Basic Income in the UK? Evaluating the evidence from other nations

Basic income is a guaranteed minimum income from the government. It is a method of compensating citizens for financial instabilities, and some believe that it could transform how the benefits system works in the UK. However, before such a system could be introduced the government would need to test, analyse and evaluate the potential benefits, and pitfalls, that may arise. Recently an Early Day Motion was tabled in parliament calling on the government to commission further research into the possibilities offered by Basic Income models. Finland, the Netherlands and Canada have already taken steps to investigate the impact of Basic Income. Here, researchers from these three nations, give their global perspective on this topic.

Historically, governments have used the welfare state to establish programmes that provide ‘regulation, redistribution and social protection’ for their citizens. But in a time of austerity cuts, a generation delineated by uncertainty and new globally competitive labour markets, it could be argued that traditional approaches to welfare systems may no longer be viable.

Basic Income could be an alternative option that proponents believe provides individual financial stability, and leads to positive improvements across many other policy areas, including the labour market, housing, health and education.

Research on Basic Income currently being undertaken in the Netherlands, Finland and Canada presents an opportunity for the UK government to learn from the experience of others, and to help determine whether a trial of Basic Income policy in the UK is feasible.

Rutger Bregman

Changes in the Netherlands

In the Netherlands, journalist Rutger Bregman is a well-known advocate for Basic Income. His columns and books on the topic are widely read, and his TED Talk has more than 150,000 views on YouTube. Dutch supporters of Basic Income believe it to be cheaper, more effective and more humane than the current welfare system – which they claim has high administrative costs, contains a poverty trap, and forces people into acts of reciprocation in order to ‘earn’ their welfare.

Even though the idea of Basic Income lacks national support, on a local level, support has been growing – with Utrecht and Groningen expressing interest. Utrecht have set out plans to conduct an experiment that targets Basic Income to citizens currently receiving welfare. Participants are split into groups, with each group receiving a different form of welfare at varying rates (for example, one group will receive full Basic Income, whilst another group will only receive a part of their welfare as Basic Income). The experiment will run for two years, after which Utrecht University will analyse and evaluate the different schemes.

This experiment comes at a pivotal moment in Dutch politics. The current government has not overhauled the current complicated tax system, which currently consists of three tax brackets and numerous tax exemption policies. Now a key task of the next government, innovative tax schemes (such as Basic Income) are likely to form an important part of the parties’ electoral programmes.

Finnish welfare benefits

The Finnish Government’s pilot of Basic Income gained international attention when announced in 2015 (albeit via some rather misleading reports about the project). The pilot is scheduled to begin in 2017 and the preparation work is being led by KELA. According to KELA, the purpose is to: ‘…find ways to reshape the social security system in response to changes in the labour market…explore how to make the system more empowering and more effective in terms of providing incentives for work…’. Further objectives include the reduction of bureaucracy and the streamlining of the complicated benefits system.

Essentially, the pilot will evaluate the effects and costs of Basic Income in different population groups. The preliminary report released on 30 March 2016 set the framework for two pilots, one which will be a local experiment and the other a random sample of the population, with the primary objective of decreasing unemployment.

Supporters of Basic Income in Nordic states believe that it would make welfare more rational but not more generous, and the preliminary report favours models of approximately €500 a month. A more rational welfare state is appealing to Finland, currently struggling to meet the demands of the current welfare system.

Justin Trudeau - Prime Minister of Canada

Justin Trudeau – Prime Minister of Canada

New intentions for Canada

The newly elected Trudeau government in Canada proclaimed its intentions to ‘explore’ a pilot Basic Income study, in which a parliamentary committee subsequently reported evidence in support of moving forward with a study on the ‘concept of guaranteeing people a minimum income’. However, the 2016 Federal Budget released on 22 March 2016 omitted any language to indicate funding would be allocated. Rather, interested provinces, such as Ontario, will dedicate funds from their own budgets. Forgoing national oversight of programme design could lead to a number of issues. For example, provinces with lower budgets may be less likely to commit funding and discrepancies between provincial pilots may make comparisons difficult.

Basic Income is not a new concept for Canada. The MINCOME experiments piloted in the 1970’s looked at ‘guaranteed annual income’ programmes, also known as the ‘negative income tax’. The study was terminated before data on economic and social wellbeing could be evaluated, but the collected data was released decades later leading to a whirlwind of assessment of the societal factors of the MINCOME community. Key findings included that Basic Income improved health gains and reduced emergency visits, increased secondary school graduates and had a better positive community response.

If the UK, or any country, were to consider a similar pilot two aspects should be noted. First, a budget which considers all implementation costs of the study, including the reporting, should be entrusted upfront; and second, policy makers at both the national and local levels of government must be consulted to ensure that differences in demographics, income distribution and cultural dimensions across the country are accounted for.

What could this mean for the UK?

It is not clear from the examples in other countries whether the up-front costs to implement Basic Income could ever be cost-neutral (for example, through the reallocation of funds or reforms to tax structures), but continued research into long term cost effectiveness is beginning to show evidence of indirect economic and social gains.

By studying the role and implementation of Basic Income in other countries (such as Finland and the Netherlands), there is much that the UK could learn. For example, systems such as the UK’s personal allowance taxation structure could be appropriately redistributed to integrate a modified version of the ‘negative income tax.’ The recent report for Helsinki suggests building from existing policies to manage demographic and cultural differences, such as adding the ‘London living wage’ in response to disproportionate living costs in London compared to the rest of the UK. Open participation in a Basic Income study could be controlled by setting applicant eligibility similarly to the Netherlands. In any case, the UK should follow the ongoing pilots to identify key learnings in labour market, housing, health and education policy development, whether it leads to piloting Basic Income or not.

Roy Blokvoort from bij Expload, Erin Montague from the Policy Institute at King’s and Suvi Taponen from Aalto University School of Business.

Creative Commons License
This blog by Policy Institute at King’s is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Leave a Reply

Your email address will not be published. Required fields are marked *