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Employment

What is a universal basic income and why is Wales giving it to care leavers?

The idea of free money for everyone may sound attractive but does a universal basic income live up to the billing? Here’s everything you need to know

A universal basic income (UBI) is an idea that has attracted plenty of attention in recent years – not least as the impact of the Covid-19 pandemic has shone a light on poverty and inequality.

The Welsh government has launched a new UBI trial, targeted specifically at the 500 young people or so leaving care in Wales each year. With around one in five homeless people in Wales having been in care, the government has turned to UBI to see if it could offer them the “safety blanket” they need. 

For many a universal basic income is a way to tackle both issues, for others it is an expensive waste of money. 

Here’s how a universal basic income could work, what the critics say, how its supporters hope it will change UK society where the gap between the rich and the poor is one of the worst in Europe.

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What is a universal basic income?

A universal basic income is a regular payment that is given to everyone in society to create a minimum income floor. That means that everyone earns the same amount of money through the payment and, therefore, cannot earn less than that in income.

The money is unconditional with no strings attached to dictate how it should be spent and no guidance on how to act to earn it.

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The idea is meant to alleviate poverty and reduce inequality and the stigma associated with benefits as everyone is receiving the same.

However, there are many forms of basic income and not all are universal – some are more targeted at certain sections of society. For example, Wales is taking an approach that focuses on people leaving care, called a  “Care Leavers plus approach”. Rough sleepers have been included in past trials in London and Canada.

How much support is there for a universal basic income?

A recent poll from YouGov found high levels of support for Universal Basic Income in London –  half of Londoners said they would support a policy. The poll, commissioned by Green Party members on the London Assembly, found the highest support from younger people aged 25 to 49. Of the 1,166 people surveyed, just 22 per cent opposed the model.

However proposals for a trial in the capital were rejected by the Labour-led Assembly, which raised concerns over the ability of local government to fund an effective trial. 

“We have to be realistic- City Hall’s devolved powers and funding are too limited to roll out an effective pilot on a regional level. If it is to be done properly, this is something that has to be enacted by national Government,” Labour’s London Assembly economy spokesperson, Marina Ahmad, told the Big Issue.

Similar levels of support for a universal basic income can be seen in the UK as a whole. A 2020 poll, also from YouGov, found that 51 per cent of the public were in support of a policy, “where the government makes sure everyone has an income, without a means test or requirement to work”. Just 24 per cent were unsupportive of the idea, with 9 per cent saying they were unsure. 

The poll also found that conservative voters were the least enthusiastic about a basic income – 39 per cent were in favour compared to 37 per cent opposed.

The mass unemployment triggered by the pandemic in 2020 led many MPs to express their support for pilot schemes to test the idea. In a letter to Chancellor Rishi Sunak, a cross-party group of more than 500 MPs, Lords and local councillors called on the government to allow councils to run universal basic income trials.

“We must trial innovative approaches which create an income floor for everyone, allowing our families and communities to thrive. The pandemic has shown that we urgently need to strengthen our social security system. The creation of a universal basic income (UBI) – a regular and unconditional cash payment to every individual in the UK – could be the solution,” the letter stated.

How much is universal basic income?

There is no set amount to a universal basic income trial and it is set based on the needs of the people it is designed to support and the budget available.

For example, a universal basic income experiment in Finland in 2017 and 2018 gave 2,000 people €560 (£490) every month for two years, targeting people who received unemployment benefits.

But in London Assembly deliberations over a universal basic income trial in the English capital in early 2020, UBI Lab London’s Daniel Mermelstein told the economic committee that modelling showed child poverty could be reduced by 40 per cent if everyone received between £60 and £75 per week (between £240 and £300 a month) regardless of income.

Writing for The Big Issue, UBI Lab Network’s Sam Gregory said: “Most proposals in the UK range between £50 and £150 a week for adults, and £30 to £80 a week for children. The highest earners would receive a universal basic income, but would also pay more in tax to fund a basic income for everybody.”

The figure changes depending on the model, its size, the people it is required to support and how much money is available to invest in the universal basic income.

Who will get universal basic income?

