Monthly Archives: October 2019

‘Basic income’ is a tax-free, unconditional and non-contributory basic income automatically paid to people (weekly or monthly) irrespective of how much they earn or their work status. Interest in basic income is growing– with pilots in Spain, Italy, Finland, Kenya  and the Scottish Government supporting Local Authorities to explore a scheme. What does a basic income scheme in England look like and how would it work in rural areas? Jessica Sellick investigates.  ………………………………………………………………………………………………..

What is basic income? Back in 1516 Thomas More published ‘utopia’, a book depicting a fictional island society. More described how every citizen on Utopia should be provided with some means of livelihood, so that nobody would become a thief first and then a corpse. Although a work of fiction dating back more than 500 years, More’s idea of providing everyone on the island with a universal basic income is now being discussed and tested across the world.  

Universal Basic Income (UBI), Citizen’s Income (CI) or Basic Income (BI) are terms often used interchangeably to refer to an unconditional and regular payment made to every citizen in a given territory or place regardless of means. Basic income has five characteristics: (1) periodic – it is paid at regular intervals; (2) cash payment – allowing those in receipt it to decide what they spend it on; (3) individual – paid to a person rather than a household; (4) universal – paid to all without being means tested; and (5) unconditional – provided without the requirement to work or demonstrate willingness to work. 

Variations to basic income include: (i) making ‘full’ or ‘partial’ payments according to whether a person’s needs are at, above, or below, a poverty line; and (ii) a preference for ‘universal basic services’ where instead of receiving a cash payment services such as education, health, care and transport are provided free for all. 

Why is interest in basic income growing? In recent years there has been increasing academic, policy, practitioner and media interest in basic income. This interest stems from: 

• Increased support from a broad range of constituencies: from different political parties and Governments, through to NGOs, civil society, academics and think tanks – who are all concerned with looking at how we might distribute and share resources more fairly [for the common good].  
• Concerns about inequality: the World Bank’s ‘changing wealth of nations’ tracked the wealth of 141 countries between 1995 and 2014. Their analysis shows that while global wealth had grown significantly over this period, per capita wealth declined or stagnated in more than two dozen countries in various income brackets. In the UK, in 2017-2018, 42% of all disposable household income went to the 20% of people with the highest household incomes, while 7% went to the lowest-income 20% (based on disposable income before housing costs had been deducted).
• New patterns of work: anxiety about the effects that automation could have in workplaces – will robots take people’s jobs? Will this lead people to more flexible but less secure working patterns?   
• Social protection: a view that some systems of social security have trapped people between benefits and poor quality low-paid work leading to economic insecurity. There is also a view that some welfare systems are leading to a culture of dependency on the one hand [reducing incentives to work and save] and failing to meet peoples’ needs on the other hand [e.g. poverty, skills, labour market changes]. There is a further view that more established welfare states spend too much on administering payments and that basic income would lead to efficiencies. 

These uncertainties around work, livelihoods and living standards amid ongoing social, economic and environmental changes have led momentum around the desirability and feasibility of basic income to build. 

Which countries have undertaken basic income pilots – and how have they been run?  While the idea of a minimum income guaranteed by the Government to its citizens can be traced back to the renaissance; more recent interest stems from the United States in the 1960s and 1970s. At this time policy makers believed negative income tax represented a simple and desirable alternative to existing programmes. The complex set of cash and in-kind benefits paid to certain categories of the population would be replaced with a single guaranteed income payment for all families that would gradually diminish as earnings increased. The scheme was piloted in New Jersey and Pennsylvania from 1968 to 1972 and involved 1,357 low income urban households. A rural experiment, in Iowa and North Carolina, was carried out between 1969 and 1973 with 809 low-income families. A third experiment, in Gary, Indiana, worked with 1,780 black and ethnic minority households. The largest experiment, involving 4,800 families, took place in Seattle and Denver from 1971 until 1982. The Seattle and Denver participants received more generous payments than the three other pilot cohorts, and the duration was extended from three to five years. All four pilots ended in 1982. 

