Universal Basic Income Could Slash UK Benefit Costs and Boost Economy, Studies Show

By Kaiden-Chase

See original post here.

Implementing a Universal Basic Income (UBI) in the UK could significantly reduce the administrative burden and costs of the current benefit system while stimulating economic growth, according to recent research and pilot programs. Advocates argue that a well-designed UBI would streamline welfare payments, lift millions out of poverty, and increase financial security for workers—ultimately benefiting the broader economy.

UBI: A Cost-Effective Alternative to the Current System

The UK’s existing welfare system is complex, costly, and often inefficient, with means-testing, sanctions, and bureaucratic overheads consuming substantial resources. A UBI—a regular, unconditional payment to all citizens—could replace much of this structure, reducing administrative expenses while ensuring a safety net for all.

A 2020 study by economists Georg Arendt and others found that a full UBI (providing £7,706 per adult and £3,853 per child annually) would cost the UK £67 billion per year (3.4% of GDP) after accounting for tax adjustments and savings from scrapping existing benefits. This is far less than the often-cited “gross cost” of UBI, as it factors in the redistribution of funds through taxation and the elimination of redundant welfare programs.

Another report by economists Stewart Lansley and Howard Reed estimated that a moderate UBI scheme—paying £60 per adult, £175 for pensioners, and £40 per child weekly—would cost just £28 billion net, less than the total welfare cuts since 2010. This model suggests that UBI could be funded by reversing austerity-era reductions in social security spending while maintaining fiscal sustainability .

Economic Benefits: Reducing Poverty and Increasing Stability

Beyond cost savings, UBI could have transformative economic effects:

1. Poverty Reduction – A UBI set at or near the poverty line would drastically lower deprivation rates. Research indicates that such a system could reduce UK poverty from 16% to just 4%, virtually eliminating child and elderly poverty .
2. Simplified Welfare System – By removing means-testing and conditionality, UBI would cut bureaucratic costs and reduce errors, delays, and sanctions that currently push many into financial hardship .
3. Labour Market Flexibility – Unlike traditional benefits, which can create “welfare traps” (where people lose support upon finding work), UBI provides a stable income floor, encouraging more people to take on part-time or flexible work without fear of sudden income loss .
4. Boost to Local Economies – Low-income households are likelier to spend additional income immediately, stimulating demand for goods and services. This could help revitalize struggling high streets and small businesses .
5. Health and Wellbeing Improvements – Studies from Finland’s UBI trial showed recipients experienced better mental health and higher trust in institutions—factors that could reduce NHS pressures and improve workforce productivity .

Challenges and the Path Forward

Critics argue that UBI could discourage work or require substantial tax hikes. However, evidence from pilot schemes suggests minimal negative employment effects, with some participants working more due to reduced financial stress . Funding options—such as reforming corporate tax breaks (currently costing £93 billion annually) or adjusting income tax bands—could make UBI feasible without drastic fiscal changes .

The Welsh Government is already trialling a UBI for care leavers, while Scotland explores broader pilots. If successful, these experiments could pave the way for a national rollout, offering a more efficient and humane alternative to the UK’s strained welfare state .

Conclusion

As the UK faces rising inequality and an overstretched benefits system, UBI presents a compelling solution: cutting bureaucratic waste, reducing poverty, and fostering economic resilience. With careful design, it could transform social security from a costly burden into a driver of prosperity.

Sources:

• BIEN (2020), The Cost of a Full Basic Income for the UK
• Compass & New Economics Foundation reports (2019-2023)
• Institute for Employment Studies (2023)
• Welsh and Scottish UBI trials