Paying everyone a basic income is not a realistic or fairer way to tackle poverty

John Kay and Mary Bonsu argue against the motion that ‘Paying everyone a basic income is a realistic/fairer way to tackle poverty’. The debate took place on October 5th 2017 at the Highgate Literary and Scientific Institution in North London. Speaking in support of basic income was Dr Malcolm Torry of the Citizens Basic Income Trust.

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John Kay

Mary and I have a difficult task this evening. Dr Torry has offered to lead us to the promised land. Our job is to explain that the road to the promised land is long and stony, that the milk is been watered down and there is very little honey. We will be accused of lacking vision, and the accusation will be right. We are realists, we live on planet Earth.

I am not a visionary, I am a nerd. The kind of person of whom, Michael Gove has told us, people have had enough.  And my introduction to tonight’s debate tonight came in the 1970s. I found myself adjudicating between two great economists, a young researcher required to illuminate their disagreement with numbers. On the one hand was James Meade , Nobel prizewinner, and one of the nicest as well as one of the cleverest men I have ever met. Meade was a supporter of basic income, which he then called social dividend.

On the other side was Tony Atkinson, a rising star of the economics profession, who had become Sir Anthony before he sadly died earlier this year. Atkinson supported a reform of Social Security which he called back to Beveridge. He wanted to implement more effectively the Beveridge report; that visionary document which caused such a stir when it was published during the Second World War.

What goes around comes around, and Atkinson and Meade were themselves reprising a debate which had occurred 30 years before. At that earlier time, the two sides were represented by Lady Juliet Rhys Williams, the architect of social dividend, and Sir William Beveridge. Each had devised their schemes in reaction to the injustices of the 1930s

The Beveridge view was encapsulated in what he called social insurance. The idea was to eliminate poverty by eliminating the causes of poverty. The state should organise insurance against the contingencies of misfortune, such as disability, unemployment, sickness and old age. Beveridge envisaged that these benefits would be supplemented by minimal social support for the few people who fell through the cracks

In the Rhys Williams vision, since poverty was the result of low incomes, and would be eliminated by ensuring that nobody had low incomes. Everyone would receive enough money to live on, and if they didn’t need it it would be taxed away. The only test of income would be the income tax,  applied to rich and poor alike.

 

Two divergent and different visions of a welfare state

My description of social dividend illustrates why although basic income and negative income tax sound very different, they represent essentially the same scheme. But Citizens Income is a left-wing label, negative income tax a right wing policy.  In the 1972 American presidential election, Richard Nixon, advised by Milton Friedman, and George McGovern, advised by another Nobel prize winner in economics, James Tobin, advocated very similar schemes of welfare reform. The main difference, unsurprisingly, was that Nixon’s scheme was rather less generous than McGovern’s. Nixon favoured negative income tax; McGovern what he called a demogrant. In the end nothing came of either scheme.

Not surprisingly. When you worked the numbers through, McGoverns’’s plan was too expensive and Nixon’s inadequate for the needs of poor households. And I found in the 1970s that this was the reality of the numbers for Britain. I compared Meade’s social dividend scheme with Atkinson’s ‘back to Beveridge’ scheme, and discovered that both had the same flaw; either the benefits were too low or the costs were too high.

So how do we resolve this dilemma ? We deal with it in the way in which all real-world welfare systems deal with it, through a range of  benefits that are both contingent and income-related. Only by that means that we can have a system that is both fair and efficient.  By fair and efficient I mean that our society makes adequate provision for those who need help, but doesn’t exaggerate the costs and undermine public support by giving large amounts of money to people who have no need of it. Messy, pragmatic compromise replaces grand vision.

I need to commend Dr Torry, because, unlike almost all other advocates of basic income, he has gone through the numbers. But only to find what everyone before has found. Having started with the principle that everyone should receive a common benefit as citizen, this general principle is modified by adjusting the payment by reference to contingencies. His plan would adjust benefits according to age, would offer extra resources to the disabled and sick, would retain a scheme of compensating people for differences in their housing costs, and so on. And so we end up with a system that does not look very different from the one we have today.

But not quite the same. There are gainers and losers in Dr Torry’s  scheme; as there must be in any revenue neutral reform. The people who gain are people who receive contingent benefits they do not need, such as the children of rich parents. The losers are mainly the  low-income working households who are the principal beneficiaries of the present complex system of tax credits. If that is a redistribution you want to see, you will vote for this motion tonight. But such redistribution is not one I want to see, still less engage in complex reform to achieve. I want to see benefits that are targeted effectively on the needy.