The Alaska Permanent Fund (APFC) was established in 1982 to collect revenue from the state’s oil and mineral leases to fund an annual stipend to Alaskans. Residents register each year from January to March, with the stipend announced in September and payments typically made in October. The amount usually ranges from $1,000 to $2,000 per person ($4,000 to $8,000 for a family of four) and the majority of Alaska’s 740,000 residents receive it.

In February 2019 the state of California launched a basic income experiment. Over an 18-month period 130 adults living in Stockton’s lower-income neighbourhoods will receive a monthly payment of $500 on a pre-paid debit card. 

The Canadian Guaranteed Annual Income (GAI), known as Mincome, took place in Dauphin, Manitoba between 1974 and 1979. The experiment covered the city of Winnipeg and rural Manitoba with lower-income households in one of the sites selected assigned to one of seven treatment groups or the control group. The families in the treatment groups received an income guarantee – or minimum cash benefit – according to family size that was reduced by a specific amount (35, 50 or 75 cents) for every dollar they earned by working. 

Towards the end of the 1970s European countries began to discuss basic income. The most widely known experiment took place in Finland from January 2017 until December 2018 and provided 2,000 randomly selected unemployed people with a monthly payment of £490.  

Back in 2016, the Italian coastal city of Livorno introduced a basic income pilot that saw the city’s 100 poorest families receive €500 a month. In January 2017, they expanded the pilot to include a further 100 families.

Also in 2016, the Dutch city of Utrecht proposed a basic income trial entitled “Weten Wat Werkt” (Know What Works). Over a two-year period the proposed trial will divide 250 citizens into test groups. Each test group will receive different amounts under different conditions. One group, for example, will receive a total of €960 monthly with no additional conditions while another group will receive €150 on top of the original amount if they engage in community service or undertake voluntary work. 

Taking its name from a 1970s basic income pilot in Canada, B-MINCOME is a project running in Barcelona from 2017 until 2020. A guaranteed minimum income is being provided to supplement the income of residents in the most deprived parts of the city – with 1,000 households receiving payments on a trial basis. 

In September 2017 the Scottish Government announced it would support Local Authority areas to explore a basic income scheme – with £250,000 offered between 2018-2019 and 2019-2020. Following a feasibility study four Local Authority areas were selected for the pilot: Glasgow, Edinburgh, Fife and North Ayrshire. The four local authority areas are undertaking research into the feasibility of a basic income pilot, supported by the Scottish Government and others, including NHS Health Scotland.  The Royal Society of Arts (RSA), for example, has been working in Fife to understand how a place-focused trial could operate and to model the potential economic impact. In a previous report on basic income the RSA proposed every adult in Scotland be given a basic annual income of £2,400, rising to £4,800. 

In September 2019 Professor Guy Standing published a report for the shadow chancellor of the exchequer setting out proposals for the next Government to implement a series of pilots across the UK. The recommendations include initially providing every adult in the UK with a weekly basic income of £48.00 (and a lower sum to children) with the payment changing over time as funding for the scheme builds up. Other organisations have suggested different models – from a partial/starter scheme through to a citizens’ wealth fund. The RSA has produced a toolkit amalgamating experiences from across the world to inform experiments in the UK.

The Centre for Social Justice (CSJ) has detailed how much a universal basic income programme would cost the UK Government under three scenarios: (1) available to all working age adults 16-64 years; (2) all adults over the age of 16 years; and (3) all households across the UK. Assuming the programme paid out to working age individuals between the ages of 16 and 64 years old [scenario 1] and the payment was equal to the income poverty line (60% of the median wage) the payment would be £16,320 per person. The total cost of the programme would be approximately £669.1 billion (roughly 83 per cent of UK public spending, or a little over one-third of UK GDP). This compares to the £283 billion spend on UK current social protection and personal social services for the period 2018-2019 (e.g. state spending on pensions, incapacity benefits, unemployment benefits, housing benefits, child benefits and social services). 

Between 2019 and 2022 basic income will be rolled out in Sikkim, India. This builds upon work carried out in in 2011 when the Indian Government and UNICEF launched two pilots to test the impact of basic income in eight villages in Madhya Pradesh. 

