Explained: what is universal basic income?

As hundreds of thousands of people were thrown out of work by the coronavirus pandemic, the idea of a universal basic income (UBI) has had a resurgence in interest across the globe.

The UK has seen a surge in support for the policy, with 84% of the public, as well as more than 100 MPs and peers in parliament, supporting the idea of a “recovery basic income”, The Guardian columnist Zoe Williams says.

That interest has not been lost on political leaders in Wales, which is set to launch a trial UBI scheme after First Minister Mark Drakeford pledged to bring the idea to the Welsh parliament (the Senedd) during his term.

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Drakeford said the pilot would “see whether the promises that basic income holds out are genuinely delivered” in people’s lives, adding: “It’ll have to be carefully crafted to make sure that it is affordable and that it does it within the powers available to the Senedd.”

What is universal basic income?

Sometimes referred to as “guaranteed” minimum income, or even negative interest rates, UBI awards everyone a fixed monthly payment, regardless of whether they are in work. This amount can be cut at a set rate if recipients meet and exceed a set limit. It is similar to working tax credits in the UK, but avoids the costly administrative burden and complexity of applications and potential tax return-based clawbacks.

What could the trial look like in Wales?

According to WalesOnline, the key details of the trial are still being finalised. However, it is understood that the research project will focus on people leaving care. It is also thought that the trial will not cover an entire geographical region.

“We have followed the progress of UBI pilot projects around the world with interest and believe there is an opportunity to test the concept in Wales,” said a Welsh Government spokesperson.

“There is more work to be done in this area but we are interested in developing a small pilot, potentially involving people leaving care.”

What are arguments for and against UBI?

The Conservatives have responded to the Wales trial by arguing that the country should not become “a petri dish for failed left-wing policies”, the BBC reports. Chancellor Rishi Sunak also repeatedly rejected the idea during the Covid-19 pandemic, arguing it was not the “right response” to the issues posed by the pandemic.

Critics often label the initiative a pipe dream, warning of sky-high costs and people quitting their jobs in droves to the detriment of the economy.

MoneyWeek editor-in-chief Merryn Somerset Webb argues in the Financial Times that pandemic support schemes have taught us that “if you give people the kind of financial support that allows them to withdraw their labour, a good number of them probably will”.

In non-crisis scenarios, those in favour of the scheme include many progressive and left-leaning economists, who argue it would help fight poverty and reduce inequality in a world where jobs are increasingly being robotised and where up to half of all work currently done, such as housework or care work, is unpaid.

Supporters also say it would reduce the cost of administering complex welfare programmes with opaque eligibility criteria. The Telegraph suggests that supporters of UBI believe it is the “only way to guarantee a basic standard of living for all citizens and protect them from sudden economic shocks”.

Some small trials have already been conducted to assess the impact of UBI-type schemes. One pilot conducted in Finland from 2017 to 2018, found the 2,000 participants were in better health and more likely to be in work at the trial’s conclusion.

What about during the coronavirus outbreak?

Before the furlough scheme was introduced, Daniel Susskind, an economics fellow at the University of Oxford, told The Telegraph that a temporary UBI scheme could “support businesses, such as pubs and restaurants, that would not benefit from a top-down financial stability package from the government or Bank of England”.

He estimated that handing out £1,000 to every citizen each month would cost the government about £66bn a month, but notes that the implementation would be cheap and quick as there would be none of the bureaucracy that comes with means testing.

In March last year, Boris Johnson told the Commons that UBI was “one of the ideas that will certainly be considered” as the government searched for a solution to the national lockdown before the furlough scheme was introduced four days later.