The clue is in the name. As a core idea, a universal basic income is universal and will be given to everyone in society, regardless of income, whether they are employed or otherwise or where they live.

However, there are different types of basic income models with some choosing to target different members of society rather than everyone.

Has universal basic income worked in the past?

While universal basic income is touted as a way of tackling poverty it is yet to be trialled at a large enough scale to prove its potential as a society wide solution.

The Finnish trial of 2,000 people is one of the largest trials so far. Paid to people who were receiving unemployment benefit, many participants went on to find jobs even while on the trial and reported a greater sense of wellbeing. People who received basic income reported less mental strain, depression, sadness and loneliness as well as more positive perception of their ability to learn and concentrate.

Another trial in Canada claimed to show incredible results when giving a basic income to rough sleepers. A charity called Foundations for Social Change (FFSC) worked with four homeless shelters in Vancouver to give 50 homeless people a one-off cash transfer of $7,500 – working out at £4,336 – as well as setting them up with a free bank account and a mobile phone.

The trial found the 50 cash transfers freed up shelter spots and saved the Vancouver shelter system $8,100 (£4,739) per person over the course of a year after the experiment began in spring 2018 for a total saving of $405,000 (£236,950). A second trial helping 200 people is now on the way.

FFSC founder Claire Williams said of the project: “In some cases people haven’t started in the same position as us, it is that financial barrier that they can’t seem to transcend. So why don’t we give them that catalyst to move their lives forward?”

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How does the Welsh trial of universal basic income work?

Care leavers in Wales will, on July 1, receive their first universal basic income payment of £1,600 a month as part of the Welsh government’s new pilot.  

The no-strings-attached money into the bank accounts of about 500 18-year-olds who have been in the care system a “safety blanket” as they enter adulthood. 

Launching the pilot, Jane Hutt, Welsh minister for social justice, said the Welsh government had chosen care leavers to be the subjects of the trial “because of the unique set of challenges they face”. 

“By supporting this group with the security of a regular, guaranteed and unconditional monthly income as they leave care, we hope we will allow them to consider their lives beyond day-to-day concerns and look to their future,” she continued. 

The monthly £1,600 payments, paid for two years, and totalling an annual “salary” of £19,000,  is the “most generous” UBI allowance in the world. Hutt did not address how the payments would maintain their value in the face of the rising cost of living and inflation, which hit 9 per cent in May, when asked by The Big Issue. 

Wales first minister Mark Drakeford announced a universal basic income would be trialled following his first speech after being re-elected on May 6 2021. Drakeford name-checked UBI in his speech in which he vowed the Welsh government would “take on board new and progressive ideas – from wherever they come”.

The Welsh leader confirmed that a trial was in development in the days that followed.

The trial will focus on care leavers after Drakeford told August’s Basic Income Earth Network Congress that“there are limits to the powers we have” under devolution. Drakeford said a basic income will allow care leavers to make decisions on their future without worrying about food or a place to stay.

Drakeford said: “That [income] will undoubtedly have the impact of raising the incomes available to those young people and in the way that our Wellbeing of Future Generations Act tells us we must on the journey to a more equal Wales.”

Wales’ Future Generations commissioner Sophie Howe has backed a universal basic income trial in Wales, claiming it will improve wellbeing in the long-term.

Howe said: “UBI could protect not just those hit hard by Covid but every one of us from other shocks to come – like the climate emergency that’s going to cause more devastation via extreme weather like heat waves and floods.”

Scotland is trialling a minimum income guarantee, what’s that?

Scottish ministers have also laid out their plans to create a form of universal basic income which they are calling a minimum income guarantee.

The difference between the two ideas is that the Scottish concept will be targeted at those on lower incomes, rather than being universal.

The ruling Scottish National Party committed to the plan in their manifesto ahead of the May 2021 elections. Ministers started developing the idea in August as social justice secretary Shona Robison led the first steering group meeting to discuss the details of the guarantee.

“We are committed to progressing the delivery of a minimum income guarantee, which could be revolutionary in our fight against poverty. It is a clear demonstration of our ambition and aspiration for Scotland,” said Robison.

