The fundamental weaknesses of any UBI pilot scheme
The Welsh Government has announced a trial of universal basic income. Or has it?
The answer is bit of yes and a bit of no.
Starting last Friday, hundreds of 18-year-olds with experience of living in care will receive £1,600 per month (around £1,280 after tax) for two years. The payments will be made either monthly or every two weeks.
UBI – or citizen’s income - is the idea that every adult citizen should be given money every month, (largely) without preconditions. If you have a job, it’s extra money. If you don’t, it will help keep the wolf from the door.
Curiosity about the idea has been growing around the world for some time, and simmering in Wales in particular, where a Citizen’s Basic Income Trust has been around in some form since 1984.
Last May, First Minister Mark Drakeford committed to a pilot scheme. In November, the think tank Autonomy published a paper exploring the idea in detail. In January, Sophie Howe, Future Generations Commissioner for Wales, said: “The introduction of a universal basic income could completely transform society by delivering a more equal, prosperous Wales.
“Piloting a UBI trial here in Wales gives us a chance to increase the prosperity of every single person, giving more people a life jacket when they need to keep their head above the water - which has the potential to create a healthier, more equal population.”
In recent years, more and more Northern Ireland politicians have spoken favourably about universal income. They will be watching the moves in Wales with interest, given how transformative UBI might be (if it works), and how bold and interesting this plan is from a devolved government.
However, while the plan to give cash to care-experienced young people is being called a UBI pilot, there are some ways in which it can’t quite fulfil that role.
The scheme was announced in the Welsh Senedd last week by Social Justice Minister Jane Hutt MS.
In response to the announcement, Conservative MS Joel James said: “I accept that this comes from a position of genuinely wanting to help. I further believe that every Member here would recognise that care leavers are a particularly vulnerable group that need additional support…
“However, Minister, my concern with this UBI trial is that this Government is changing the narrative of universal basic income by conflating it with providing specific help for care leavers in the hope that, after two years, you will have data that justifies the roll-out of a UBI. This approach is inherently flawed, because you will not actually be able to extrapolate any data from such a specific and, might I add, vulnerable group to apply it to a full cross-section of society.
“Moreover, by using care leavers as your measurement group, I believe that you are diminishing the opportunity for rigorous scrutiny of UBI, because any adverse comments will be met with a counter-argument that the person making them is against care leavers, which is not only very unlikely to be true, but it will, overall, prevent many people from engaging with the scrutiny process out of a fear of a backlash.”
Mr James makes some pretty good points, and some bad ones.
Specifically, his assertion that this scheme struggles to assess whether UBI would work in general is tough to dispute, for one very newsworthy reason.
This is a basic income trial. However – and this problem is more or less inherent to all trials of UBI – it’s not a universal income if only a few hundred people are getting the payments.
This means the trial cannot address one significant potential issue with UBI: its effect on the economy.
Inflation is running rampant. The cost of living is rising. People are struggling. Giving people and families more cash to help with this is a worthy idea. However, one longstanding concern with UBI is the potential for it to drive inflation.
With only a small group receiving payments, inflation will not be an issue for this scheme – but that means the pilot won’t address a matter that will be raised by UBI doubters.
Mr James also made some other points, which are fairly typical when it comes to UBI scepticism. For that reason, they should be examined.
“On the grounds of helping care leavers, we believe that giving them every opportunity to make the best of their lives is right, and we recognise the trauma and very difficult circumstances some of them have faced.
“However, we also have to be mindful that within this group there are some extremely vulnerable people with complex needs, and giving them £1,600 a month in theory may help them in the short term, in reality it could make the situation worse for them in the long term.
“Firstly, this vulnerable group of teenagers, some of whom come from challenging backgrounds, could become, without the right help and support, targets for people looking to coerce, abuse and exploit them because of the extra money. How will you prevent this?
“Secondly, as you have mentioned previously, we know that there are people within this group, although they are a very small proportion, that have drug dependency issues, and having such a large amount of money given to them, again without the right help and support, could worsen existing issues. And thirdly, the Welsh Government is ultimately creating a cliff edge for care leavers who will simply have their money stopped after two years.”
These arguments may not be strong. However, as they are common amongst people unconvinced by the idea of a citizen’s income, UBI proponents will have to deal with them.
Maybe a vulnerable person who received financial help with not use that aid wisely. Maybe they will use it very badly indeed. But the experience of one person, or a select few, is not representative of the effects of the scheme itself.
Maybe they’ll all waste the money? That doesn’t seem likely. The fact is, giving struggling people financial support is something that works. Lives improve. Prospects grow. People are happier and healthier.
In general, the vulnerable young people helped by this scheme are going to see that happen to themselves. They will – overall – be looking at brighter futures.
Some may make bad choices – and, as Mr James also says, some could even become victims of exploitation. None of that is good. However, they are negative second-order effects that are not going to outweigh the positives from the first-order effect of this scheme: young people leaving care will receive help to become financially stable.
There are plenty of reasons to think this scheme will do great work. It could change the course of several lives.
The same principle holds for UBI in general. Whether a citizen’s income works overall will come down to its wider effects.
How much of the current cost-of-living spike is down government payments to individuals over the past few years, like furlough or SEISS or more targeted supports?
How much is down to other factors? Is this the acceleration of a years- or decades-long trend of squeezing the majority in favour of a rich minority? How much is the pandemic, and war? How much is just corporate greed and opportunism?
These are serious questions that need to be answered. Anyone who is enthusiastic about a basic income needs to be hyperaware of the potential for inflation to be a problem, in both perception and reality.
What happens if a UBI trial goes ahead and inflation goes up? Plenty of people will draw a link between the two. The perception will have to be addressed.
What about the reality? What if UBI represents a significant inflationary force?
If it does, any UBI scheme will need to account for this and to make sure its benefits outweigh any negatives.
If it doesn’t, UBI proponents will need to be able to demonstrate that in a compelling way (i.e. deal with the perception) or the accusations will continue – and could derail the whole idea.
The UK economy has been on a miserable trajectory for some time. The cost of living has become major news but inflation has been more robust than general income growth for a long, long time. That is emphatically true now but, even if inflation falls to something more normal and less scary, the previous status quo involved most people and families getting poorer over time. That is just the same problem but slower.
This needs to be addressed. UBI is one potential tool in the box. If it can be made to work, it could be transformative.
UBI would be a massive, expensive undertaking that fundamentally overhauls the financial relationship between citizens and the state, and between rich and poor.
Its champions need to be careful. They need to anticipate pitfalls and address them ahead of time – because they won’t get too many chances to prove the concept works.
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