No customers = no business. That’s the obvious lesson from 4 weeks of lockdown, as companies across the economy struggle to cope with the sudden catastrophic loss of revenues.
It’s hard, indeed, to think of a more stark illustration of the risks to capitalism than this. The very nature of profit implies that more is being taken out of the system by companies, for the benefit of their shareholders, than they are putting in. Ally that with a dogma of Government which insists on levying low taxes on profits, and the result is a system designed to allow vast wealth to accumulate in the banks of a few people. So it’s not too far-fetched to envisage a world in which the vast majority of the population no longer have money to spend on anything which those enterprises produce, resulting in a complete system failure.
As businesses increasingly become less reliant on actual people to do work, replacing them with robots allied with artificial intelligence systems of control, even without the impact of Covid19, that critical point might well be closer than many people assume.
We can see that this crisis has thrown everything we know about work, society, the value of key workers and economics up in the air. In the short term, in addition to all the personal stress and dangers, it’s put at risk the financial position of a huge number of people, their families and almost every single business that exists, as well as placing huge strain on the whole of the public sector and charities.
The Government’s response to this has had two key characteristics.
It has been piecemeal – indeed scattergun – and it has tried to use existing mechanisms to distribute funds. The first has resulted in many people being omitted from receiving the benefits, at least to date, and has been a staggeringly incoherent, badly thought through and poorly executed failure. The latter may have kept HMRC and DWP staff in jobs, but has resulted in solutions which are complex, slow, divisive and wholly ineffective. Which shouldn’t be a surprise given the woeful record of the DWP in distributing the so-called Universal Credit, which is neither universal nor a credit, and whose main aim seems to have been to humiliate and punish people for the misfortune of being poor, unemployed or unwell.
The result has been not just to create worse poverty and debt, but to impose a knock-on impact throughout the economy. Tenants can’t make their rental payments; residents can’t pay their Council Tax; people don’t have money to spend, and get into ruinous debt, because UC takes so long to come through.
On top of that, businesses can’t pay their rates. Economic activity has fallen through the floor and continues to plummet. No-one has money to spend, and no confidence about when that might change. These are not conditions in which businesses can survive, even without worrying about their staff and their fixed costs, unless there is a fundamental change in the way the economy is structured.
So far, so gloomy. But the challenge offers new possibilities too, new ways of addressing inequality which would boost confidence and provide an economic stimulus. At the forefront of those possibilities is the idea of a Universal Basic Income (UBI), something I’ve been arguing for over quite a long period. Now it appears that Spain’s Government, led by the socialist PSOE, is about to embark on a nationwide trial of the concept.
To be fair, the idea isn’t that new: Thomas More suggested it in 1516, and Kent’s own Thomas Paine supported it in the late-18th Century. More recently, economists concerned about the effects of robotization and artificial intelligence on the nature and quantity of paid employment have been kicking the tyres of UBI to see if and how it would work, and both Canada and Finland have run trial schemes.
The key elements are that it does what it says: it’s Universal – every adult receives it unconditionally and automatically, regardless of personal circumstances; it’s Basic – to cover, for example, needs up to the poverty line or perhaps a minimum level of core personal costs for housing, heating, food and clothing; and it’s an Income – thus taxable as part of the total income of an individual.
If you think that’s utopian, or dangerous, then look at what the Government has already pledged for workers during the lockdown: £2500 per month maximum, but crucially only for those who qualify. That means lots of assessment and forms, perhaps means-testing, and lots of civil servants spending time going through applications before eventually issuing some money – quite possibly taking up to 5 weeks to do so. Yet even today over 11 million people have taken up the scheme, which would create an annualised cost of £330 Billion.
Now consider this. There are just over 52 million adults (over 18) in the UK. To give them the arbitrary sum of £1,000 a month (chosen only so I can do the maths!) would cost £625 billion per year. Which is a scary number until you realise that in 2017-18 we spent around £383 billion on pensions, universal credit, housing benefit and jobseekers allowance, all of which it would replace. In other words, the additional annual expenditure on a UBI at that level might be £240 billion, which is less than the Government has pledged for just a small number of people under its temporary schemes. On the other hand, a UBI would provide a significant economic boost – almost certainly inflationary in the first instance, which would have the side effect of helping reduce the UK’s deficit – while cutting the costs of administration significantly. It would, though, require a radical departure from the current taxation system, primarily through imposing a much greater level of tax on the real profits of business.
There are other reasons for considering UBI. Not least of those is the long term trend of de-skilling and casualisation of employment which, while most evident in the so-called gig economy, is a direct result of new technologies being introduced. It is not a huge leap to imagine there being very few well paid jobs left in 20 years as AI and automation become the norm. What happens then for our society, if the vast majority of people have to exist on the current levels of benefits or minimum wage jobs? Because it’s quite clear that many businesses will not be able to survive when their consumer base is so impoverished.
UBI has the potential to offer an egalitarian, effective, affordable and redistributive model for sharing the wealth created by corporations, while still providing incentives to work to earn the money for more luxurious goods and services. It safeguards everyone, would bring many millions of people (and especially children) out of relative poverty, recognises the economic value of carers and homeworkers (both groups which are predominantly comprised of women), and would be comparatively easy to administer.
People will raise objections, both practical and political, to the idea. I’m not here arguing that it’s without challenges. But if we could accept the principle and spend our time trying to work through those questions and practices, we could have the key to a future in which being a citizen of this country means that you get to share a little in the wealth which the efforts of the economy as a whole create. And surely that is not an objective which should be casually tossed aside.
The two-child cap is a poor fit for Labour
by Lauren Davison | 23.07.23 | In: CommentLabour members were blindsided by Keir Starmer's recent commitment to keep George Osborne’s two child-cap on benefits. Thanks to Tory austerity, 1 in 4...Read More
UBI – the Way Forward?
