AT its most simple universal basic income (UBI) is a government programme in which every adult citizen receives a set amount of money on a regular, unconditional basis. The current range of proposals are probably best understood as a patchwork of possibilities rather than a single idea or policy, but it’s basically about giving money to solve social and economic problems.

UBI has a specious appeal and its advocates sometimes speak of it as the catholicon that will save capitalism from itself. However, some of the problems are signalled by its own advocates.

Nick Srnicek and Alex Williams in Inventing the Future, write that UBI’s establishment would allow workers to have “the option to choose whether to take a job or not (but)... if the payment isn’t high enough to let people to refuse work, UBI might push wages down and create more ‘bullshit jobs.’”

And here, Luke Martinelli from Bath University summarises the issue nicely: “An affordable UBI is inadequate and an adequate UBI is unaffordable.”

A truly universal UBI of £10,000 per annum for people over 16 and replacing all existing benefits, would cost nearly 30 per cent of GDP. In addition to the impact on public finances, the threat to other items of public expenditure, the impact of any resultant tax increases on the poorest in society, the issue remains that £10,000 is not a substantial annual salary that would give everyone the option to reject work and “bullshit jobs” as Srnicek and Williams loftily and coarsely dismiss some labour.

The compass paper

Compass wrote “Universal basic income: An idea whose time has come?” in 2016. It’s an interesting paper as despite being for the concept in principle, its intellectual rigour helped highlight some of the fundamental issues.

The “full UBI” schemes that they projected replaced all or most of the existing benefits: both showed an average gain for poorer households but a large number of losers amongst people at the lower end of the distribution, the losses all leading to sharp rises in relative child poverty. Also, the basic tax rate was lifted to 30 per cent to help meet the costs.

Their preferred “partial” scheme was a modified UBI that kept many existing means-tested benefits, but not child benefit.

For an additional £8.5 billion it has some good elements as a supplement to the current welfare scheme, but was not a solution to the problems of relative poverty, economic precarity nor the changing nature of work under this capitalism.

Compass also acknowledged that separate arrangements would need to be put in place to handle the childcare costs that arise from parental employment representing additional net costs of up to £14 billion on top of the £8.5 billion projected already. There would also be an additional net cost for disability and housing.

“Because of the high levels of rent and widespread variations in such levels and the current structure of the housing market in Britain, some kind of means- tested support will be inevitable... Ultimately, reducing reliance on means-tested housing support will depend on housing policies that would bring current costs down.”

This is an admission that UBI is no catholicon and has to be part of an integrated set of solutions to rectify the injustices of class society.

UBI and unemployment

The prospect of a shrinking job market due to increased automation has swollen the ranks of UBI supporters. Many see UBI as a way of mitigating the social and economic downsides of technological change and the resulting unemployment.

Working through a simplified example questions this. Say the corporate sector puts one million people out of work on an average salary of £30,000 per annum due to technological advances and assuming a corporate tax rate of 25 per cent (the new rate from March 2023), they pay an additional £7.5 billion tax that year on the increase in their profit (25 per cent of £30 billion).

Assuming a simple tax rate of 20 per cent, the unemployed workers will pay £6 billion less tax that year so the government is only around £1.5 billion better off, assuming that they are able to capture all that increased profitability through corporate tax.

Assume that the unemployed workers received £10,000 UBI per annum and spent 90 per cent of their post-tax income including UBI, this yields an expenditure of £30.6 billion per annum from this workforce when they were employed

If they have to rely on their UBI payments they will probably spend all of it, amounting to £10 billion. So that’s £20.6 billion taken out of consumer spending, with the government only being a dubious £1.5 billion better off through the tax system.

The increased profits of the firms that make redundancies will go to already wealthy people and institutions with a much smaller propensity to spend. Theoretically some of it could be spent on increased investment in capital and research and development, however recent experience shows that it will go on share buy-backs, dividends and other investments including those associated with tax havens.

In order to compensate for the reduced demand, the government will be forced into a combination of increased taxes on wealthy and middle-income people, borrowing and/or printing money.

There are two major constraints on this: the wealthy are very good at hiding their money — around 10 per cent of world GDP rests in tax havens — and their political power also militates strongly against increased taxes on their income, whether it be personal or corporate; giving everyone in Britain over 16 a UBI of £10,000 per annum is equal to around 28 per cent of GDP, that’s a significant impact on the room for other expenditures that could alleviate the impact of job losses.

To quote Daniel Zamora in Jacobin: “No existing economy can pay for a generous UBI without defunding everything else. We would either have to settle for the minimalist version — whose effects would be highly suspect — or we’d have to eliminate all other social expenditures.

“Until we profoundly transform our economies, we can’t implement a measure that would cost more than 35 per cent of GDP [his calculation of some of the more generous schemes suggested in France] in economies where the state already spends around 50 per cent of GDP.

“The power relations needed to establish this level of UBI would constitute an exit from capitalism, pure and simple, rendering depictions of UBI as a means of social transformation nonsense.”

Predictions about the inevitability of mass job losses due to automation are all based on the assumption, and normalise the myth, that the economy is a mechanism that exists outside of human agency. The economy is created by people: people who could collectively chose to stimulate employment in the crucial sectors of health, education and environment if they so desired. UBI is a capitulation to the dominance of neoliberalism, not a robust response to its excesses.

It is necessary and possible to raise funds to bring greater security, opportunity and power to all people, but the money needed to pay for an adequate UBI scheme would be better spent on comprehensive reforms and building the infrastructure and values essential for a just and environmentally sustainable economy.

Stewart McGill is convener of the Communist Party’s political economy commission.