Let me end with two concluding remarks. The first is to reject any suggestion that the dilemmas I have described can be avoided by obtaining funding from the magic money tree. As I said at the beginning, I live in the real world. There is no magic money tree. And if you have been watching television in the last two weeks, you will know that if that was a magic money tree the fruit would not have ripened before there was a long queue of people plucking the tree for their own pet schemes.

And much of the revived interest in basic income comes from Silicon Valley. Folks over there plan to replace all our jobs; robots will do the manual work and artificial intelligence will do the brainy work. Only the clever residents of Palo Alto and Mountain View will still be employed. Basic income is the sop they offer us to enter their brave new world.

In the town hall at Bury, there is a large mural which illustrates John Kay, inventor of the flying shuttle, climbing out a window to flee the Luddites smashing his machinery. People have been predicting for more than two centuries that technology would eliminate jobs and while certain kinds of jobs have been eliminated, employment overall has gone on rising. We have been good at finding new productive things to do. And as long as we continue to value effort and innovation, and discourage those who would spend their days playing video games at the expense of hard working people, we will continue to prosper.

See also John’s paper on the basics of basic income.

 

Mary Bonsu

Good evening ladies and gentlemen, my name is Mary Bonsu and tonight I too will be opposing the motion: “this house believes that basic income is a realistic way to tackle poverty”. On the matter of belief, I’m sure most of you “BELIEVE” the concept of free money is a reasonable one. I mean if Dr. Torry came up to me and said “hey here’s £400 for the month”, I would take the money… no questions asked. Tonight, however, is about asking questions, and not taking too good to be true opportunities at face value.

Those such as Thomas Paine have argued that Basic income is some sort of moral obligation. That, we as citizens, deserve free money for existing in a particular society. The sad truth, ladies and gentlemen, is that when it comes to basic income, we are entitled to nothing. A right implies an obligation by others and rights entail obligations for those who benefit from those rights. We are, however, entitled to work for our money. As a normal society does. The right to free speech, to life, to equality are all credible moral obligations. and entail obligations to us to use free speech responsibly, to live lives that are worthwhile, to take advantage of opportunities

What kind of message are we spreading as a society, if we facilitate handing money over to people for simply doing nothing? There would be no moral value to work, some would laze around with no ambition, no direction and no yearning to develop ourselves for the better. To enforce Basic income would be a step backward for society, by removing the incentive to work hard for our income, we are discouraging effort. A fair society, is one where an individual is rewarded for their contribution not for simply being born and breathing.

Now, as I have just said, we should all work for our money, there are no entitlements in life which do not carry responsibility. I do recognize though, that life does get hard. At times, there are those who make the conscious effort to contribute to society and try to help themselves but simply cannot. For example, the disabled, the elderly and active job seekers. Those are the demographics that deserve our help as there is credibility behind their entitlement to help from us through the government. This might sound familiar to you, ladies and gentlemen, because that system is our current welfare system. It is imperative to ask ourselves, what gap is Basic Income supposed to fill? Which groups in society are not benefiting from the welfare state at this moment. Three groups ladies and gentlemen;

  1. Students – who have maintenance loans and bursaries.
  2. Stay at home people with wealthy partners
  3. Those who simply refuse to work.

If we currently do not give money to those who refuse to work and those with wealthy partners, why should we under the basic income system? What motivation is there? There is no gap to fill. I, personally would not be comfortable with handing my hardearned money to someone who simply refuses to work and to do so undermines the basis for seeking support for those who need – and deserve- our help. There is no reason to sympathise with someone who takes the lazy route out.

Basic income on the surface might seem incredibly fair – let us give everyone an equal sum each month, why not. But in reality, it is like giving Usain Bolt a head start in a race against infants, while taking the wheelchair from those who cannot travel without. We would be widening the gap of social inequality. If we think about it, basic income makes no logical sense. It is very difficult to see why we would give a high earning professional the same financial support as a disabled person who is unable to work and has no other source of income. Surely, this is just encouraging social inequality instead of focusing our energy on helping those that really need it, we are offering financial help to a CEO and their partner. There is often talk about how inefficient our benefits system is today. However, the solution is not more inefficiency. We need to focus our energy on bridging the gap of social inequality. Would it not be a better use of our system to focus on a real solution rather than put a “looks like equality” plaster on it and hope that it gets better.

So, the next time someone offers you £400 for the month… do not take it. Think about the damage that the handout will bring to society. Think about it. And then kindly say to that person, as I say to Dr. Torry’s motion – No. Thank. You.

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