Labour set to back replacing benefits with welfare handouts to EVERY person John McDonnell says as Canada and Finland AXE the policy after trials proved it was too expensive
- Shadow chancellor said Labour likely to back pilots of the controversial policy
- Idea involves scrapping benefits and replacing them with nationwide handouts
- It has been tested in some European countries but never rolled out in full
Labour is poised to endorse a universal basic income policy that would axe benefits in favour of welfare handouts to every person, John McDonnell said today.
The shadow chancellor said the next Labour manifesto would likely include pilots of the controversial policy, which has been experimented with in Europe but never rolled out in a country the size of Britain.
He claimed the proposal was an idea that ‘a lot of people are pressing for’ despite the eye-watering costs of introducing it.
Mr McDonnell’s announcement came on the same day Canada axed trials of the policy as too expensive. Finland dropped a pilot programme in the spring.
Labour is poised to endorse a universal basic income policy that would axe benefits in favour of welfare handouts to every person, John McDonnell (file) said today
Supporters of UBI claim it would reduce the bureaucracy involved in means-testing benefits and could also help address future challenges as jobs are replaced by automation and artificial intelligence.
But critics argue it involves giving taxpayers’ money to wealthy individuals who do not need it rather than focusing on those who require support.
It could also mean huge tax rises if the payouts were set at a higher level than the current welfare state costs.
Mr McDonnell told the Independent he had recently discussed the idea with former Labour leader Ed Miliband, who was ‘really keen’ on getting a pilot of the scheme in the next manifesto.
What is a universal basic income and why is McDonnell calling for one?
A universal basic income is a cash pay-out – often estimated at around £10,000 – paid to every eligible citizen of a country.
The policy was once seen as radically far-left, but there have been growing calls for it to be adopted by Western countries.
Supporters say the pay-out would help individuals retrain or secure their finances in the face of the threat of mass job losses as a result of the rise of robots and artificial intelligence.
They say a cash sum is a more efficient way of helping people than the complicated and bureaucratic system of welfare benefits which currently exist.
They say individuals usually make the best choices about how to use money to better their own economic position – for example by retraining – than the state.
But critics say the policy is wildly expensive and risks saddling Britain with billions of pounds of extra debt just as we have started paying down the deficit.
They also say it is unfair to pay a universal basic income to all citizens – pointing out that wealthy Britons do not need it.
Asked if a pilot scheme could feature in Labour’s plans at the next election, Mr McDonnell said: ‘It’s one of those things I think we can get into the next manifesto and see, it’s worth a try.
‘There have been pilots elsewhere. I’m trying to wait for the feedback.’
A working group examining the feasibility of a scheme is being led by Mr McDonnell’s adviser Guy Standing.
The shadow chancellor said: ‘If you look at what’s happened elsewhere in other countries – and I think Scotland is looking at it as well – they are doing it on a small geographical basis in particular towns. Guy is looking at that now and coming forward with proposals.
‘It will be thrown into the discussions about the next manifesto – that’s one of the ideas that a lot of people are pressing for.’
Mr McDonnell also acknowledged there would ‘almost certainly’ be a debate at Labour’s annual conference in September, which could see divisions over the party’s approach very publicly exposed.
‘There will be a range of policy debates and Brexit is bound to be one of them,’ he said. ‘There’s bound to be debate this year.
Labour has refused to rule out the possibility of supporting a fresh referendum on Europe, but Mr McDonnell indicated he would prefer a general election.
‘On a general election you’re deciding the issue but also you’re deciding the team,’ he said.
A universal basic income is a cash pay-out – often estimated at around £10,000 – paid to every eligible citizen of a country instead of means tested benefits to the poorest (file image)
‘My own view at the moment – this week we’re in a situation where the Prime Minister, the Secretary of State for Health, (Brexit Secretary) Dominic Raab, have all said we’re stockpiling medicines, stockpiling food in case there’s a no deal – that’s how bad it’s got.
‘My view is that they should just move over and let us start the negotiations. If they are not willing to do that – general election and let’s decide.’
He added: ‘My worry is that if you go for another referendum we could have an equally split vote and divide the country all over again.’
Mr McDonnell also said that could be ‘really dangerous’ and may allow the ‘xenophobic right to exploit the issue again’.
WHAT IS UNIVERSAL BASIC INCOME AND HOW WOULD IT WORK?
Universal Basic Income (UBI) proposals are on the rise, with many backing the system as a possible solution for unemployment caused by the rise of machines equipped with artificial intelligence taking over the workforce.
They system would see governments paying every citizen of a country a base salary to cover costs including food and rent.
The guaranteed sum would be paid by the state to everyone, regardless of wealth or work status.
Dpending on the details of the UBI proposal, the funds could be added to existing benefits or put in place of them.
Left-wing supporters of the system say that it could lower proverty rates. For the right-leaners, it’s a route to a less bureaucratic wellfare system.
The program would likely be funded by an increase in income taxes across all income levels.
To pay every adult and child in the United States a yearly income of $10,000 (£8,045) per year, the government would likely have to cut most non-health social spending programs and raise the share of GDP collected in tax by ten per cent, according to the Economist.
Another suggestion is a negative interest rate, that would take a percentage of every citizen’s bank account each month.
A universal basic income in the United Kingdom that would give every adult and child £12,000 ($14,900) per year requires a negative interest rate of 2.5 percent per month, according to the Centre for Welfare Reform.
So, if a person were to have £5,000 ($6,600) in his or her bank account at the beginning of the month, by the end, £4,884 ($6,500) would be left because £116 ($153) would be taken by the government for a universal basic income pot.
Some have suggested a sliding scale of basic income, so the higher a person’s employment salary, the lower basic income check he or she would receive from the government.
The left-wing French presidential candidate Benoit Hamon, backed by the star economist Thomas Piketty, has also made the basic income part of his platform.
Finland is the first European country to pay its unemployed citizens an unconditional sum.
The two-year pilot scheme, which started January 1, gives unemployed Finland citizens aged 25 to 58 a guaranteed sum of €560 (£490/$648) that replaces existing social benefits.
The funds will still be paid if they eventually find work.
In Marica, Brazil, a seaside town of about 150,000 people near Rio de Janeiro, the left-wing municipal government has spent the last year finding out universal basic salaries work.
In Marica – a surviving Workers’ Party bastion in increasingly right-leaning Brazil – the basic income idea fits in well with the leadership’s socialist fervor.
However, if Finland is handing out payments of about $590 (£450) a month – and only to a test group of unemployed people for now – the amount in Marica is a measly 10 reais, or about $3.20 (£2.40). The new mayor hopes to raise the amount to $32 (£24) in 2017.
Only the town’s 14,000 poorest families are currently being given the income, which is denominated in Mumbucas, a virtual currency created to pay welfare under Quaqua three years ago.
The 10 reais is added to the 85 reais ($27/ £20) monthly welfare check for families whose income doesn’t top three times the minimum wage. The extra money is also given to poorer people aged between 14 and 29 and pregnant women already receiving other benefits.
There’s another limitation: only 131 local businesses – less than 10 percent of the total – accept payment in Mumbucas, the mayor’s office says.
The currency, which physically exists only on specially issued red magnetic cards, is unpopular with business owners because they must wait more than a month after purchases are completed for the government to convert payments into reals.
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