While other countries have not provided basic income per se, they have made cash payments to their citizens – Iran, for example, provides each citizen with $33 a month; and between 2007 and 2009 residents in two rural settlements in Namibia received $12 a month to help tackle malnutrition.  

Each of these countries has adopted a different model – from the level of payments made (how much and to whom) to where the funding comes from (and for how long). In some cases pilot schemes have been funded from direct taxation and the development of capital funds with dividends (North America) while in others from sources other than the earned income of citizens (e.g. oil in Alaska, aid in Namibia). Some schemes have ‘strings’ attached to them (e.g. a requirement for children to attend school) while in other instances basic income replaces existing state benefits and/or is targeted at lower income residents or to subsidise low-wage work. In other schemes a regular sum of money is paid to all citizens regardless of their circumstances. 

What are the results – does basic income work? For many these experiments and schemes herald a new way of thinking about the links between public/social services and income security. Proponents believe basic income offers an unconditional safety net that can help people out of poverty by giving them time to apply for jobs, learn new skills or obtain better paid work (tackling in-work poverty); support greater personal freedom, dignity and decision-making; and reform existing welfare and social security systems. Opponents argue that basic income is too expensive to implement (in some cases requiring much higher taxes), leads to an increase in unemployment in vulnerable groups and fails to substantively improve life circumstances (i.e., of individuals in insecure work and poor quality housing). 

What can we learn from experiments that have already taken place or are in train? 

Unfortunately the lessons from the experiments in the United States (negative income tax) and Canada (Mincome) in the 1970s were not gathered or disseminated. 

Preliminary results from Finland found little or no impact on the likelihood of recipients’ undertaking paid employment (i.e., no effects on employment or unemployment or income levels compared to a control group). The Finnish Government had hoped the experiment would lead to an increase in participation in paid work. However, the evaluation did find that people felt healthier and more optimistic about the future. In 2018 the Government decided not to renew the scheme and it ended. The final report on the experiment will be published in 2020.

In Ontario, a pilot running in 2016 was intended to help people living on low incomes better meet their basic needs, including improving their outcomes in food security, stress, mental health, healthcare usage, housing stability, education and employment. Some findings of the work have been shared – with recipients reporting that they could treat food as medicine, undertake voluntary work and were experiencing reduced stress in everyday life. However the Government announced in August 2018 that the research project would be ending. According to Lisa MacLeod, Minister of Children, Community and Social Services: “we have a broken social service system. A research project that helps less than four thousand people is not the answer and provides no hope to the nearly two million Ontarians who are trapped in the cycle of poverty,” 

The National Bureau of Economic Research’s (NBER) working paper on the labour market impacts of the Alaska Permanent Fund found that universal and permanent cash transfer does not decrease employment. Using data from the Current Population Survey and a synthetic control method, the NBER’s analysis showed that where the dividend had no effect on employment per se, it did increase levels of part-time working. 

Aggregating evidence from various schemes, What Works Scotland (WWS) produced a scoping review of ten basic income interventions (from some 28 published studies) in September 2018. WWS found evidence of labour market participation, health, education and a range of social and economic outcomes. For interventions carried out in the 1970s there were small reductions in labour market participation for male household heads and larger reductions for second earners and single parents. More recent studies have found little impact on labour force participation. A number of studies have reported on positive health outcomes (e.g. improved mental health and diet, reduced service use) and social outcomes (e.g. improved parenting, reduced offending). 

Similarly, the World Health Organization (WHO) commissioned a policy paper on basic income policies with a view to researching innovative approaches to reduce health inequalities. Citing evidence across countries that insecurity surrounding income support status has adverse effects on people’s physical and mental health; the paper explores how providing basic income stability is both crisis-preventative and health-constitutive and fits with the WHO’s approach of providing universal policies across the whole gradient but implemented at a level and intensity that is proportionate to need.  

What about basic income in rural areas? 

