MARK DRAKEFORD’s announcement that the Welsh Government plans to trial Universal Basic Income in a few locations in Wales captured headlines in online media.
The First Minister was variously said to have ‘hinted’ at a trial or announced a trial would take place.
However, nobody should have been surprised by the First Minister’s announcement.
Not only was the policy contained in Labour’s Manifesto for May 6’s election – a bit more than ’a hint’ – but also the principle of holding a trial in Wales was enthusiastically passed by the last Welsh Parliament in September last year. It was a policy in Plaid Cymru’s election manifesto and Labour’s; so, whether Labour went it alone in Government or was in partnership with Plaid Cymru, a trial was on the cards.
WG KNOWS WESTMINSTER HAS THE FINAL WORD
However, whether the Welsh Government can carry out a trial is beyond its immediate control.
Headlines that said the Welsh Government WILL carry out even limited Universal Basic Income trials are also jumping the gun.
When the Senedd debated a motion brought forward by Jack Sargeant MS on September 30, 2020, here is what the Finance Minister Rebecca Evans had to say about it: “The Welsh Government would be open to such a trial taking place in Wales, but we have to be realistic that such a trial would not be possible without the active cooperation of the UK Government, and this is because of the interaction of universal basic income with the tax and benefit system.
“If such a trial were offered, we would also require that conditions were met to ensure that the Welsh Government and this Senedd were able to play a significant role in the design, governance and accountability of any scheme.
“Were the Welsh Government to make payments to individuals without the cooperation of the UK Government, this could simply result in them being ineligible for existing benefits or paying more in tax.
“Aside from the fact that this would not then be a proper test of the effect of an unconditional payment, it would result in the transfer of resources from the Welsh Government to the UK Government.
“And, sadly, our recent experience of the UK Government’s approach to the taxation of our payments to social care workers doesn’t suggest that we should expect their active cooperation.”
In short, the Welsh Government needs Westminster’s ‘active cooperation’ to make a trial possible.
Without Westminster’s cooperation, those who get the Universal Basic Income could (are almost certain to) lose all of their entitlements to other benefits, tax credits, and other means-tested benefits. They could also have to pay tax on it.
WHAT IS UNIVERSAL BASIC INCOME?
Universal Basic Income is not a new idea. Its long history stretches back to antiquity and has been a feature of both romantic and progressive political theory for centuries.
At its simplest, Universal Basic Income does away with a raft of welfare benefits. It substitutes them with a single payment of a fixed amount.
Schemes that guarantee a basic income, short of enough to live on, exist in a few US states and a handful of national economies. However, those are more of an income floor for those who are otherwise dependent on welfare benefits. They are not an actual Universal Basic Income.
A national trial in Finland ended after two years with no definitive finding of better outcomes for those who received UBI over those who did not.
The Covid pandemic increased interest in the idea of UBI in continental Europe. At the same time, the US used a series of relatively modest income replacement initiatives to stop people’s descent into poverty (or into deeper poverty).
The UK’s furlough scheme was – essentially – a basic income guarantee but not genuinely universal in nature.
A major multi-national academic study published in 2017 found that UBI probably improved some health outcomes and increased the likelihood of children attending school.
However, the same report also concluded the evidence for positive outcomes from UBI-type schemes was ‘very uncertain’.
THE COST TO WALES
The main deterrent to a truly Universal Basic Income is cost.
• If a full universal basic income were paid in Wales to all working-age adults and set at the level of the official living wage, the cost would be around £35 billion a year.
• If set at the level of the real living wage, the cost would be around £40 billion.
• For illustration, those figures are around twice the size of the Welsh Government’s budget. As a further comparison, income tax in Wales raises in total just over £5 billion.
• Of course, the costs could be much reduced if universal basic income were paid at a lower rate. However, payment at a lower rate would reduce its attractiveness.
Those last four points are not our own words. They are the Welsh Government’s position as set out in 2020 by its own Finance Minister.
Nothing has changed those figures since September 30, 2020.
They demonstrate the prohibitive and unsupportable cost of UBI to Wales without massive and systemic change across the whole UK.
SCOTCH MIST
As an illustrative example of the timescales and complexity of introducing even a pilot scheme, we only need to look at Scotland.
In September 2017, the Scottish Government announced it would support local authority areas to explore a Citizen’s Basic Income Scheme by establishing a fund to help regions to develop their proposals further and establish appropriate testing.
The funding offered was £250,000 over the two financial years 2018/19 and 2019/20.
Four local authority areas: Fife Council, City of Edinburgh Council, Glasgow City Council and North Ayrshire Council, worked together to research and explore the feasibility of local pilots of Basic Income in Scotland.
Notlaunch a basic income. Explore its feasibility.
Over three and a half years since the Scottish Government’s announcement, there is still no UBI trial in Scotland.
Putting such a scheme in place depends, yet again, on Westminster’s cooperation.
A report on the progress of the feasibility study notes’ any pilot [must] have the necessary support to influence the future of national policy and the role of Department of Work and Pensions (DWP), HM Revenue and Customs (HMRC), HM Treasury and the NHS will be vital in the design and implementation of a Basic Income pilot.’
Three years to design and complete a feasibility study into a limited trial in four local authority areas in Scotland combined with the need to wait for Westminster approval does not suggest a quick fix.
And if it’s not a rapid process in Scotland, it will scarcely be quicker in Wales.
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