No customers = no business. That’s the obvious lesson from 4 weeks of lockdown, as companies across the economy struggle to cope with the sudden catastrophic loss of revenues.
It’s hard, indeed, to think of a more stark illustration of the risks to capitalism than this. The very nature of profit implies that more is being taken out of the system by companies, for the benefit of their shareholders, than they are putting in. Ally that with a dogma of Government which insists on levying low taxes on profits, and the result is a system designed to allow vast wealth to accumulate in the banks of a few people. So it’s not too far-fetched to envisage a world in which the vast majority of the population no longer have money to spend on anything which those enterprises produce, resulting in a complete system failure.
As businesses increasingly become less reliant on actual people to do work, replacing them with robots allied with artificial intelligence systems of control, even without the impact of Covid19, that critical point might well be closer than many people assume.
We can see that this crisis has thrown everything we know about work, society, the value of key workers and economics up in the air. In the short term, in addition to all the personal stress and dangers, it’s put at risk the financial position of a huge number of people, their families and almost every single business that exists, as well as placing huge strain on the whole of the public sector and charities.
The Government’s response to this has had two key characteristics.
It has been piecemeal – indeed scattergun – and it has tried to use existing mechanisms to distribute funds. The first has resulted in many people being omitted from receiving the benefits, at least to date, and has been a staggeringly incoherent, badly thought through and poorly executed failure. The latter may have kept HMRC and DWP staff in jobs, but has resulted in solutions which are complex, slow, divisive and wholly ineffective. Which shouldn’t be a surprise given the woeful record of the DWP in distributing the so-called Universal Credit, which is neither universal nor a credit, and whose main aim seems to have been to humiliate and punish people for the misfortune of being poor, unemployed or unwell.
The result has been not just to create worse poverty and debt, but to impose a knock-on impact throughout the economy. Tenants can’t make their rental payments; residents can’t pay their Council Tax; people don’t have money to spend, and get into ruinous debt, because UC takes so long to come through.
On top of that, businesses can’t pay their rates. Economic activity has fallen through the floor and continues to plummet. No-one has money to spend, and no confidence about when that might change. These are not conditions in which businesses can survive, even without worrying about their staff and their fixed costs, unless there is a fundamental change in the way the economy is structured.
So far, so gloomy. But the challenge offers new possibilities too, new ways of addressing inequality which would boost confidence and provide an economic stimulus. At the forefront of those possibilities is the idea of a Universal Basic Income (UBI), something I’ve been arguing for over quite a long period. Now it appears that Spain’s Government, led by the socialist PSOE, is about to embark on a nationwide trial of the concept.
To be fair, the idea isn’t that new: Thomas More suggested it in 1516, and Kent’s own Thomas Paine supported it in the late-18th Century. More recently, economists concerned about the effects of robotization and artificial intelligence on the nature and quantity of paid employment have been kicking the tyres of UBI to see if and how it would work, and both Canada and Finland have run trial schemes.
The key elements are that it does what it says: it’s Universal – every adult receives it unconditionally and automatically, regardless of personal circumstances; it’s Basic – to cover, for example, needs up to the poverty line or perhaps a minimum level of core personal costs for housing, heating, food and clothing; and it’s an Income – thus taxable as part of the total income of an individual.
If you think that’s utopian, or dangerous, then look at what the Government has already pledged for workers during the lockdown: £2500 per month maximum, but crucially only for those who qualify. That means lots of assessment and forms, perhaps means-testing, and lots of civil servants spending time going through applications before eventually issuing some money – quite possibly taking up to 5 weeks to do so. Yet even today over 11 million people have taken up the scheme, which would create an annualised cost of £330 Billion.
Now consider this. There are just over 52 million adults (over 18) in the UK. To give them the arbitrary sum of £1,000 a month (chosen only so I can do the maths!) would cost £625 billion per year. Which is a scary number until you realise that in 2017-18 we spent around £383 billion on pensions, universal credit, housing benefit and jobseekers allowance, all of which it would replace. In other words, the additional annual expenditure on a UBI at that level might be £240 billion, which is less than the Government has pledged for just a small number of people under its temporary schemes. On the other hand, a UBI would provide a significant economic boost – almost certainly inflationary in the first instance, which would have the side effect of helping reduce the UK’s deficit – while cutting the costs of administration significantly. It would, though, require a radical departure from the current taxation system, primarily through imposing a much greater level of tax on the real profits of business.
There are other reasons for considering UBI. Not least of those is the long term trend of de-skilling and casualisation of employment which, while most evident in the so-called gig economy, is a direct result of new technologies being introduced. It is not a huge leap to imagine there being very few well paid jobs left in 20 years as AI and automation become the norm. What happens then for our society, if the vast majority of people have to exist on the current levels of benefits or minimum wage jobs? Because it’s quite clear that many businesses will not be able to survive when their consumer base is so impoverished.
UBI has the potential to offer an egalitarian, effective, affordable and redistributive model for sharing the wealth created by corporations, while still providing incentives to work to earn the money for more luxurious goods and services. It safeguards everyone, would bring many millions of people (and especially children) out of relative poverty, recognises the economic value of carers and homeworkers (both groups which are predominantly comprised of women), and would be comparatively easy to administer.
People will raise objections, both practical and political, to the idea. I’m not here arguing that it’s without challenges. But if we could accept the principle and spend our time trying to work through those questions and practices, we could have the key to a future in which being a citizen of this country means that you get to share a little in the wealth which the efforts of the economy as a whole create. And surely that is not an objective which should be casually tossed aside.
Also published in The Canterbury Journal.
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