A basic income ‘could cut poverty to its lowest point in decades’

Introducing a basic income could cut poverty to its lowest point in 60 years, a new report argues.

The research, by Basic Income Conversation and Compass, found introducing weekly minimum payments of £41 for a child and £63 for an adult could more than halve the number of children in relative poverty to 12.5 per cent, taking it below its historic low point of 14 per cent in 1977.

Experts also said the model would require no additional public finances and could be paid for through tweaks to internal tax rates and National Insurance contributions. They say it would drop pensioner poverty by half and reduce poverty among working-age people by a quarter.

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The claim comes amid the cost of living crisis and rising inequality in the UK. The Sunday Times Rich List revealed on Friday that there are now more billionaires than any other time on record in the UK sparking calls from campaigners for a wealth tax. There has also been increasing pleas from food poverty campaigners at the Independent Food Aid Network (IFAN) to get cash into the hands of low-income households.

Howard Reed, director of the economic research consultancy Landman Economics, and Stewart Lansley, a fellow at the University of Bristol, two of the co-authors of the report, said: “We keep being told that the alleviation of today’s heightened levels of poverty would be too complex and too expensive.

“This report shows that a basic income is within reach, would be affordable and feasible, and would be a clear route to building a better post-Covid society.”

The report analyses how three different basic income payments would work. The first is a starter scheme to provide a lower entry payment, the second an intermediate scheme with an increased income and the third a full payment designed to hit a minimum income standard.

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Under the plans a child would receive £41 a week under the more modest scheme, rising to £63 under an intermediate scheme while a full scheme would pay £95, equivalent to just under £5,000 a year.

For single adults, experts suggest £63 per week for the lower end of the model, rising to £145 or £225 for more generous schemes, maxing out at £11,700.

The measures could see a family of four earn anywhere between £10,816 an £33,280 a year depending on the generosity of the scheme.

Under universal credit, the standard amount someone who is single and aged under 25 receives £265.31 per month (pm), equivalent to £66 per week (pw), or £334.91 pm, equivalent to £83 pw, if they are over 25 years of age.

This rises to £416.45 pm (£104.10 pw) for people living with a partner under the age of 25 and £525.72 pm (£131.43) if they are over 25 years of age. 

A basic income would create an income floor that would significantly improve living standards and life chances for people currently living in poverty or being pushed into difficulties due to rising prices and bills in the cost of living crisis.

Analysis showed the poorest in society would see the most gains from the model compared to the wealthiest.

Experts argue the model deals with two of the main criticisms of a basic income: that payment levels are either too small to make a difference or too generous to be affordable.

They said making a few tweaks to the tax system can cover the investment. Lowering the rate at which people pay income tax to £750, down from £12,570, and increasing existing tax rates by 3p in every pound, would cover the basic income.

National Insurance contributions, which rose in April, should also be tweaked to cover the net cost without stretching public finances.

The academics argue these changes would cover the proposed £274bn gross cost of the most modest scheme as well as providing a framework that would pay the £677bn bill for the most generous.

Neal Lawson, director of Compass, said: “At a time of skyrocketing poverty, this report shows universal basic income can take us back to the lowest level of child poverty in over 50 years at no net cost to the Treasury.

“In showing universal basic income can deliver record low levels of poverty with no extra burden on the nation’s finances, this report makes transformative change a political decision not an economic one.”

A basic income has failed to attract support among the Westminster government but has proven attractive to devolved powers.

The Scottish government is currently developing a minimum income guarantee while the Welsh government is set to trial a basic income this summer. Under the pilot, 500 people leaving the care system will receive a £1,600 monthly basic income for three years.

Meanwhile, IFAN, which represents 550 independent food banks across the UK, has been calling for a “cash-first approach” to helping families experiencing food poverty due to the cost of living crisis.

“An emergency supply of food cannot resolve someone’s financial crisis and will only act as a temporary sticking plaster,” the network said in a letter to Boris Johnson earlier this year.