Introducing a weakly universal basic income(UBI) for everyone in Britain would have a net cost worth less than the aggregate cuts to benefits since 2010, according to a report.
The government could make tax-free payments of £60 to every adult, £175 for those over 65 and £40 for each child under 18, regardless of other income, in a proposal designed to cut rising levels of poverty and inequality across the country.
The report by the economists Stewart Lansley and Howard Reed, and published by the leftwing thinktank Compass, said that the net cost of reworking the tax and benefits system would be £28bn, a figure less than the aggregate cuts to welfare since the Conservatives came to power in 2010.
The changes would return social security spending back to the level of a decade ago to help cover the costs of the UBI, alongside what the economists said would be some modest increases in income tax for higher-paid workers.
The report comes a week after the launch of a similar plan from the New Economics Foundation (NEF) thinktank was welcomed by the shadow chancellor, John McDonnell, in a signal of the growing interest in UBI, and as economists increasingly look at ways to finance a basic income proposal.
Under the NEF proposal, the tax-free personal allowance would be scrapped and the proceeds used to fund a flat payment of £48.08 a week for every adult.
There are concerns that UBI systems diminish work incentives, although supporters say they will become increasingly necessary as the rise of the automated economy will put greater numbers of workers’ jobs at risk.
UBI trials in Finland, the only advanced economy to launch such a widespread scheme, found that people receiving basic incomes were happier, but they were no better and no worse at finding employment than a control group.
Some economists on both the left and the right have argued for UBI as a source of personal empowerment, providing citizens with more choice over work, education, training, leisure and caring. Others argue that UBI would be too expensive and would be difficult to set at the right level, so higher spending on public services would work better.
Supporters of UBI include Matthew Taylor, the chief executive of the RSA thinktank, who conducted a review of the gig economy for Theresa May and had previously led Tony Blair’s policy unit. The RSA has worked with the Scottish government to pilot UBI schemes in Scotland.
The Lansley and Reed plan would include the abolition of tax-free allowances to help finance the new UBI. However, it also calls for the introduction of a 15% income tax band for the lowest-paid workers, while existing income tax rates would rise by 3p in the pound.
Child benefit and the state pension would be scrapped, with the UBI rendering it redundant. However, most other elements of the benefits system would remain.
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Overall, 75% of households would benefit from the changes, while the richest 25% would lose money. Other impacts would be for child poverty to be cut by more than a third and pensioner poverty by almost a third.
Lansley and Reed said the total cost of the UBI would be as high as £300bn, although this would be mostly covered by the tax and benefit changes, with the final £28bn covered by returning welfare spending to 2010 levels.
They said: “The basic income would update the British system of social security for the 21st century. All households would enjoy greater certainty about future income, directly tackling growing economic and social insecurity.”
The first paragraph and headline of this article were amended on 18 March 2019 to clarify that the net cost of UBI would be less than the cost of benefit cuts, not that reversing benefit cuts would cover its cost.