The Universal Basic Income (UBI) is much discussed. Peter Sloman examines its history in relation to that of UK redistributive welfare policies. He describes how in the late 18th century the ‘Speenhamland system’ guaranteed poor families a minimum income linked to the price of bread, paid through the poor relief system. Thomas Malthus claimed that this increased poverty by encouraging births among the irresponsible poor. Then came the 1834 Poor Law reform and harsh sanctions upon ‘able-bodied wastrels’ who could not support themselves and their families. Discussion of guaranteed income was stifled.
Around 1900 the poverty surveys of Booth and Rowntree revealed that most people in poverty actually worked hard for inadequate pay. The emerging economics discipline demonstrated that unemployment was mainly due to economic fluctuations, promoted by William Beveridge’s study of unemployment published in 1909, leading to demands for state action and the first measures of what became the welfare state, including the first state pensions from 1908 and National Health and Unemployment Insurance from 1911. Sloman overlooks the Liberal government’s introduction from 1907 of Europe’s first graduated income tax to fund redistribution.
State welfare grew between the wars, unevenly, including housing, health and education services and unemployment pay, to improve working-class living standards, fitness for work and political compliance, though objections to the cost and fears of undermining self-help persisted. Sloman describes inter-war proposals from radicals including Bertrand Russell and GDH Cole, Conservatives like Juliet Rhys-Williams, and others, to replace benefits with a universal subsistence income funded from taxation. They varied in details, all aiming to end poverty and unrest more effectively and cheaply than existing selective benefits. But they had limited appeal. Conservatives resisted higher taxes. Labour preferred to focus on trade union bargaining and management of the economy to achieve full employment at decent pay which they believed was the best route to ‘welfare’.
Welfare proposals multiplied during the war, most popularly those of Beveridge in his report of 1942. He recommended cash benefits adequate for essential needs for food, housing, clothing, fuel etc., for all who could not work for unavoidable reasons including unemployment, sickness, old age, funded by contributions from workers employers and the state, guaranteeing benefits as a right contributors had paid for. They covered all workers, rich and poor, to encourage a sense of common citizenship and protect low-earners from stigma as ‘dependents’ on ‘hard-working taxpayers’, which Beveridge was determined to eliminate. Payments and benefits would build up gradually over 20 years, creating a substantial fund to cover costs
Like other commentators, Sloman misunderstands some of Beveridge’s proposals. He repeats the mistaken assertion of some feminists that Beveridge promoted ‘male breadwinner’ assumptions. He explicitly regarded wives who stayed at home not as dependents upon male breadwinners but as ‘partners’ who ‘must be regarded as occupied on work which is vital though unpaid, without which their husbands could not do their paid work and without which the nation could not continue’ (Report para 107), echoing the views of feminist Eleanor Rathbone. Hence wives had a right to benefits funded by their husbands’ contributions. Beveridge did not, as is also asserted, believe that wives should stay at home but recognized that many of them did, often with little option due to the ‘marriage bar’ which forced women to give up employment on marriage. This largely died out during the war but survived in 1942. Sloman also criticizes Beveridge for failing to provide cash benefits for full-time workers as Heath, Thatcher and Blair did, but his lifetime aim was achieving full employment at sufficient pay to prevent any need for in-work benefits.
Beveridge’s proposals could potentially have almost eliminated poverty but they were never fully implemented. In 1946 insurance benefits were introduced immediately for existing NI contributors, new mainly better-off entrants contributed for ten years, preventing accumulation of a substantial insurance fund. Benefits were set below subsistence-level. By 1950 a million pensioners needed means-tested supplements. Sloman attributes the lower benefits to the wartime government but they were the Labour government’s decision which disappointed Beveridge. Sloman does not recognize that Labour restricted welfare spending to prioritize economic growth and create full employment, always their, and Beveridge’s, ambition. Achieving this did more to raise living standards than their welfare reforms. Labour also introduced the most progressive, redistributive income tax of the century, which helped them lose middle-class votes and office to the Conservatives in 1951. The Conservatives made cuts, but they broadly preserved full employment and the new ‘welfare state’, which was extended by Labour governments in 1964-70 and 1974-9. Sloman describes how living standards rose until, despite its reputation, the ‘benighted decade’ of the 1970s saw income and wealth inequality reach its narrowest point of the century and welfare benefits and services their peak, though they were never perfect and poverty persisted.
Sloman describes how Rhys-Williams revived her proposals to challenge the costs of Labour’s reforms but Conservatives and employers thought them too costly and likely to encourage ‘wastrels’. Right-wing resistance to redistributive welfare in the US led to proposals in the 1940s for a Negative Income Tax (NIT) paying cash equivalents of tax allowances to those below the tax threshold. It was never implemented in US but the idea grew in Britain in the 1960s and 70s following the widely publicized ‘rediscovery of poverty’ by the research of Brian Abel-Smith and Peter Townsend published in 1965. Labour supporters were attracted to NIT to increase income assistance without the costs and inefficiencies of means-testing. The Child Poverty Action Group, founded in 1965 following Abel-Smith and Townsend’s revelations of extensive child poverty, proposed withdrawing child tax allowances, which benefited the better-off, to fund an adequate Child Benefit for all families. The Inland Revenue initially insisted this was administratively impossible, but Labour introduced it in 1979.
Meanwhile means-testing gained support among Conservatives. They preferred minimal, conditional cash transfers to universality because they could incorporate pressure to work. Heath’s government of 1970-74, among other ‘selective’ measures, introduced a means-tested Family Income Supplement to family allowances, but it was costly to administer and only achieved 50% take-up, a persistent weakness of means-testing.