While some basic income experiments have included rural areas, it was back in 2012 that an overarching proposal was published calling for a ‘rural basic income’ (RBI) to be introduced within the European Agricultural Fund for Rural Development (EAFRD). Proponents of RBI argued it would reduce pressure on rural residents having to move and increase spending capacity in local areas. In recognising that experiments and pilots are important, the proposal argued that a small region does not resemble a complete national economy, therefore RBI should be implemented across the European Union at the same time by reforming the Common Agricultural Policy (CAP); giving direct payments to all residents living in rural areas, including farmers. Using Eurostat figures of EU inhabitants living in rural areas and the Gross Domestic Product (GDP) of each Member State, and then taking 40% as the basis for a RBI, the proposal estimated the cost of an EU-wide scheme at more than 1000 billion (or five times the total EU budget at the time). As it would not be possible to finance RBI from the agricultural budget alone, a variety of finance models were presented – from co-financing by Member States and levying a basic income tax through to setting certain conditions to be in receipt of RBI (e.g. targeting people in disadvantaged areas). 

Back further still, in 2010 the Joseph Rowntree Foundation (JRF) extended its work on Minimum Income Standard (MIS) to explore how needs and costs varied for rural households.  Researchers found people living in rural areas typically spent 10-20% more on meeting their everyday requirements compared to their urban counterparts. In 2010 it was suggested that single working adults needed to earn at least £15,600 a year in rural towns, £17,900 in villages and £18,600 in hamlets or remote settlements. For a couple with two children the annual earning requirement increased to £33,000-£42,000. The 2019 MIS reveals in order to reach a minimum acceptable living standard in 2019; a single person needs to earn £18,800 a year and a couple with two children £20,600 per parent. While the MIS figures have not been updated for rural households since 2010 combined with the EU proposal on RBI they provide starting points for considering how much a basic income scheme would cost in rural areas and whether it is affordable / how it might be financed. 

Does basic income work? 

Answering this question depends on what you mean by work – what are the aims, objectives and outcomes expected? In the case of Finland, for example, where the policy objective was to get people into employment, recipients were no more likely to find jobs compared to the control group that did not receive the payments. However, this example and those evidenced by the WHO have highlighted some of the social benefits (e.g. health and wellbeing improvements, changes to the way people access and use public services). 

Undertaking a basic income experiment therefore requires careful consideration: 

• Is there broad political support for basic income – and how might Government move from idea to policy and implementation? 
• Is there public support – how is basic income understood and is it seen as feasible? 
• How would it operate? For example, will it be paid to all individuals or to certain cohorts or in specific circumstances? Will it be conditional or unconditional, withdrawable or non-withdrawal, means-tested, targeted or tiered? Will existing state benefits and services remain in place, be reformed or replaced?  
• How much would it cost – and where will the money come from? Will there be any financial losses (to people) and/or savings (to society and the state)?  
• What impact would the scheme have on the individuals who would receive it – and how will we measure and evaluate these outcomes? 

Where next? While basic income is growing in popularity as a concept, there is no universal or agreed upon formulae for deciding how much should be paid, to whom, when and for how long. Basic income continues to be a sticky issue with debates continuing around whether it is desirable, necessary, affordable, should be means-tested, available to all or targeted. For all the efforts involved in setting up pilots across the globe – are they worth it and what do they achieve? While answering these questions is not always clear, basic income in all its forms has not been tried and tested on a large scale. With work underway in Scotland and interest in England, will there be an appetite for designing a feasible, fundable and meaningful basic income scheme for rural England? Watch this space. 

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Jessica is a researcher/project manager at Rose Regeneration. Her current work includes evaluating two veteran support projects (in Cornwall and North Yorkshire); supporting public sector bodies to measure social value; and evaluating a series of community safety and crime reduction projects. She is also a senior research fellow at The National Centre for Rural Health and Care (NCRHC). In her spare time Jessica sits on the board of a housing association. 

She can be contacted by email jessica.sellick@roseregeneration.co.uk or telephone 01522 521211. Website: http://roseregeneration.co.uk/https://www.ncrhc.org/ Blog: http://ruralwords.co.uk/ Twitter: @RoseRegen