Countering Basic Income

As predicted, basic income is slowly inching into the limelight, with the Finnish government keen to experiment and centrist thinktanks like the RSA pumping out costed "models". The media response to this development has employed a number of traditional techniques, from raising a sceptical eyebrow at the funny ideas of foreigners to outright misrepresentation. In a fine example of the genre, Daniel Boffey in the Observer used a half-hearted Dutch scheme to confuse the basic income concept with the old idea of asset-based egalitarianism: "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". This is like comparing a 21st birthday present with free school milk, but it serves to distract from the real justification for a basic income, namely that it is a social dividend and therefore a persistent benefit.

While liberals are uncomfortable discussing it in these terms, as that would raise questions about social power that are only partly alleviated by the sophistry of luck egalitarianism, conservatives are happy to discuss a basic income so long as the word "universal" is replaced by the more selective "guarantee" or "safety net" (like Oliver Letwin's 80s view of discos and drugs, the basic income is a characteristic of "the other"). This has produced the amusing sight of liberal sceptics employing the conservative style of argument first anatomised by Albert O Hirschman in The Rhetoric of Reaction, namely the triple-whammy of perversity, futility and jeopardy. The perversity argument suggests that any attempt at a positive change will be counter-productive and make matters worse; the futility argument suggests that certain changes are impossible and thus a waste of effort; and the jeopardy argument suggests that change will have unintended and negative consequences.

In the context of a universal basic income (UBI), the three arguments have been combined into the trope of the "welfare trap". The need for discretionary (and thus means-tested) payments over-and-above the basic income, such as for housing or disability support, would exacerbate the current problem (perversity) where the rate at which in-work benefits are withdrawn as wages rise means that recipients have little incentive to increase their hours or improve their skills (futility). With a basic income you'd universalise this problem, thus eroding the work ethic (jeopardy). To add to the irony, conservatives sympathetic to a basic income guarantee (BIG), like Jeremy Warner, happily dismiss the moral dimension: "it scarcely seems to matter" (though it's worth noting he can't resist suggesting that an EU country adopting such as scheme "would be swamped by riff-raff").

Though the liberal sceptics have talked in general terms about the incompatibility of a universal, one-size-fits-all income with a welfare system based on variable needs, some have been honest (or naive) enough to focus predominantly on the problem of housing benefit. Indeed, if you take housing out of the equation, the issues around disability and other discretionary benefits look trivial, not least because many of today's features (work fitness tests, marginal financial support) would disappear with a scheme that was universal and more generous than current benefits. Given that the basic income idea is routinely introduced by reference to experiments or debates in other countries, it is notable that discussion of its feasibility so quickly reduces to what might appear a very UK-centric (and even London-centric) concern.

A good example of this was provided by Tim Blackwell in the New Statesman, specifically critiquing the Citizen's Income Trust scheme that provided the basis for the Green Party's botched proposal earlier this year, and which assumed the continuation of housing benefit and council tax support. The problem is that withdrawal rates for these benefits would be as bad as now, giving rise to perversity: "People with inherited property and modest trust funds would do well from the CIT scheme. Lone parent tenants in need of childcare would do very badly". Though dressed in progressive colours, this image of the conflicting interests of a trustafarian and a single mum is our old friend the trope of the shirker and the striver (inherited wealth versus a parent who wants to work).

Blackwell's admission of the necessary adjustment to make the scheme work reeks of futility: "You would need to pay everybody’s rent and council tax in full. Merely retaining housing and council tax support is insufficient. Alternatively, fix the housing system so that everyone has access to well-maintained, secure and affordable housing". In other words, reverse the last three decades of government policy and local authority practice. Given that it originally took 30 years, from 1945 to 1975, to achieve something close to "decent houses for all", a time when housing doesn't "pervert" a basic income looks remote. Having played this trump card, he reduces the basic income to an incremental campaign to ameliorate the uglier aspects of the benefits system: "significantly reducing conditionality is perhaps the most immediately achievable goal".