The idea of a guaranteed income persisted. Some anticipated an increasingly flexible labour market due to modern technology, arguing that a guaranteed income would prevent resulting destitution, enabling people to use their freed-up time positively including gaining new skills. Then, under Thatcher’s Conservative governments from 1979, unemployment and poverty soared, benefits and services were cut and sanctions increased while taxes fell, the labour market and financial services were deregulated. Housing costs rose following the sale of council houses without replacement and abolition of rent controls, necessitating the introduction of means-tested housing benefit. Attacks on ‘scroungers’ intensified to justify cuts and privatization of services. The rich grew richer and inequality grew. Spending rose as welfare shrank due to the costs of means-tests and sanctions. In response, radical groups, including Claimants’ Unions and the Women’s Liberation Movement, promoted a basic income, though others opposed it as utopian, preferring to fight for good wages, jobs and gender equality.
When New Labour came to power in 1997 Gordon Brown as Chancellor integrated taxes and benefits, aiming, successfully, to reduce unemployment and child poverty. Labour abandoned its previous strategy of raising universal benefits and introduced a complex, costly system of tax credits which raised low working incomes, funded by savings from declining unemployment, abolition of the married couples’ tax allowance and mortgage interest relief and freezing personal tax allowances. But their complexity combined with computer failings caused substantial over- and under-payments and major problems for claimants. Economists and trade unionists criticized them for subsidizing low wages and undermining efforts to raise productivity and trade union organization.
Labour’s introduction of Britain’s first minimum wage might have countered these effects, but it remained low under pressure from employers, though they also improved work conditions, including giving part-time workers equal rights with full-timers. Labour gave positive support to the unemployed with its ‘New Deals’ for under-25s, single mothers and over-50s, providing advice about work and training as well as benefits and free childcare for mothers, replacing rather than ‘building on’ (as Sloman claims) punitive Conservative sanctions. They were funded by a £5bn ‘windfall tax’ on privatized utilities. Complementary redistributive measures included Educational Maintenance Allowances to enable young people in low-income families to remain in education or training to age 18, the Sure Start scheme to improve the health, educational and social skills of the youngest children from deprived backgrounds to give them a better start in life, substantially increased Child Benefit, and means-tested Pension Credits which raised pensioner incomes to their highest level since state pensions began, though about 30% of eligible people did not apply. Funding for the NHS and education increased substantially. Inequality persisted but grew more slowly; low incomes rose while high incomes rose faster, unconstrained by Labour.
The financial crisis of 2008/10 limited further redistribution. It had no place in the ‘austerity’ policies of the Conservative-led coalition government which followed. George Osborne, as Chancellor, attacked ‘shirkers’ assisted by tax credits. He cut taxes and working-age benefits but increased take-home pay by raising the income tax threshold, later raising the minimum wage, relabelled the National Living Wage, which it was not. Tax credits and other working-age benefits were merged into a single, highly conditional, strictly administered system, Universal Credit, designed by Iain Duncan Smith, Minister for Work and Pensions, to minimize redistribution and enforce work. It was slow, complex, considerably more expensive and less generous than previous benefits. Poverty and debt were increased by delayed payments, abolishing benefits for the third and later children born after April 2017 and capping household benefits. When the UN Rapporteur on Extreme Poverty and Human Rights surveyed poverty in the UK in 2018 his report excoriated a system ‘fast falling into universal discredit’. The government boasted that unemployment fell exceptionally low, but so did work security and pay with the surge of the unregulated ‘gig economy’ as employers ignored the ‘living wage’. By 2018 independent researchers found 23% of the population in poverty, 60% in low-paid working households.
Sloman describes the reforms to raise pay, regulate the workplace and improve public services, promoted by the new Labour leader Ed Miliband as ‘predistribution’. Supported by his successor, Jeremy Corbyn, without the label, plus public ownership and creation of higher-skilled, better-paid work. But doubts about the feasibility of such transformation led, writes Sloman, to an ‘explosion of public interest in UBI’ including among Labour Party members and trade unionists. They believed that such policies belonged in a vanished world of stable work, further eroded by technology, while UBI would end destitution and enable workers to reject exploitative work. It could be funded from state investment in automated work, assisted by wealth taxes and converting tax allowances to UBI payments.
But such schemes proposed no more than subsistence incomes and would take time to implement. It was hard to persuade policymakers that problems could be resolved by any form of UBI except at considerable cost. Fears that it would encourage ‘shirkers’ remained pervasive. There was growing interest in UBI in other countries and some local experiments, as in Finland in 2017/18. This did not report until after this book was published, but the findings did little to raise hopes that UBI is a realistic possibility.
The book was written before the pandemic intensified poverty and unemployment. As Sloman argues, ideally, people need stable, dependable incomes. UBI could provide this but it is hard to see how, given prevailing preferences for selectivity, conditionality and low taxes, and demands arising from the pandemic for increased public spending on health, social care and other services. Sloman suggests, not very optimistically, that resistance might be defused by meeting the cost with a Citizens’ Wealth Fund or carbon tax. The history of political division over British welfare suggests that if any government courageously implemented UBI it would be abolished by its successor. The pressures that have increased poverty and eroded the welfare state could prevent UBI. Sloman present a clear account of the emergence of UBI and the arguments for and against, without raising hopes that it is realistically on the horizon.
