Thoughts on Jonathan Reynolds article re Basic Income

Recently the Labour MP Jonathan Reynolds wrote an interesting article in the New Statesman of how the concept of Basic Income was becoming increasingly attractive especially given how the uber-slow-motion car crash of Universal Credit that is unfolding. I am pleased that this concept is being discussed more seriously given the changes occurring to how modern economies work. Below I give my two-pennies worth as to how Labour could think about the challenges identified in Reynolds article.

Both the concepts of Basic Income and Universal Credit are seductively simple but in practice don't lend themselves to bringing simplicity to people's lives or in delivering policy intentions.

Uuniversal Credit has been plagued by IT problems as the complexity of people's lives and how the State interacts with them overwhelms any technical solutions. The biggest problem that cannot yet (ever?) be resolved by technology is the level of conditionalities expected for Universal Credit. Ironically its the lack of universality in Universal Credit that stops the system from delivering its declared outcomes.

The pure system of Basic Income has the opposite problem as the lack of conditionality results in perverse policy outcomes. Declan Gaffney's article in The Guardian discussing the problems of implementing a Basic Income programme in an imperfect world. Gaffney rightly points out that conditionality is used within the current system to correct unfairness which a pure Basic Income system wouldn't achieve.

Yet the research of Professor Jane Costello into the effects of a stipend on a community of 8,000 Cherokee Indians from their new casino in North Carolina (this is a good discussion of that research) perhaps offers (dare I say the words) 'a third way' to consider instead of a pure version of Basic Income or Universal Credit.

As ever, it requires being clear on policy intentions. In Reynolds' article, his friend Gordon poses a good question: “How....will we ensure sufficient support for people as they have to retrain throughout their working lives - not just for several different jobs, but for several different careers?”

What I would suggest are three specific policies to work together. The first policy would introduce a 'Income Buffer' available to all working age adults set (for illustration) at £3,000 per annum. The second policy would be an annual 'Lifelong Learning Grant' to all adults again set at £3,000. The third policy is to make Jobseekers Allowance time-limited and contribution based abolishing long-term unemployment.

Income Buffer

Rather than seeing Basic Income as a replacement for multiple benefits, an Income Buffer would be an additional scheme to the existing benefits system which would adjust their awards accordingly.

While I would make the Income Buffer universal for working age adults, I wouldn't make it unconditional. Instead I propose using the Income Tax system to create a taper so that as personal income increases so less buffer is required. I would designate the Income Buffer as part of a person's taxable income. Given that someone working 40 hours a week on the Osborne Living Wage in 2020 would be earning £18,700 gross per annum then any taper needs to be considered as to its starting point.

This would have beneficial effects for those affected by zero-hour contracts as it would create some stability to plan around. It would strengthen the positions of the self-employed. It would also reduce the cliff-edges between being in-work and out-of-work that have become increasingly sharp with current government policy.

Essentially its a mitigation policy for the current transitionary work environment that exists in the UK for a large part of the population. While such a policy doesn't have the ambitions of savings that a pure Basic Income system implies, it would give a working model that with further developments could integrate other benefits into the Income Buffer.

Lifelong Learning Grant

One of the many things that frustrated me about Labour's 2015 election campaign was the £3,000 cut in university tuition fees proposed. While there was a good back-end argument about the affordability of the Student Loan book to Government and the effects of that debt on graduates activity in the economy, Labour spokespeople couldn't articulate this or respond to the fact that for universities, the front-end funding was very successful for their budgets and students were discounting the future to attend university in the present. It was also a very limited cohort to appeal to (part of the 'vote Labour get a toaster' problem).

Instead, what I would propose is an annual Lifelong Learning Grant that everyone over 18 would be given to spend. Each Lifelong Learning Grant would be time-limited so that people would either spend it or lose it as each grant cannot be rolled over to the following year. The grant would have to be spent on accredited courses but these should vary from universities, further education colleges all the way through to evening classes.

So for the student facing £9,000 of tuition fees, they can use their Lifelong Learning Grant to offset some of the costs whilst keeping the financial benefits for universities. However the potential is in developing an educational culture across all sections of society generating economic activity and allowing people to develop new skills or retrain whilst in work or if they have been made redundant.

In particular, I would localise the accreditation process allowing local authorities to encourage and influence what is provided to support their economies. Yet such a policy supports personal choice as ultimately it will be each individual who chooses how to spend their Lifelong Learning Grant.

Abolishing Long-Term Unemployment

This also stems from another frustration with the 2015 election campaign. In particular not having the courage of our convictions so were left having a mealy-mouth set of policies that was designed to appeal to the Daily Mail but was incoherent regarding work and unemployment.

Likewise, we have senior politicians who will reflect the public desire for contribution-based unemployment benefits but don't have the confidence to follow that logic through. Any contribution-based system is time-limited by necessary.

As my local Labour MP says 'the clue is in the name - Labour'. The Labour Party formed by workers who believed in fair pay for fair work and a decent society. Its not difficult yet that seemed lost at the last general election. We're now seen as the party for benefits and for the marginised. We need to return to our roots.

So lets adopt a contribution-based unemployment system but with the quid pro quo that once the time limit expires, there will be employment available at the 'Osborne living wage'/minimum wage. Not work for your benefits as Rachel Reeves suggested last year. If you work, you are paid a wage. Traditional Labour values that actually simplify the relationships between the person and the State.

