Thoughts on Jonathan Reynolds article re Basic Income

Recently the Labour MP Jonathan Reynolds wrote an interesting article in the New Statesman of how the concept of Basic Income was becoming increasingly attractive especially given how the uber-slow-motion car crash of Universal Credit that is unfolding. I am pleased that this concept is being discussed more seriously given the changes occurring to how modern economies work. Below I give my two-pennies worth as to how Labour could think about the challenges identified in Reynolds article.

Both the concepts of Basic Income and Universal Credit are seductively simple but in practice don't lend themselves to bringing simplicity to people's lives or in delivering policy intentions.

Uuniversal Credit has been plagued by IT problems as the complexity of people's lives and how the State interacts with them overwhelms any technical solutions. The biggest problem that cannot yet (ever?) be resolved by technology is the level of conditionalities expected for Universal Credit. Ironically its the lack of universality in Universal Credit that stops the system from delivering its declared outcomes.

The pure system of Basic Income has the opposite problem as the lack of conditionality results in perverse policy outcomes. Declan Gaffney's article in The Guardian discussing the problems of implementing a Basic Income programme in an imperfect world. Gaffney rightly points out that conditionality is used within the current system to correct unfairness which a pure Basic Income system wouldn't achieve.

Yet the research of Professor Jane Costello into the effects of a stipend on a community of 8,000 Cherokee Indians from their new casino in North Carolina (this is a good discussion of that research) perhaps offers (dare I say the words) 'a third way' to consider instead of a pure version of Basic Income or Universal Credit.

As ever, it requires being clear on policy intentions. In Reynolds' article, his friend Gordon poses a good question: “How....will we ensure sufficient support for people as they have to retrain throughout their working lives - not just for several different jobs, but for several different careers?”

What I would suggest are three specific policies to work together. The first policy would introduce a 'Income Buffer' available to all working age adults set (for illustration) at £3,000 per annum. The second policy would be an annual 'Lifelong Learning Grant' to all adults again set at £3,000. The third policy is to make Jobseekers Allowance time-limited and contribution based abolishing long-term unemployment.

Income Buffer

Rather than seeing Basic Income as a replacement for multiple benefits, an Income Buffer would be an additional scheme to the existing benefits system which would adjust their awards accordingly.

While I would make the Income Buffer universal for working age adults, I wouldn't make it unconditional. Instead I propose using the Income Tax system to create a taper so that as personal income increases so less buffer is required. I would designate the Income Buffer as part of a person's taxable income. Given that someone working 40 hours a week on the Osborne Living Wage in 2020 would be earning £18,700 gross per annum then any taper needs to be considered as to its starting point.

This would have beneficial effects for those affected by zero-hour contracts as it would create some stability to plan around. It would strengthen the positions of the self-employed. It would also reduce the cliff-edges between being in-work and out-of-work that have become increasingly sharp with current government policy.

Essentially its a mitigation policy for the current transitionary work environment that exists in the UK for a large part of the population. While such a policy doesn't have the ambitions of savings that a pure Basic Income system implies, it would give a working model that with further developments could integrate other benefits into the Income Buffer.

Lifelong Learning Grant

One of the many things that frustrated me about Labour's 2015 election campaign was the £3,000 cut in university tuition fees proposed. While there was a good back-end argument about the affordability of the Student Loan book to Government and the effects of that debt on graduates activity in the economy, Labour spokespeople couldn't articulate this or respond to the fact that for universities, the front-end funding was very successful for their budgets and students were discounting the future to attend university in the present. It was also a very limited cohort to appeal to (part of the 'vote Labour get a toaster' problem).

Instead, what I would propose is an annual Lifelong Learning Grant that everyone over 18 would be given to spend. Each Lifelong Learning Grant would be time-limited so that people would either spend it or lose it as each grant cannot be rolled over to the following year. The grant would have to be spent on accredited courses but these should vary from universities, further education colleges all the way through to evening classes.

So for the student facing £9,000 of tuition fees, they can use their Lifelong Learning Grant to offset some of the costs whilst keeping the financial benefits for universities. However the potential is in developing an educational culture across all sections of society generating economic activity and allowing people to develop new skills or retrain whilst in work or if they have been made redundant.

In particular, I would localise the accreditation process allowing local authorities to encourage and influence what is provided to support their economies. Yet such a policy supports personal choice as ultimately it will be each individual who chooses how to spend their Lifelong Learning Grant.

Abolishing Long-Term Unemployment

This also stems from another frustration with the 2015 election campaign. In particular not having the courage of our convictions so were left having a mealy-mouth set of policies that was designed to appeal to the Daily Mail but was incoherent regarding work and unemployment.

