The beguiling notion of a minimum income for all

Another attempt to convince us all of the merits of a universal basic income over in The Guardian. This is based on the experiment done in Dauphin in the 1970s. Some of us here very much like the idea but as we do so that means that we've also thought through the idea a little more than some others have:

But is this really an old-fashioned, leftist idea? I remembered reading about an old plan, something that has been proposed by some of history’s leading thinkers. Thomas More hinted at it in Utopia, more than 500 years ago. And its proponents have spanned the spectrum from the left to the right, from the civil rights campaigner Martin Luther King to the economist Milton Friedman.

It’s an incredibly simple idea: universal basic income – a monthly allowance of enough to pay for your basic needs: food, shelter, education. And it’s completely unconditional: not a favour, but a right.

The first problem with the proof being used here, that Dauphin experiment, is that it wasn't a universal basic income, was not ion fact a right to a certain income unconditionally. Rather, what was tested was a negative income tax. If you earn less than x then that income will be topped up to x. And there was a tax rate applied too, you only kept 50% of earned income over a certain level.

This is an important point because it mirrors the development of the idea itself. It was Milton Friedman who did a lot of the heavy lifting here. He started out with a universal basic income. And quickly realised that there was just no way to tax everyone enough to pay it out. So he moved to the negative income tax idea, that there's a minimum income, yes, but earned income counts against it in some manner.

That was still too expensive for the time and so it morphed into tax credits - the EITC over in the US being introduced at about the same time as this Dauphin experiment. The EITC arrived with us as working tax credits rather later.

And the reason is simply cost. The Dauphin guaranteed income was about $16,000 (in 2014 $) for a single person. Call that about £13,000 here today. To produce that as a universal basic income would cost about £650 billion, not that far off total government tax revenue today. Or 35 to 40% of GDP, that sort of number. Sure, we can subtract much of current welfare spending to get to the net cost but that's not the sort of amount that we think we can squeeze out of the economy in tax without beginning not to have much of an economy.

Which is why it turns up as working tax credits, something conditional, not something universal.

It is possible to construct it so that it is universal - but that means paying attention to the other part of UBI, basic. At a rate around the state pension, perhaps the state pension guarantee, say £150 a week per adult, then it could be done with the redirection of current spending rather than taxing everyone to heck and back. As Charles Murray showed in "In Our Hands", $10,000 a year for the rather richer United States could just about be done.

We can have universal and basic of substantial and directed but not substantial and universal. And of course this is before we get to the fantasies of the JRF and the like where everyone should have a "liveable" income.

Some of us here support a UBI, others don't. But it is still true that the number only stack up if great attention is paid to the basic part of it. If it's to be anything more than that most basic amount then the universal part has to go.