Could universal basic income ever take off in the UK?

Universal basic income has been described as everything between a utopian ideal and "dangerous nonsense", but with a trial due to take place soon with local authorities in Scotland, how likely is it that it could become a reality in the UK? Jo Faragher investigates.

There were many inspirational quotes doing the rounds after the recent death of the physicist Stephen Hawking, but there was one that rang particularly true for anyone interested in the future of work.

In his last ever post on the discussion platform Reddit, he'd written an ominous warning about how automation could affect the distribution of wealth.

"If machines produce everything we need, the outcome will depend on how things are distributed," he said. "Everybody can enjoy luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution."

Hawking hints in his post at an idea that is not new, but one that has gained more ground in the last two or three years - that individuals could at some point be entitled to a universal basic income (UBI). Other supporters of the idea include Jeremy Corbyn, US politician Bernie Sanders and Facebook's Mark Zuckerberg.

A trial of UBI in Finland, where 2,000 people were selected at random and paid a monthly stipend of €560, was rejected for further funding in April while the Finnish government explores other social security avenues. When the trial was launched, its supporters claimed it would boost mobility in the labour market, giving people a secure income between jobs.

We won't know its true impact on the group selected until 2019, when the results of the experiment are published. Other trials of this type of system - including an annual dividend paid out by the US state of Alaska - have not resulted in the mass worklessness or higher unemployment many had predicted.

Closer to home, four councils in Scotland will begin a feasibility study this year for a basic income pilot. The Scottish government has set aside £100,000 to help fund trials in Fife, Glasgow, North Ayrshire and Edinburgh local authorities, but the idea is still in its very early stages.

How does universal basic income work?

At its simplest, UBI promises an income paid to all individuals, without means testing, to provide them with some level of financial security so they can retrain if they wish, or more easily balance caring responsibilities with more flexible working options. But is it a valid (or even affordable) option for a future where we could see job losses due to automation, or is it "dangerous nonsense", as suggested by Conservative MP Nick Boles?

"UBI is a bit like an iPhone," says Anthony Painter, director of the action and research centre at the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA). "It's simple to use but there's quite a lot packed in behind the scenes.

"The design would need to be considered very carefully; it would depend on the system it's introduced in to, and the perspective from which it's introduced."

The RSA has proposed two models for basic income, with the most viable badged as a "universal basic opportunity fund". This would fund every citizen under the age of 55 with a £5,000 "opportunity dividend" for up to two years, taken at a time of their choosing over a decade. The fund would initially last for 10 years, with dependent children also eligible for the payment in the year a parent, or both, were receiving it.

Because moving to a system of regular payments would be drastic both financially and culturally to UK citizens, explains Painter, these one-off payments could act as a potential stepping stone towards a more purist version of UBI.

"It's not as though one day we just switch off the lights and we're in an entirely new realm, a different relationship between citizen and state. This kind of thing would take generations to bed down," he says.

The Institute for Public Policy Research recently proposed a similar idea, known as the Citizen's Wealth Fund, where all 25-year-olds would receive a £10,000 "inheritance" that they can use to invest in their futures. Carys Roberts, senior economist at IPPR, claims the sum would enable "citizens to collectively own a portion of our national wealth, and make sure everyone benefits from rising returns to capital, not just people who will inherit or who already own assets".

How much would UBI cost?

One of the criticisms levelled at UBI is its potential cost - in its simplest form it proposes paying a lot of public money to those in society who don't need it, as well as those who do.

The RSA estimates that an opportunity fund could cost around £14.5bn per annum over 13 years, with the cost each year dependent on how many citizens elected to take the payment and at what point in the year.

Other models (such as the Citizens Income Trust) propose that adjustments to national insurance contributions and tax thresholds could cover much of the cost, with additional money raised through administrative savings (the theory being that UBI is simpler to administer than universal credit or other welfare payments).

"Our argument is that UBI would be easier to implement if it was more like a state pension or child benefit type of payment," adds Painter. "Universal credit demands to know your household income, needs a real-time interface with an employer, decides whether you've met certain conditions, what your caring responsibilities are etc - with this there are far fewer variables in the system."

There have even been suggestions that a "robot tax" could in some way fund a regular payment for those whose careers have potentially been displaced by automation. Bill Gates has suggested governments tax companies' usage of robots at a similar level to employees, claiming this will "slow down the speed of automation" and manage the displacement of human jobs by automation.

But Jonathan Ebsworth, partner for disruptive technologies at Infosys Consulting, is sceptical. "A robot tax seems to be the initial response," he says. "However, taxing innovation is a very slippery slope, which risks stalling this revolution in its tracks. Defining what constitutes a robot will also present massive challenges to legislators.

