A universal basic income of £48 per week

The concept of the government giving a no-argument, across-the-board income to everyone isn't new. It's been tried before in other countries; and indeed way back in the early 1970s, in this country, under Ted Heath's Conservative government, a Green Paper was issued on the the notion of 'Tax Credits.'

It was to be a kind of 'reverse Income Tax', so that employers would pay their staff extra cash to supplement their taxed wages, if the net-of-tax amount were less than some national standard figure. The employers would get the money needed from the tax taken from their higher-paid employees. Or if the employer might end up out of pocket, then they could apply to the Inland Revenue for instant reimbursement.

In any event, all lower-paid workers got a pay packet of the same size, even though the mix of Tax Credit and taxed wages might vary between individuals. It was certainly a way of having a national minimum wage, if one were in a job.

It came to nothing. Ted Heath's government fell in 1974, and the incoming Labour government didn't take the idea any further.

Fast forward to 2019. A proposal to give £48 a week to every adult, with a little less to children. Paid for by withdrawing a slew of personal tax reliefs.

I wondered where that figure of £48 came from. But not for long.

£48 per week x 52 weeks = £2,496. That's the amount of cash each adult would get as their Universal Basic Income, regardless of their other income.

How paid for? By taking away £2,496-worth of tax relief from each adult who pays tax. At the moment every basic rate taxpayer gets a tax-free personal allowance of £12,500, which covers the first slice of their income before they start to pay tax at 20%. They would otherwise pay 20% tax on the first £12,500 of their income. And 20% of £12,500 = £2,500.

Aha! So the underlying plan must be to take away the tax-free personal allowance worth £2,500, and substitute a cash receipt of £2,496.

Oy! That's £4 less! But maybe the actual UBI will be £48.08.

For taxpayers like me it makes no difference. Presumably I''d get that £48.08 every four weeks - rather like my State Pension - meaning extra income of £192.32 thirteen times a year. Meanwhile I pay £2,500/12 = £208.33 twelve times a year in extra income tax. The one balances the other.

For people on very small incomes it would however make a noticeable difference. They don't get the benefit (or full benefit) of  that tax-free allowance at the moment, because they don't pay Income Tax, or very little. But in future they would get the full benefit, paid in cash.

I dare say there must be a net cost to the government that they would have to cover by eliminating a host of other tax reliefs. Anyone's guess, which reliefs might be for the chop.

What about the point that having a guaranteed UBI of £48 per week would make everyone lazy and work-shy? I think that can be dismissed. It's not quite £7 a day: emergency-level cash, enough to keep a careful person fed and healthy, but too little for anyone with an ordinary home to run and wanting to lead any kind of normal social life. Two adults would share £96 per week; two adults plus two children maybe £150 a week; but it's still not a tempting option, deliberately living on the UBI alone. I'd hate to have to do it.

On the whole I like the idea of a UBI, because it seems socially fair and would be universal and automatic, requiring no means-testing. It would be a whole lot simpler than the current confusing array of different tax reliefs and benefits. And people who, for whatever reason, don't claim their proper entitlements would finally get the money they should have.