My instinct on the time-limit is that everyone would be entitled to three months then you have to earn each incremental increase in time by how long you have put in. The system, that tops up the Income Buffer, could be as generous as some of our European neighbours are (depending on contributions!). Also the time-limited nature of this system is the sanction. We'll treat people as adults, provide help and support but when your time is up, its up.

The quid pro quo for a contribution-based system is, I admit, still in the formation stage of my thinking. Yet if we look at the direction of travel of current welfare policies and the last Labour manifesto then it isn't a big leap to make. This is where we need to keep in mind that there is often a difference between socially useful activity and economically valued activity. I also think we need to consider the space that local authorities have withdrawn from.

So that's the compact with the British people that I would draw - the State will support you if you support your community. So valuing work of social value. This would align the State more towards the development of the 'gift economy' that is emerging and being discussed by thinkers such as Paul Mason. Delivering this will need a shift away from centralised procurement in Whitehall.

Thoughts

If Universal Credit has taught us anything, its that 'Big Bang' solutions to policy problems are fraught with simplistic utopian thinking for which the consequences are often worse than the current policy delivery. A pure Basic Income system would also suffer from this effect.

Hence why I would suggest thinking about an Income Buffer concept. It shouldn't be difficult to make arguments for this policy in television studios and on the doorstep. Defending against criticisms such as 'affordability' will require some thought.

An Income Buffer would directly respond to the financialisation of people's lives especially in the South-East while creating more economic stimulus in the poorer communities of the country. It also reflects the increasing fragmentation of the modern economy by lubricating people's working activities. It would create room for people to retrain and reskill in conjunction with the Lifelong Learning Grant. It also creates the opportunity to reform unemployment benefits so that they are contributory as public opinion would like them to be.

For the policy to be accepted then it needs to be set at a level where it isn't possible to live off and shouldn't be seen as being generous to 'scroungers'. Hence why existing benefits should be reduced in accordance with the Income Buffer. Currently £3,000 is approximately the JSA rate for 18-24 year olds so whether you have a lower buffer set for this cohort would need to be considered. Access to other support such as Housing Benefit would have to be linked with the social compact discussed above.

As with any policy change, there will be winners and losers. I'm sure that many problems will be pointed out. Yet as with Jonathon Reynolds' article, I would argue that the role of Government is to achieve policy outcomes as to what sort of society we want to live in, what resilience needs to be built into our communities to adapt to a changing world and how to stay true to Labour values. Its not an easy challenge.

Rose Tint My World a message for Labour leadership candidates

It was great when it all began

I was a regular Tony fan

But it was over when he had the plan

To invade Iraq and Aghanistan...

Ian Dunt has today written an article on stategy, cynicism and idealism which resonates with a twitter discussion I had yesterday with a fellow Labour Party member on using themes such as Tax Justice to make the Party more electable. To quote Ian's salient point:

Labour seems to have split into three factions: The beige, the red and the white. The beige – represented by Andy Burnham and Yvette Cooper - are mechanical, seemingly without political values, poor to middling media performers and change according to the prevailing political weather. Burnham, for instance, was a Blairite under Blair, a Brownite under Brown and a Milibandite under Miliband. Under none of those personalities did he appear to be a winner. The whites, representing the white flag contingent and currently led by Kendall, have only one tactic: surrender. They are Blairites without any of the intellectual underpinnings. The reds, under Corbyn, are singing from the same socialist hymn sheet as ever, with absolutely no changes, either ideologically or tactically, since the 1970s.

Is it so much to ask that we could ignore the beige, but have a little bit of red and white together? It is possible to get a genuine leftist into Downing Street, but it requires giving up on some of the political purity which seems to motivate Corbyn's supporters.

Ian Dunt ends his article by stating that Jeremy Corbyn and Liz Kendall have a lot to learn from each other if they sat down and listened to each other. I agree with this sentiment.

What I found interesting about the theme of Tax Justice was that Jeremy and Liz were approaching the subject from opposite ends but both were developing the theme: e.g. Liz's request of Margaret Hodge to look at the world of corporate welfare and Jeremy adopting the arguments of Richard Murphy that HMRC should calculate tax revenues using GDP (tax gap in excess of £100bn) rather than their own tax returns (tax gap of £35bn).

The ideas of how we collect taxes and where we spend them are two sides of the same coin.

So my proposal to my comrade was a mixture of cynicism and idealism. I proposed that part of the increased revenues from an aggressive HMRC operating on Tax Justice principles be used to reduce income tax on middle earners up to £100k to 35p in the pound.

We know that the wealthy through various accountancy-inspired schemes pay around 35% of income. The middle classes therefore pay a higher proportion of income. So reducing the percentage paid in tax by this cohort has some notional fairness to it.

I also think we shouldn't forget the lesson of the 1992 election when John Smith's tax proposals scared those who were struggling particularly in the over-heated South-East despite having what seemed reasonable salaries. The same conditions exist today so the Party needs to avoid scaring people with headlines about high taxation.. So by having a policy that supports the 'middle-classes' as defined by the Daily Mail would park the tanks on traditional Tory ground.

Given the increasingly blunt tool that is Income Tax for collecting from high earners, being creative in alternative tax devices to capture from the wealthy would be sensible and show some learning from George Osborne. This would mean giving up the symbolic 50p threshold that defines the Party as being anti-hard-working-families types (pass the sick bucket vicar). Less symbolism, more practical policies please.

Tax Justice with ensuring that the majority benefit from it would cause the Tories some difficulties and present problems to right-wing newspapers as well. It is a policy that is both cynical and idealistic.

So my message to the four leadership candidates is to rose-tint our world with smart polices. Don't dream it, be it...