Time for housing to back a basic income?

By Matt Leach - on 15/01/2014

Following the controversial broadcast of Channel 4's Benefit Street, HACT's Chief Executive Matt Leach wonders if the UK housing sector could help drive the discussion on alternative solutions for the welfare state.

The debate on welfare took an unpleasant turn earlier this month with the broadcast of Channel 4’s Benefit Street.  Although its producers argued the programme was intended as a well meaning window into the lives of the poorest and most excluded, its editing and presentation – and surrounding press and social media coverage - served principally to reinforce a corrosive British welfare debate based around notions of us-versus-them, scrounging and the deserving/underserving poor.

As income inequality and economic exclusion – whether amongst those excluded from the workforce or the growing number of working poor – becomes more of an issue in developed economies, sensible debate about whether our welfare system is capable of meeting society and individuals’ is becoming increasingly important.  Early signs of genuinely new thinking around welfare reform from Iain Duncan Smith now seem long gone.  And the tabloid fog that surrounds welfare benefits at best prevents serious discussion of how to address the needs of the most vulnerable and excluded; and at worst leads to welfare-as-political-football debacles like the bedroom tax.

But if the UK seems stuck in a welfare rut, in other countries some interesting new thinking is emerging, and its worth paying attention to – if only to expose the lack of courage across mainstream political thinking here.  And it centres on an idea that in its time has been advocated by everyone from radical socialists to Richard Nixon and Friedrich Hayek.  And its one that housing providers looking for new ways to address poverty and exclusion amongst their tenant base would do well to start engaging with.

Across the Atlantic, serious thinkers on both the left and right in the US are starting to consider the case for moving on from current welfare debates and looking at what they are calling a Universal Basic Income.  The idea is simple – rather than imposing ever more complex (and sometimes punitive) welfare benefits on the poor, it would be more straightforward and practical to guarantee every citizen a flat basic allowance, which would be unaffected by any earnings they gained on top of it. 

The major driver of interest is forward looking and economic. With jobs increasingly being squeezed out of economies by technology (something I’ve blogged on in the past), and real wages in developed economies largely stagnant as income levels amongst the richest continue to grow, increasingly we face the likelihood that the next big economic problem facing the west will be one of demand – that we can make more goods and services than we can afford to buy with the wages most of us are getting paid. 

From the left, which is inherently sympathetic to Keynsian belief in the value of stimulated of demand by government fiscal policy, a basic income solves this problem in a straightforward way.  Giving people money to spend stimulates economic activity and prevents demand collapse. From a practical point of view, a less complex system of income redistribution also reduces the extent to the most vulnerable are excluded from help by not being able to understand or access the benefits they are entitled to.

From the right, the giving back of money from state to individuals also has considerable attraction.  Whilst tax cuts can stimulate demand to an extent, because they tend to favour the rich who do not spend all their extra money directly on consumer goods, they are less efficient at stimulating demand than a basic income, which because of its wider distribution across different income groups would be more likely to be spent.  At the same time, the moral hazards imposed on individuals as a result of conventional approaches to welfare are removed, and incentives to work increased.  At the furthest reaches of libertarian thinking, it offers a genuine alternative to the current model of the welfare state.

But interest in a Basic Income is not confined to the United States.  On October 4, Swiss supporters of a Basic Income lodged 126,000 signatures in favour their proposal, enough to trigger a referendum on its introduction. Its not going to happen soon - there is no date yet for the referendum – it could take 2-3 years, and subsequent legislation could take longer.  And experiments in Canada as long ago as the 1970s and in India more recently have demonstrated (on a small scale) the positive social, economic and health benefits that can be delivered.  Its even been tried (a long time ago) in part of the UK.

That’s not to say there aren’t issues standing in the way of progress towards a Basic Income.  There are concerns about its impact on incentives to work (although it is arguable that these concerns are at least as applicable to many existing welfare benefits); it would undoubtedly be expensive, possibly requiring the scaling back of other state activity to finance its introduction (meaning at least some of the basic income might need to be spent on purchasing public services that at present were provided for free); the extent to which the state could influence individuals’ decisions (including the seeking of work) through benefits would be massively reduced; and in a country like the UK, with massive disparities in cost of living between regions, it might be difficult to introduce in a way that avoided excessive numbers of “losers” (this might be particularly true if housing benefit were swept into any Basic Income settlement; and it would require a level of political courage to push forward so far absent from the UK welfare debate.

But it looks increasingly like a policy idea that is going to gain ground over the next 2-3 years rather than go away.   Even in the UK, we’re starting to see some stirrings of interest, with advocates emerging from both left and right and some 10,000 UK signatures to a recent cross-continent initiative to get the Basic Income on the agenda at an EU level.  Is it time housing providers became part of that debate?

Welfare; Benefits street; basic income


Basic Income

The question of funding an extra income has a solution: the value of land, the stuff that housing sits on and that swells and swallows so much of most family budgets. Already places like Aspen CO and Singapore do capture a slice of that “ground rent”, via taxation, and use some of it to help make housing affordable for residents. It’s a huge font of funds for government to tap, since people spend so much for natural assets like locations and resources and EM spectrum and ecosystem services. Of course, if society as a whole were to receive that spending, then lenders, speculators, and absentee owners would no longer be able to capture it. A small price to pay for economic justice! If government were to recover the socially-generated value of nature, and of the privileges it grants such as corporate charters, there’d be no need or excuse for counterproductive taxes. Taxes on earnings, sales, and buildings could all be repealed. And if the citizenry were to receive a share of surplus public revenue, there’d be no need or excuse for wasteful and addictive subsidies. Corporate welfare and white-elephant infrastructure projects and such could all be eliminated. With Land Dues instead of the whole array of taxes, and with Citizen’s Dividends in lieu of bureaucratic subsidies, everyone could delight in the disappearance of mindless work to automation. Universal material security would become a norm, letting the worries of econo-man slip thankfully into the past. Ah, blessed geonomics!

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