Friday, 15 August 2014

Universal Basic Income vs the current welfare system

In this article I'm going to set out the case that a Universal Basic Income based welfare system would be a massive improvement on the current punitive welfare bureaucracy in the UK.

What is Universal Basic Income?

I've already written a fairly comprehensive article explaining Universal Basic Income, so for the sake of brevity I'm not going to go into masses of detail about it again here, other than to say that it is a form of unconditional welfare payment to which all citizens are entitled.

Ideally the UBI payment should be set at a rate which covers the basic costs of living (housing, water, energy, food) meaning that nobody would be forced to live in abject poverty in 21st Century Britain. Those wanting anything more than a frugal and very basic standard of living (stuff like foreign holidays, expensive furniture, new cars, fashionable clothes ...) would have a strong incentive to work in order to pay for their luxuries.

One of the main benefits of a universal, unconditional welfare payment would be the removal of virtually all of the costly means testing bureaucracy from the welfare system. Another benefit would be the near complete elimination of welfare fraud, which would free up teams of fraud investigators to go after much bigger fish such as tax-dodgers and organised crime networks.

What is wrong with the current welfare system?

There are so many flaws in the current welfare system that it would be literally impossible to list them all in a blog post. It was in bad enough shape when New Labour left office in 2010 but after four long years of Iain Duncan Smith's hopeless mismanagement, it is now a humanitarian disaster of bad planning, poor implementation and dehumanising bureaucracy. For the sake of brevity I'll limit myself to detailing just four of the worst aspects of the current welfare system, and how the introduction of UBI would represent a significant improvement.

1. The disincentive to work

One of the biggest problems with the current welfare system is the way in which it creates strong disincentives to work through the removal of benefits. In many cases benefits are removed at such a rate that people find themselves even worse off if they decide to work. 

Many hundreds of thousands of people have found themselves receiving desultory increases in income (often less than £1 per hour worked) because of the way that benefits are removed almost as fast as additional income is earned, or have even found themselves economically worse off for having found a job

At best, the additional income through finding work is desultory, at worst finding a job actually costs people a share of the pittance they were surviving on. Few would argue that these factors are not strong disincentives to work.

Iain Duncan Smith's catastrophically botched Universal Credit scheme was supposedly designed to eliminate these appalling disincentive to work, but research by the Joseph Rowntree Foundation found that it actually does no such thing. Should Universal Credit even survive Iain Duncan Smith's incompetent management, many people would still be financially worse off should they decide to increase the number of hours they work under the Universal Credit system.

Even though Iain Duncan Smith and the DWP relentlessly talk up their Universal Credit scheme as the biggest welfare reform in decades, it's absolutely clear that it is actually nothing more than hugely expensive tinkering with an already dysfunctional system.

The introduction of a system based on Universal Basic Income would neatly resolve the disincentive to work problem because if the public are always entitled to their basic unconditional income, paid work would always result in a notable increase in individual income, since the individual would be earning their salary, on top of their unconditional basic income payment.

2. Sanctions

The problem that the disincentive to work problem presents to the establishment order is that it is extremely difficult to tackle long-term unemployment when work doesn't pay, or results in nothing more than a desultory increase in overall income.

The fact that people can't be positively encouraged into work with the "carrot" of increased income means that the only motivational tool left for the state to use is the "stick" of rendering people absolutely destitute through arbitrarily applied sanctions if they won't comply with DWP demands.

Nearly a million people were left destitute by DWP benefits sanctions in 2013
. The widespread use of benefits sanctions is a humanitarian catastrophe, and I'm not exaggerating with hyperbolic language either. Very many people have died during their benefits sanction period (most often the mentally disabled and severely ill). In many cases people were still fighting appeals against arbitrary DWP sanctions until the day they died from their illnesses, in many other cases people committed suicide or even starved to death.

Iain Duncan Smith and the DWP have repeatedly lied that there are no such things as sanctions targets and sanctions league tables, however sanctions targets and the official DWP sanctions league tables were both leaked to the press in 2013

Sanctions targets and league tables are particularly vile things because it is blatantly much easier for DWP staff under enormous pressure to meet their monthly sanctions quotas by tricking the mentally disabled and uneducated into violating DWP rules, than it is to expend a great deal of effort in catching out the minority of committed benefits "scroungers", who often understand the DWP rules better than the staff themselves.

Under Universal Basic Income this kind of deliberate impoverishment by the state simply couldn't happen because everyone would be entitled to an unconditional subsistance income. This would mean that the pressure on DWP staff to trick vulnerable people into making mistakes in order to fulfill their sanctions quotas would be completely eliminated.

The power of the state to use absolute destitution as a social weapon against the public would be completely removed by virtue of the fact that the public would have an unconditional right to their subsistence income.

3. Means Testing

There are two main problems with the idea that all welfare payments must be means tested.

The first is the costly burden of bureaucracy that this approach loads onto the system. The current welfare system employs tens of thousands of people to means test welfare payments, welfare recipients are made to waste countless hours filling out forms with the same personal information and collecting supporting evidence over and again, and the whole system costs countless £billions to administer.

