their proposal a Negative Income Tax , while the RSAMC confusingly but for understandable reasons (Negative.. bit negative sounding) referred to their proposal as a UBI.
The actual difference between a NIT and UBI is that the former is based on the tax system in the form as a top up to income, or a minimum income if you earn nothing at all. As you earn more it is taxed back off you, like child benefit is, while a UBI is cash given, with then some ambiguity on where the money comes from to pay it. The work disincentives for a UBI are quite bad, because if you have just enough to live, then why not sit around all day. A NIT is a system in which you keep more money for each pound that you earn, with say a tapered withdrawal rate of 40p, so there is at some incentive to go out into the wider world, work and seek higher wages.
I like people working because you know,
I am an evil capitalist who wants to crush the human soul it is how a modern economy works, and makes me and you richer. But also, unemployment has been very strongly associated with depression, lower levels of happiness, mental health issues, and poor self esteem, which we don’t like at all.
Since we probably should be thinking about the future of work, where low productivity labour will either be priced out by minimum wage increases or simply unable to provide enough to have an acceptable living standard, this is probably something we should think about.