The announcement of a Universal Basic Income (UBI) pilot is one of the most eye-catching Welsh Government policy proposals of recent times.
There are strongly held opinions on either side of the debate around UBI. Its advocates describe it as having the potential to be “our generation’s NHS”, while others consider that it’s “not the answer to poverty”.
Our article gets into the detail of the debate, exploring arguments for and against UBI, what the devolution settlement means for a Welsh pilot, and what evidence from elsewhere can tell us.
What is UBI, and what is being proposed in Wales?
UBI describes an approach where the government provides adults with a standard, regular, unconditional payment, regardless of their other income. Some argue a UBI should provide enough to live on by itself; others support more limited universal payments, made alongside existing social security systems.
Welsh Government plans for a UBI pilot are at an early stage, but look to be focussed on a small, targeted group. The First Minister has said there are “strong arguments” for the pilot to focus on care leavers.
However, a number of individuals and organisations supporting the introduction of a UBI have set out potential alternatives. Both Autonomy and Jonathan Rhys Williams from UBI Lab Cymru have called for a geographically spread, non-means-tested pilot over a multi-year period, which would involve around 5,000 people at an annual cost of around £40 million to £50 million. The Future Generations Commissioner has supported a similar approach, and has also suggested a pilot targeted at the arts sector.
How will the devolution settlement affect a Welsh UBI pilot?
Social security isn’t devolved to Wales, with the exception of Council Tax Benefit and the Discretionary Assistance Fund. A key challenge for the Welsh Government will be developing a pilot that is within the devolution settlement, and the First Minister has said that one reason for a limited pilot is that “we don’t have all the powers in our own hands to do it on our own”.
In 2018 Scotland received powers to top up benefits reserved to Westminster, and to create new benefits in areas unconnected to reserved matters. Since then, there have been calls to review the social security system in Wales, including by the Fifth Senedd’s Equality, Local Government and Communities Committee.
The interaction between the UBI pilot and the tax and benefit systems will also be a key issue. The Minister for Finance and Local Government, Rebecca Evans previously said (in her former role as Minister for Finance and Trefnydd) that a UBI trial:
[…] would not be possible without the active co-operation of the UK Government, and this is because of the interaction of universal basic income with the tax and benefit system.
While Scotland has greater social security powers than Wales, recent work carried out there provides insight into these issues. Four Scottish local authorities explored the feasibility of a Citizens Basic Income (CBI), and concluded that:
“[T]he required legislative and delivery competencies for a CBI pilot are reserved to the UK Government and, therefore, at present neither the Scottish Government or Local Authorities on their own could introduce a CBI.”
There were also concerns that a pilot could “lead to direct financial detriment for participants”, as the existing social security system may reduce the existing benefits paid to pilot participants due to increased household income and assets.
What are the key arguments for and against UBI?
The extensive writing on UBI shows support and criticism from a wide range of viewpoints.
The UBI Lab Network, Basic Income and the Royal Society for Arts, Manufactures and Commerce call for UBI, and UBI Lab Cymru has done so in the Welsh context. Polling for the Future Generations Commissioner found nearly 70% backing in Wales for a UBI pilot.
Several consistent themes emerge. Proponents of UBI argue that a basic income:
- is every citizen’s right, providing security from poverty and improving health and well-being;
- can distribute national income more equitably;
- can reward non-wage labour such as caring;
- gives workers freedom to choose other, perhaps more entrepreneurial, options; and
- is simple and easier to understand than complex social security systems.
However, opponents argue that UBI:
- is extremely costly (with the Minister indicating a full UBI in Wales could cost between £35-40 billion);
- isn’t targeted, so money goes also to those who don’t need it;
- represents a significant shift from existing social security systems; and
- can provide a disincentive for people to seek employment.
What are potential alternatives to UBI?
While some organisations such as the Centre for Social Justice support the current Universal Credit system over a UBI, others have called for different approaches to be introduced rather than a UBI. Some of these are more deliverable within the devolution settlement than others.
Dr Victoria Winckler of the Bevan Foundation has suggested reforming the current social security system, and making immediate changes to ‘Welsh benefits’ operated by the Welsh Government like the council tax reduction scheme and free school meals.
Professor Ian Gough supports the introduction of Universal Basic Services (UBS), which advocates greater universal provision of public services such as care, transport and housing.
The New Economics Foundation has called for the introduction of a Living Income for all, while a report for the TUC by the Fabian Society advocates developing alternative universal benefits to better meet the challenges of changes to the working world.
What can we learn from international experiences of UBI?
Several UBI trials have been carried out, although none have involved a full UBI model.
The largest and longest term study of UBI is in Kenya. It began in 2016 and involves 20,000 people split into three groups: a short term group (two years), a long term (12 years), and a lump sum group.
In March 2021 the study reported that the recipients of UBI experienced “better food security and were less likely to report experiencing hunger”. However, it also found that UBI in Kenya “was not effective at completely protecting recipients from economic hardship”.
A Basic Income Experiment was undertaken in Finland between 2017-2018. 2,000 unemployed people aged 25-58 received a monthly payment of €560. The experiment found that employment effects were small, “but recipients were “more satisfied with their lives and experienced less mental strain” and had “a more positive perception of their economic welfare”.
The First Minister has said that a UBI pilot will “need to be carefully designed to make sure that it is genuinely adding income for the group of people we are able to work with”. As we get more detail on the Welsh Government’s plans, we’ll return to this subject to see how it measures up to this ambition.