£10,000 proposed for everyone under 55

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What would you do with £10,000?

The government should give £10,000 to every citizen under 55, a report suggests.

The Royal Society for the encouragement of the Arts, Manufactures and Commerce (RSA) said it could pave the way to everyone getting a basic state wage.

The idea sees two payments of £5,000 paid over two years, but certain state benefits and tax reliefs would be removed at the same time.

The RSA said it would compensate workers for the way jobs are changing.

The money would help to steer UK citizens through the 2020s, “as automation replaces many jobs, climate change hits and more people face balancing employment with social care”, the report said.

‘Storm clouds’

Payments would come from a British sovereign wealth fund in the form of two annual £5,000 dividends, the RSA proposes.

The payments would not be means tested, and applicants would only have to demonstrate how they intended to use the money.

Anthony Painter, director of the RSA’s Action and Research Centre, said: “The simple fact is that too many households are highly vulnerable to a shock in a decade of disruption, with storm clouds on the horizon if automation, Brexit and an ageing population are mismanaged.

“Without a real change in our thinking, neither tweaks to the welfare state nor getting people into work alone, when the link between hard work and fair pay has broken, will help working people meet the challenges ahead.”

A Government spokesperson said: “Our priority is to have a welfare system that supports those who work and cares for those who can’t, while being fair to the taxpayer.

“Providing a universal basic income would not allow for the same targeted support that is tailored to meet individual needs.”

But the RSA The report says the fund could help people: “A low-skilled worker might reduce their working hours to attain skills enabling career progression.

Media captionA pilot scheme in Finland is giving 2,000 unemployed people an income, instead of benefits

“The fund could provide the impetus to turn an entrepreneurial idea into a reality. It could be the support that enables a carer to be there for a loved one.”

The fund would be built from public debt, levies on untaxed corporate assets and investments in long term infrastructure projects, and be similar to Norway’s $1 trillion sovereign wealth fund.

As the dividends would replace payments such as Child Benefit, Tax Credits and Jobseeker’s Allowance, the savings for the government could also be ploughed into the fund.

The right questions

Anyone receiving the “dividends” would not be able to claim any tax allowances, which the RSA says would act as a disincentive to wealthier earners wanting to apply for the handout.

In all, the RSA puts the cost of the scheme at £14.5bn a year if it is fully subscribed to, and a total of £462bn over 13 years, more than half of which would be paid for by government savings.

The Labour Party has said it is looking into similar arguments for a Universal Basic Income (UBI).

Jonathan Reynolds MP, Labour’s shadow Treasury minister, said: “This new report from the RSA raises the right questions about the future of work and the long-term challenges we face, including making sure automation and the changing nature of work deliver a fairer, more prosperous society.”

Scotland is considering piloting UBI schemes in Glasgow, Edinburgh, Fife and North Ayrshire.

The RSA report suggests that options for funding a full UBI included a tax on wealth, levies on companies’ assets, and a tax on tech firms – such as Amazon, Facebook and Apple – using or transferring people’s data.

Universal Basic Income – a work in progress

The history of UBI can be dated back to Thomas Paine’s essay, Agrarian Justice, where he proposes the idea as part of a social security system.

More recently the idea has been put into practice in limited ways. For instance, in Alaska all residents have been entitled since 1982 to a yearly cash dividend from the Alaska Permanent Fund.

Finland is half way through a two year nationwide pilot scheme, giving 2,000 unemployed Finns a monthly income of €560 (£497) which continues even if they find work.

Scotland has provided funding for four local authorities to look into the idea.

In the US one Democrat presidential nominee hopeful, Andrew Yang is proposing his version of UBI, a $1,000 a month “Freedom Dividend”.

Even so, some economists believe full UBI can’t work.

Brexit campaigner Patrick Minford from Cardiff University’s Business School said UBI is “not a workable scheme because it’s far too expensive”.

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“It creates a tremendous tax, a disincentive for the average person further up the income scale who’s paying for it all.”

There are questions over how much of a social security system UBI would replace.

Would citizens still be able to claim disability allowance or help with housing?

The RSA believes that properly done UBI would help people get into work, give them an opportunity to rethink their lives and contribute to better health and wellbeing.

Others claim it would be a disincentive.

However, a report by the National Bureau of Economic Research into the Alaska Permanent Fund concluded that “it does not significantly decrease aggregate employment”.

A report by the OECD into UBI said that its effect would be hugely different depending on the circumstances of each individual and the existing tax and benefits systems.

UBI could also be ruinously expensive for governments and provide limited benefit for the poor, it said.

According to the OECD report, if the UK were to fund UBI only with money saved by abolishing the existing benefits system it would lead to higher levels of poverty.

It adds: “However, even in the case where taxes are raised significantly to pay for [UBI] it does not significantly reduce poverty.”

£10,000 proposed for everyone under 55

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