Coronavirus could end the UK’s Universal Credit and usher in Universal Basic Income, report says

A new report warns the current welfare system is “unlikely to survive” in the long term.

By Nick Tyrrell Local Democracy Reporter


The UK’s current welfare system, including Universal Credit, is “unlikely to survive” the shock of the coronavirus crisis.

This is the conclusion of a report from a leading economic think tank.

The paper, from the Institute of Economic Affairs (IEA), also says that the government’s furlough scheme, which is paying the wages of employees of privately owned companies, strengthens the case for a form of Universal Basic Income.

The IEA report, C-19: Redefining the State of Welfare?, will be welcomed by many within Liverpool Council, which has called for a number of years for Universal Credit to be scrapped and backed a trial for Universal Basic Income in a motion passed last year.

The coronavirus crisis has caused major upheaval within the welfare system, with a surge of people needing to access Universal Credit amid rising joblessness.

Recent unemployment figures indicate Liverpool is one of the worst hit cities in the country, with unemployment rising from 2.9% to 7.6% between March and April.

The IEA report’s author, Stephen Davies, says the complexity of applying for and administering Universal Credit, as well as a lack of flexibility and support for workers in the gig economy or who are self employed, is being exacerbated by the crisis.

He warned that the likelihood of it taking years to recover from the crisis meant pressure to change to welfare system would only increase.

The report says: “[The pandemic] will bring to a head discontent with the existing system that has been growing for some time and will bring certain ideas for reform from academia and think tanks to the centre of the policy debate.

“It is likely to strengthen support for moving to some kind of Guaranteed Minimum Income (GMI) as the central feature of a reformed welfare system.

“One specific variant of that wider class of measures is a Universal Basic Income (UBI).

“There is the clear possibility of a consensus forming around that idea because it has supporters on all parts of the ideological spectrum and can be defended from different ideological starting points.”

Dr Davies said the implementation of the furlough scheme had stoked debate around whether government has a duty to ensure that there is a lower limit below which an individual’s income can not fall.

Universal Basic Income, a form of Guaranteed Minimum Income (GMI), is one of the most well-known policies promoted by supporters of this principle but Dr Davies said a number of options of a similar vein existed and could be considered.

He also warned there were numerous administrative and political challenges to implementing any form of GMI, rendering such a scheme practically impossible in the short term.

Instead he said a move towards such a system would likely rely on the expansion of benefits within the current system, such as an increase in child benefit, and said further research and informed debate around options for the welfare system still needed to take place.


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