The second problem with means tested benefits is the way in which they are perceived by the public. When a benefit is universal, very few people strongly oppose it because everyone is entitled to it. Take the provision of universal healthcare through the NHS as an example. The NHS has very strong public support, with just 7% of the public favouring NHS privatisation
(not that this remarkable level of public support has stopped the Tories from carving up the NHS and giving it away to their donors).
If the state decided to bring in new rules to means test health provision (lets say anyone earning over £20,000 per year would have to pay compulsory medical insurance and/or pay for their medical services) there would almost certainly be a large decline in the level of public support for the NHS. It's much easier to convince people that welfare provision is a very good thing if they are entitled to a share of it. If they get the idea that they are paying for it, but that they are barred from receiving any of the benefit, it's easy to understand how strong feelings of resentment would arise.

The introduction of Universal Basic Income would resolve both of these problems.

The bureaucratic costs of administering the system would be massively reduced if the vast majority of people received a standard UBI payment. Of course administrative costs cannot be completely eliminated from any system, however, the lower the cost of administration, the higher the share of the budget that actually ends up where it should be - with welfare recipients. UBI would ensure that a much higher proportion of the welfare budget actually gets paid out to the public, rather than being wasted on the administrative costs of endless means testing.

The introduction of UBI would also assuage public resentment at the cost of the welfare system. The fact that everyone would be entitled to UBI would mean that nobody would be left thinking "why should I have to pay for this when I get no direct benefit from it".

4. Corporate parasitism

In recent years there has been an ever accelerating drive to bring in private outsourcing companies (A4e, Atos, Serco, Capita, G4S, Pertemps, Seetec ...) to carry out the administrative functions of the welfare system. This process was not started by the Tories (New Labour were the ones who introduced the discriminatory Atos WCA assessment regime for the disabled for example), however, under Iain Duncan Smith's "leadership" the DWP has brought in ever more private outsourcing companies into the welfare system on vast £multi-million contracts. Some of the most shocking examples include, the expansion of the notoriously inaccurate Atos WCA regime, the hopelessly underperforming Work Programme and their "Help to Work" forced labour scheme.

Many of these parasitical outsourcing companies make near enough 100% of their revenues from government contracts, and the contracts are so badly written and one-sided that it really doesn't matter how badly these outsourcing company perform, they suffer no financial penalties, they still get paid and they still get awarded even more government contracts despite their appalling track records of failure.

The problem is so serious that even companies like G4S that have carried out vast frauds against the taxpayer still end up being handed more £multi-million contracts, even though they were supposedly barred from bidding for government contracts during the tendering process

Another example of a corporate outsourcing parasite that has been caught out defrauding the taxpayer is A4e. This is a company which made 100% of its revenues from government contracts at the time its director Emma Harrison decided to award herself an £8.6 million dividend. Given that all of the companies revenues are generated through the taxpayer funded "welfare to work" system, it's easy to see how this vast dividend represents nothing more than skimming off a percentage of the welfare budget to fund the lifestyle of a very wealthy individual.

The introduction of a system based on Universal Basic Income would eliminate the possibility of corporate outsourcing parasites skimming the welfare budget and diverting money that should be helping the most vulnerable people in society into their corporate accounts.

With the massively reduced bureaucracy, and the end of sanctions backed forced labour schemes that UBI would bring about, the scope for corporate parasitism of the welfare system would be severely reduced.

Of course there would still be a role for private companies looking to profit from helping people into work, but they'd have to help people train for and find the kind of work they want, rather than just hoovering up government subsidies in return for forcing them onto unpaid forced labour schemes under the threat of absolute destitution via benefits sanctions.


The current system was bad enough before the Tories even came to power, but after four long years of Iain Duncan Smith's maniacal blundering it's in the most appalling shape it's ever been in (and many would argue deliberately so). Iain Duncan Smith's tenure at the DWP has been little but a dreadfully prolonged systemic failure.                   
I'm not trying to say that Universal Basic Income is some kind of wonderful panacea. It wouldn't cure all of the problems in society in one simple step. There are no such things as magic bullets. What I have tried to demonstrate is that the principle of UBI could make the foundations of a much better welfare system than the current shambles.

I believe that a person would have to be delusional to argue the case that the current welfare system is well designed, well managed and efficient, therefore most sensible people would accept that there are grounds for improvement.

In my view you can either support the near identical prescriptions of the Westminster establishment parties (tinkering with the broken system) or you can support a completely new approach, be it based on Universal Basic Income, or some other fundamental reform to the system.

I suppose it comes down to this. If you are naturally a right-wing authoritarian who believes that the state has a right/duty to use the threat of absolute destitution as a social weapon against the public to force them into paid or unpaid work, you're probably quite happy with the way things are done right now.
If however you believe that the state has no right to force people, including tens of thousands of children, into absolute poverty simply because a family member committed "welfare crimes" such as being five minutes late to an appointment
, selling remembrance poppies, attending a job interview or even suffering a heart attack during an interview, then Universal Basic Income represents an elegant solution to the problem. If every citizen has a right to an unconditional subsistence income, then the state would no longer have the ability to use the threat of poverty/hunger/cold/homelessness as a social weapon.
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