The problem with the CIT proposal is that in trying to make the scheme revenue neutral (i.e. no increase in the total welfare bill) it entrenches the existing "dole" of £73.10 a week Jobseeker's Allowance (JSA). This represents a fall from 21% of average wages in 1979 (then Unemployment Benefit) to 11% today. Unless we really believe the unemployed in the late-70s were living the life of Riley, this would suggest a basic income closer to £150 a week might be appropriate. A simple rule of thumb to identify pseudo-basic income schemes is to look at the difference between working-age adults and the retired. The RSA scheme proposes a weekly income of £71 for the former and £142 for the latter. This preserves the fiction that the state pension has been earned through NICs rather than being a subsidy by current tax-payers to former tax-payers. A true basic income scheme would euthanise the contributory principle, and it would also do away with any "reduced rate" nonsense for under-25s or the denial of the benefit to prisoners (as emblematic as the denial of their voting rights).

On the right, the withdrawal of benefits is converted from a problem with the scheme's implementation to a core design principle. Sam Bowman of the Adam Smith Institute thinks that: "basic incomes that are not tapered out are a complete waste of money, redistributing lots of money to people on high and middle incomes unnecessarily. It amazes me that this anti-progressive approach seems to be popular among some on the left". The distaste for universality is covert admission that the basic income is merely a dole. Insisting on the division of society into "givers" and "takers" in this way avoids addressing the significance of the basic income as a social dividend, and thus by definition a universal right, and it also reinforces the reactionary idea that tax-payers should be thought of as having superior rights.

The preference on the right is for a flat-rate payment (or negative income tax, a la Milton Friedman) to replace the welfare state in its entirety. This shrinks "incompetent" government, diverts much of the money to the private sector (in the form of a demand for insurance), and institutionalises the moralism of personal responsibility. What it ends is the role of government as the most efficient buyer (due to economies of scale) of certain public services, its role as the protector of those not suited to "standing on their own two feet", and its potential as a counter-cyclical employer/buyer of last resort (you can forget any idea of a job guarantee in such a scenario). This is the end of solidarity, or as a Hayek put it, "a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born".

The significance of housing costs isn't just an unfortunate coincidence that if absent would allow a basic income to be considered more feasible. The growth of interest in a basic income goes hand-in-hand with the growing "problem" of housing affordability. The era of affordable homes was also the era of social democracy. In other words, state intervention to regulate labour from "cradle to grave" extended to the provision of housing. Once labour started to become marginally redundant, housing was no longer seen as a public good and became a form of individual capital investment: arguably the most important form of capital in the neoliberal era. This was not a coincidence, let alone the result of an economic boom.

The price of housing, like the easier availability of credit, reflects expectations of future income. The cost of housing is therefore primarily an income issue, not a matter of market supply or planning regulations. It has risen because of longer working lives, more dual-income families and larger disposable incomes (due to deflation in food and commodity costs), exacerbated by a growing population and lower household density. High prices in London owe more to the expectation of future London wage growth, relative to the rest of the UK, than they do to oligarchs or foreign investors. It is demand, rather than a builders' strike, which pushes up prices. Constraint on supply exists to support these higher prices, as does NIMBYism. The latter is an anti-market impetus, which is why further market deregulation, such as relaxing planning laws, is doomed to fail. As Steve Randy Waldman puts it, "Homeowners understand their actions not as monopolizing the housing market but as protecting their homes and neighborhoods from the market".

Basic income sceptics think that housing is a killer issue, but it's simply proof that when we talk about "the housing problem" we're talking about the same issue that underlays the basic income: social protection in a post-social democratic world. The polarisation in housing costs - very high in London, very low in Redcar - reflects the polarisation in jobs and wages. If the economy cannot provide enough well-paid jobs to meet demand, then it will also fail to provide sufficient housing as future income expectations polarise. Free-market conservatives increasingly admit the former, which is why they are interested in the basic income in its parsimonious dole form. Some are even admitting the latter, though their preferred solution is to decant the unemployed, freeing-up social housing in the capital for more "productive" use and turning the regions into economic bantustans. The problem with the basic income debate is that it is being dominated by centrist liberals in denial about the structural inadequacies of capitalism and reluctant to engage with the instrumentalism of the right.