“The policy is innovative, bold and radical. It reflects our clear desire to do everything with our limited powers to deliver the change needed, using every lever at our disposal. Eradicating child poverty and building a fairer, more equal country must be a national mission, not just for the government, but our parliament and broader society.”

While there is plenty of support from councils across England, Westminster has not been as supportive.

A DWP spokesperson told The Big Issue in August 2021: “Universal credit has delivered during the pandemic, providing vital support to millions. Unlike a universal basic income, our approach to welfare recognises the value of supporting people into well-paid work while protecting the most vulnerable in society.”

There are also grassroots attempts to launch basic income pilots in the UK.

A first-of-its-kind basic income pilot is coming to London with campaigners Basic Income Conversation launching a £10,000 crowdfunding campaign to offer cash to families unconditionally.

The small-scale project will see at least 150 people given £50 payments to test the idea. The experiment comes as household finances are set to be squeezed in the months ahead with rising bills and taxes and falling universal credit payments expected to hit Brits hard this winter.

What does the UK government in Westminster think about a universal basic income?

Most recently, SNP MP Angela Crawley brought a debate to the House of Commons on the potential for a universal basic income to tackle the cost of living crisis.

“…a universal basic income would mean that every citizen was provided with a subsistence income. It would mean secure, regular payments into every individual’s bank account, without threat of disruption. In real terms, it would ensure that every person in this country was always able to afford food, keep a roof over their head, provide for their children and have a minimum standard of living,” she told the Commons. 

She then urged chancellor Rishi Sunak to abandon universal credit –  “the cruel and unforgiving system that depicts desperate people as undeserving” and “to seriously consider a universal basic income pilot scheme.”

The Westminster government has described the model as expensive and that has been echoed by MPs in the Work and Pensions Committee who also said a universal basic income would “not target support at people who need it the most”.

Campaigners have disputed this claim, insisting that re-working the tax system could mean the money handed out in a basic income could be returned through tax on high-income earners who do not need the cash.

When announcing the Welsh trial, Hutt, Welsh minister for social justice, criticised Westminster for not collaborating with them on the trial. 

“The UK government has not cooperated with us as we would wish. We don’t want this basic payment to be taxed for example, and yet they’re taxing it,” she told The Big Issue. 

Nevertheless, she hopes Westminster will pay attention to the scheme, learn and benefit from it. 

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Do experts think universal basic income a good idea?

The idea is still untested at large scale to show how it could impact on society but it has both supporters and detractors.

The leading argument in favour of a universal basic income is that it will go some way towards tackling poverty and close the gap between the rich and poor.

The conversation around both issues has intensified during the Covid-19 pandemic which has affected the world of work and seen millions of people turn to furlough and universal credit to make ends meet.

However, experts have been arguing that a model of universal basic income could make a difference long before the pandemic.

“I think it was crunch time a long time ago with this,” Cleo Goodman, co-chair of the Basic Income Earth Network Congress 2021 Local Organising Committee – the world’s biggest universal basic income conference. “I think a basic income makes practical sense, not just ethical sense, I think it would have been a better move than 10 years of austerity, certainly.

“But it would also have been a better move than piecemeal solutions to income support during the pandemic, which left people behind. The whole point of it is that it’s universal, that it’s comprehensive, that it is genuinely a floor that people can’t fall beneath. So it was always too late when we weren’t able to build that.”

Goodman’s 2019 report, co-edited with Mike Danson, professor emeritus Heriot-Watt University into how a basic income could interact with existing housing problems in Scotland found a basic income could help to prevent homelessness through eviction. The report also concluded that people who live together are often “financially worse off” while means-tested benefits and a universal basic income could help to prevent that.

However, a number of concerns were also highlighted in the report, including that a universal basic income would not address the geographic discrepancies in housing costs or the relative high rate of inflation surrounding housing costs and implementation may lead to people being worse off financially.

How can you join the conversation about a universal basic income?

There is a growing grassroots movement behind a universal basic income.

The Universal Basic Income Lab Network is a campaign group made up of local decentralised groups across the world – as the pandemic broke out in March last year they had seven labs. Now they have 38 across the globe including 32 in the UK. To join or start a UBI Lab where you are, visit ubilabnetwork.org.

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