A Universal Basic Income may not be an answer to tackling poverty in Scotland
Sometimes radical policies choices do not always deliver radical change. This is a lesson that we can learn across the board, and throughout history. But according to our new analysis this may also be the case for the idea of a Universal Basic Income.
A Universal Basic Income (UBI) is an idea that has gained great attention in Scotland, and beyond, in recent years. In its purest form it’s defined as a universal payment, given to every adult and child, without any strings or conditions, and paid as a flat rate regardless of income or employment status. It would replace all or most other forms of means-tested social security payment. It’s a simple and radical change with many adherents across the political spectrum.
As the idea of a UBI has gained traction we’ve seen a number of experiments across the world, including in Finland (though this is a payment to those who are unemployed rather than universal), and here in Scotland the Scottish Government has funded a number of feasibility studies to look at the idea and how it might work, or not.
There are many reasons to propose a UBI, including looking ahead to the potential of a much more automated world, with lower levels of employment (for humans at least), as a way to balance returns to capital and labour, and as a way to increase bargaining power for workers (to name only a few). Equally many propose a UBI for reasons of fairness and equality.
But it’s on this last point – fairness and equality – that our research shows that the idea of a UBI might have an inherent problem.
IPPR Scotland’s new analysis shows that even if we could find the eye-watering sums required to implement a UBI, it may not actually deliver the radical change on poverty we wish to see in Scotland. Indeed, it may make relative poverty in Scotland worse.
We should be clear that this analysis is static, and so does not take account of some of the potential behavioural effects, which some proponents argue would be significant (though they would need to be significant). And secondly, our analysis looks at a UBI from the point of view of relative child poverty. There may be lots of other ways of assessing a UBI’s strengths and weaknesses.
So what did we find? We modelled a UBI set at just above £100 per week per adult, and £50 per week per child. What we found surprised us. We knew the cost of a UBI would be huge – we found a UBI set at these rates would cost around £20bn per year. What we didn’t expect was its effect on relative child poverty. Far from reducing child poverty, a UBI at these rates (and at this huge cost) would increase relative child poverty by up to 35,000 children against a Scotland median income. Likewise, it would have the same effect if implemented across the UK, against a UK median income. This is because a Universal Basic Income would increase median income and move the relative poverty line, bringing more children into relative poverty than it would take out of relative poverty.
Even a Scotland-only UBI, measured against a UK-wide median income, would only reduce relative child poverty in Scotland by around 60,000 children, leaving 23% of children in poverty. For £20bn a year, that is a pretty poor return.
So is a UBI the radical policy Scotland has been waiting for? A radical reform? Yes. With a radical cost? Yes. But with a radical impact? Maybe not. Not for relative child poverty rates at least.
Late last year, the whole of the Scottish Parliament voted unanimously to introduce new legally binding targets to reduce relative child poverty to beneath 10% by 2030. Our recent report showed that this is possible to meet, but only if we’re ambitious and optimistic. And while government investment will be needed to make progress on the target, meeting Scotland’s poverty targets would cost around £2.6bn a year, likely to be beyond government action, and increases in tax and benefits alone. To meet Scotland’s child poverty targets we will therefore need to combine ambition and optimism with hard-headedness.
Our analysis shows that far from contributing to meeting these targets, a UBI may actually make meeting Scotland’s child poverty targets more difficult. A UBI could be a headwind against tackling child poverty that we can ill-afford.
The Scottish Government’s feasibility studies into a UBI are a good idea to potentially capture other strengths and weaknesses. Piloting and researching radical ideas is absolutely the right approach and the Scottish Government deserves credit for doing so. However, when we have brand new child poverty targets, unanimously agreed only a few months ago by the Scottish Parliament, then every investment in making Scotland fairer, and every change to social security in Scotland, should be seen through the lens of whether it would contribute to reducing child poverty or not – just as the Poverty and Inequality Commission recommended in their impactful first report earlier this year.
The creation of the Poverty and Inequality Commission and the Scottish Government’s subsequent (and very welcome) announcement to introduce a new Income Supplement in Scotland, are potentially great steps forward for tackling child poverty in Scotland. What our research shows is that Scotland’s moves on social security should not take inspiration from a UBI in its purest form at least.
Radical policy is, and should be policy that delivers radical impact. But in terms of relative child poverty at least, a UBI in its simplest form may not have the radical impact we need.