Likewise, we have senior politicians who will reflect the public desire for contribution-based unemployment benefits but don't have the confidence to follow that logic through. Any contribution-based system is time-limited by necessary.

As my local Labour MP says 'the clue is in the name - Labour'. The Labour Party formed by workers who believed in fair pay for fair work and a decent society. Its not difficult yet that seemed lost at the last general election. We're now seen as the party for benefits and for the marginised. We need to return to our roots.

So lets adopt a contribution-based unemployment system but with the quid pro quo that once the time limit expires, there will be employment available at the 'Osborne living wage'/minimum wage. Not work for your benefits as Rachel Reeves suggested last year. If you work, you are paid a wage. Traditional Labour values that actually simplify the relationships between the person and the State.

My instinct on the time-limit is that everyone would be entitled to three months then you have to earn each incremental increase in time by how long you have put in. The system, that tops up the Income Buffer, could be as generous as some of our European neighbours are (depending on contributions!). Also the time-limited nature of this system is the sanction. We'll treat people as adults, provide help and support but when your time is up, its up.

The quid pro quo for a contribution-based system is, I admit, still in the formation stage of my thinking. Yet if we look at the direction of travel of current welfare policies and the last Labour manifesto then it isn't a big leap to make. This is where we need to keep in mind that there is often a difference between socially useful activity and economically valued activity. I also think we need to consider the space that local authorities have withdrawn from.

So that's the compact with the British people that I would draw - the State will support you if you support your community. So valuing work of social value. This would align the State more towards the development of the 'gift economy' that is emerging and being discussed by thinkers such as Paul Mason. Delivering this will need a shift away from centralised procurement in Whitehall.

Thoughts

If Universal Credit has taught us anything, its that 'Big Bang' solutions to policy problems are fraught with simplistic utopian thinking for which the consequences are often worse than the current policy delivery. A pure Basic Income system would also suffer from this effect.

Hence why I would suggest thinking about an Income Buffer concept. It shouldn't be difficult to make arguments for this policy in television studios and on the doorstep. Defending against criticisms such as 'affordability' will require some thought.

An Income Buffer would directly respond to the financialisation of people's lives especially in the South-East while creating more economic stimulus in the poorer communities of the country. It also reflects the increasing fragmentation of the modern economy by lubricating people's working activities. It would create room for people to retrain and reskill in conjunction with the Lifelong Learning Grant. It also creates the opportunity to reform unemployment benefits so that they are contributory as public opinion would like them to be.

For the policy to be accepted then it needs to be set at a level where it isn't possible to live off and shouldn't be seen as being generous to 'scroungers'. Hence why existing benefits should be reduced in accordance with the Income Buffer. Currently £3,000 is approximately the JSA rate for 18-24 year olds so whether you have a lower buffer set for this cohort would need to be considered. Access to other support such as Housing Benefit would have to be linked with the social compact discussed above.

As with any policy change, there will be winners and losers. I'm sure that many problems will be pointed out. Yet as with Jonathon Reynolds' article, I would argue that the role of Government is to achieve policy outcomes as to what sort of society we want to live in, what resilience needs to be built into our communities to adapt to a changing world and how to stay true to Labour values. Its not an easy challenge.

Contract imposition and the opportunity for the BMA Doctors

Jeremy Hunt yesterday in Parliament stated that he would impose the new contract.

There is for the BMA and its 'Junior' Doctors an opportunity here for industrial action which is more effective than strikes as a protracted dispute with work to rule or strikes will reduce public sympathy.

It comes in this simple fact - no contract can be imposed on those possessing the current contract. There has to be a termination of your existing contract in August. The new contract will be laid out and by continuing to work without challenging that contract means you accept the new terms.

It is the space between termination and acceptance that the BMA and its Doctors should exploit.

The BMA should set up an exclusive employment agency for Doctors to join in August at the point of termination of their existing contracts.

The Doctors should then inform their current employers that: they'll be accepting redundancy in August as a result of their contract termination; they'll be expecting the statutory redundancy pay (for those entitled); they'll be joining the employment agency at the point of termination; any work undertaken after the point of termination as a result of shift pattern will be voluntary and not an acceptance of a new contract; any further retention of their services will be through the employment agency and its terms and conditions.

Through collective action, having tens of thousands of Doctors only accessible through this employment agency will impose significant additional costs onto NHS Employers while having to accept significantly better working conditions and practices. What are the NHS Employers going to do? Who else will they find by August?

You "cannot buck the market" as Tories are so fond of saying. This is a market response to the non-market practices of Hunt and co.

By terminating the employment contracts of Doctors, the NHS frees them to organise their lives in a better way for themselves. Exploit that opportunity. Embrace the market and watch the panic rise with NHS executives as their projected budgets and services spiral out of control. By controlling the future, a better settlement can be negotiated today.