New research involving experts from Northumbria University proposes a new universal basic income model that could cut poverty by more than half, bringing it to its lowest level in 60 years, without additional calls on public finance.
The report, funded by the Wellcome Trust and led by Basic Income Conversation and Compass, represents the most substantial attempt to date to assess the impact of a Universal Basic Income (UBI) scheme and the greater security of the income it offers. It comes 80 years after the publication of the landmark Beveridge Report, which was instrumental in the creation of the UK welfare state.
The tax-neutral scheme, proposed by researchers from Landman Economics, the University of Bristol and the University of York, as well as Northumbria, involves no additional calls on public finances and no net increase in taxation. The cost would be exactly offset by additional revenue from internal changes in tax rates and national insurance contributions.
Matthew Johnson, a professor of politics at Northumbria University, is one of the report’s co-authors, Fighting poverty: the power of a universal basic income, released today. His research focuses on the links between culture, politics and well-being.
Professor Johnson explained: ‘I understand that for some people this will seem like a counter-intuitive policy in many ways, but after working on it for several years I am now convinced that a universal basic income is one of the only general-purpose policies. the instruments at our disposal to deal with the crisis in mental and physical health and the regional inequalities which are accentuated in the current context of the crisis in the cost of living.
“The multidisciplinary team involved in this research has focused its efforts on developing proposals likely to have a real impact. If we really want to take it to the next level, people need stability to have a base from which to seize opportunities, be enterprising, build businesses and take risks.
Depending on the model, compared to the current system:
- Child poverty more than halved to 12.5%, bringing it back below the level of 14.0% in 1977.
- Working-age poverty fell by just over a quarter, from 19.4% to 14.9%.
- Poverty among pensioners fell by 54%, from 16.7% to 7.7%. This brings the level of pensioner poverty well below the lowest post-1961 rate of 14% in the early 1980s.
- The Gini coefficient – a summary measure of inequality – falls by 12.5%, bringing it back towards the peak of equality reached in the 1970s.
- Gains are concentrated among the poorest and losses among high-income groups
The model involves two main sets of changes to the existing tax and benefit system:
- A set of guaranteed weekly payments that provide a floor income. This is £41 per child and £63 per adult of working age, representing a guaranteed payment of almost £11,000 a year for a family of four.
- A series of tax adjustments pay the weekly basic income: the changes involve a reduction in personal allowance to £750, an increase in existing tax rates of 3p per pound and a change to the current system of contributions to national insurance.
In addition to ensuring budget neutrality, these changes ensure that gains are concentrated among the poorest.
Another co-author of the report is Stewart Lansley, a visiting scholar at the University of Bristol. “We are told over and over again that reducing today’s high levels of poverty would be too complex and too costly,” he said. “This report shows that a basic income is within reach, would be affordable and feasible, and would be a clear path to building a better post-Covid society.”
Neal Lawson, Director of Compass, added: “At a time of skyrocketing poverty, this report shows that Universal Basic Income can bring us back to the lowest levels of child poverty in over 50 years. By showing that universal basic income can lead to record levels of poverty without any additional strain on the nation’s finances, this report makes transformative change a political decision, not an economic one.
Professor Johnson will present the research at an online event, organized by the Basic Income Conversation, due to take place on 21st June. Learn more here.
Gemma Brown at Northumbria University [email protected]
Lena Swedlow at Compass on [email protected]
Notes to Editors: