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Employment

Is a universal basic income ‘too expensive’ for the UK?

Giving cash to everyone unconditionally would be ‘extremely expensive’ and not help the people who need it most, says the Work and Pensions Committee. But campaigners disagree

A group of senior MPs have backed the UK government’s decision to not introduce a universal basic income to alleviate poverty, despite calls for trials by campaigners and an upcoming pilot in Wales.

The Work and Pensions Committee said a universal basic income (UBI) would be “extremely expensive” and urged the UK government to focus on ensuring universal credit meets basic needs in a report into the future of work.

The MPs said “it was vital for people who find themselves out of work to have access to a robust safety net” but warned the government against pursuing a UBI that would “not target support at people who need it the most”. Up to 14.5 million people were in poverty in the UK before the pandemic, according to government figures, when taking housing costs into account.

The Westminster government’s approach differs to Wales where a UBI pilot scheme is in development. Question marks remain over how families will make ends meet as the £20 universal credit increase introduced during the pandemic is set to end in September.

The economic shock of the pandemic should act as a warning sign as to how quickly the world of work can changeStephen Timms, Work and Pensions Committee chair

Stephen Timms, Work and Pensions Committee chair

UBI campaigners insisted the unconditional support of a UBI would prevent families falling into poverty and was well within the country’s budgets.

“The Work and Pensions Committee is wrong to say that a universal basic income wouldn’t target support to those who need it most,” Tchiyiwe Chihana of the UBI Lab Network told The Big Issue. “A universal basic income would create a safety floor, protecting every single person in this country from falling into absolute poverty.”

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Chihana also insisted the cost of implementing a UBI was achievable, pointing to recent modelling from the US. Georgetown University academics found a UBI scheme would eradicate absolute poverty in the UK at the cost of £67 billion per year, or about 3.4 per cent of GDP, paid for by reducing corporate subsidies and tax breaks.

The UK has spent £64bn on the furlough scheme as of June 2021 to support 11.5m jobs, on top of increasing universal credit and other welfare and support payments.

“The pandemic has completely changed the conversation around universal basic income,” said Chihana. “The furlough scheme has revealed that the government can spend large amounts of money to protect citizens from insecurity and poverty. The reality is that this is a policy that a country like the UK can afford to put in place. Not doing so is a political choice – not an economic one.”

A Department for Work and Pensions spokesperson told The Big Issue universal credit has “delivered during the pandemic” and said the government “recognises the value of supporting people into well-paid work while protecting the most vulnerable in society”.

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The report comes a day after DWP minister Will Quince confirmed in the House of Commons that the £20 increase to universal credit payments will end in September. Around six million people currently claim universal credit in the UK. An estimated five million turned to the benefit at some point between March 2020 and April 2021.

Work and Pensions Committee chair Stephen Timms quizzed Quince on whether the impact on child poverty would be assessed before removing the increase, warning that it could pull 400,000 people, many of them children, below the poverty line. In response, Quince said: “It is our expectation that this additional financial support and other direct covid support will end once our economy has opened.”

Chancellor Rishi Sunak announced a six-month extension to the £20 universal credit increase at the Spring Budget following calls from anti-poverty charities to extend what many called a “lifeline”. 

While Covid-19 restrictions have decreased in the summer months, the economic recovery and the impact on the jobs market is set to continue beyond them.

That is one of the reasons why Welsh First Minister Mark Drakeford announced a UBI would be piloted in Wales, whereas the idea has also been partly trialled internationally, including in Spain and the USA’s own Covid recoveries. A trial in London was also greenlit ahead of May’s London Mayor election.

In the report released on Tuesday, Timms’ committee also warned technological changes in the world of work, including home working and increased automation, must not exacerbate existing inequalities.

Younger people, disabled people, women, and people from some ethnic minorities are particularly at risk of missing out on jobs, the committee found.

Timms said: “The economic shock of the pandemic should act as a warning sign as to how quickly the world of work can change. Time is not on the Government’s side. The DWP needs to act now to make sure every worker has the skills and job protections they need to thrive.”

Women’s Budget Group Director Mary-Ann Stephenson echoed the committee’s call for a long-term strategy to tackle the risk.

“The Women’s Budget Group recognises that changes in the world of work present the government with an opportunity to boost the economy, by pursuing a high-road approach to the labour market – reskilling and retraining people for new, high quality jobs,” she said.

The MPs insisted a greater focus should be placed on retraining and reskilling and the government’s two major employment support schemes, Kickstart and Restart must do more to meet the needs of disabled people.

A DWP spokesperson said: “Our multi-billion-pound Plan for Jobs is helping people right across the country to retrain, get into work, and develop the skills they need now and for the future.

 “We will continue to work across government as we address the challenges, and seize the opportunities, presented by the changing world of work.”

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