"If not through a direct robot tax, UBI could be funded through income tax rates or VAT rates. However, some careful, rational assessment will be required to make sure that this really is affordable."

Incentives to work

Ksenia Zheltoukhova, head of research at the CIPD, agrees that the main concern around UBI is funding it, particularly if the aim is to offer an income high enough for someone to survive on. "While some trials suggest an overall balance between savings and costs of the system, others show a UBI would lead to government deficit," she says.

"The main differentiating factor in this is the extent to which a guaranteed income changes people's behaviour towards work, and the number of people who choose to live on UBI rather than work and pay tax."

Painter at the RSA argues that UBI preserves the incentive to work. "Under the current system, workers tend to be risk averse because they know if something goes wrong with their job they have the welfare state to fall back on. UBI could give them the incentive to retrain or try something different," he says.

Painter even predicts that a UBI could cause upward pressure on wages, adding: "Security means people can walk away. With a guaranteed income, people have more money to spend, which is good for business, and there will be a positive impact on employee voice, which is good for engagement."

Those in favour of UBI also argue that it supports the more positive aspects of flexible or gig working, citing examples of basic income trials where entrepreneurialism has flourished and a better work-life balance created.

"As we've seen from the rise of the gig economy, people are attracted to flexible working options - even if it means they'll lose the benefits and job protection of permanent roles," adds Ebsworth. "UBI could provide a vital safety net for the 'precariat', but one would hope it would also empower people to take entrepreneurial risks more readily."

Barb Jacobson, from the campaign group Basic Income UK and a welfare rights adviser, believes that UBI could reduce the stress many workers currently feel due to insecure contracts or working arrangements. "Some people are working far too hard with no control, others can't work more hours because they will be penalised by the benefits system," she says.

"We have people across the income spectrum needing to take time off due to work-related stress. Our hope is that UBI would create a situation where people could pick and choose - so there are jobs where both employers and employees can benefit from flexible contracts."

Zheltoukhova, however, wonders whether this might create a debate around what people "should" be doing with their time thanks to the security of a regular guaranteed income. "The question of what legitimate and illegitimate uses of people's time are would still remain - while these are currently made by the welfare system, the outcome may not be the same if each individual is making that choice on their own," she adds.

And because discussions around UBI often focus on "technological unemployment", or the threat of automation to jobs, many question what effect it could have on productivity. Zheltoukhova adds: "The overall impact is dependent on multiple factors, including the speed and effectiveness of technological implementation, as well as the economy's capacity to create different types of jobs that complement technologies. Over the next few years we need to see what the trials of UBI demonstrate in terms of costs and outcomes."

Rise of the robots?

Fabio Zoffi, an entrepreneur and president of artificial intelligence and blockchain company ORS Group, argues that it will be technology itself - rather than social security reform - that will fix the imbalances that UBI hopes to redress.

He says: "If we were to introduce something like this on a global scale we'd need strong taxation to rebalance the asymmetry of wealth. Even if we could do this, giving money to people for not working at a level where they can survive financially is not scalable."

Zoffi argues that using emerging technologies such as blockchain, cryptocurrency and AI could give more power to smaller businesses and entrepreneurial individuals. "At the moment too much wealth is concentrated among major companies such as Amazon, and some predict this will get worse. We can reform capitalism from the inside," he adds.

Using these technologies, business transactions could be based more on trust than a company's stock market valuation; margins would be reduced to a level that could be manageable for start-ups and not just major corporations. And while Zoffi supports the ideals behind UBI, he believes there are other routes governments could take to offer citizens enough security to innovate.

"You could have a system where we offer something such as basic health insurance or free energy supply, so people don't have to worry about those things," he says. "This doesn't destroy the willingness to work. Humans need to keep busy, but that doesn't always mean working for someone else."

A recent report by PwC into the impact of automation on jobs said that the first step in considering UBI's viability is "to gather an evidence base on the different options through pilot schemes, detailed financial modelling and other studies" - something that is clearly under way. It also remains to be seen how realistic some of the dramatic predictions around technological displacement turn out to be, adds Painter.

"We're not anticipating that there will be the mass unemployment scenarios people predict as a result of automation," he says. "There will be winners and losers with AI, and UBI preserves the incentive to work."

And the idea may not be as alien and hopelessly utopian as we think. There was a scheme in the 1980s during the Thatcher administration known as Enterprise Allowance, which gave unemployed people who set up their own business a guaranteed allowance of £40 per week. It reportedly funded 325,000 people, contributing to the business careers of Creation Records founder Alan McGee and the man behind Superdry, Julian Dunkerton.

In an age where few employees have sufficient savings or financial security to take risks, and UK productivity lags behind its peers, might it be time to revive this idea? "It was successful because companies were set up and employed people, so there was a return on investment," Painter concludes. "When you give people the means to try something new, they do. Because who doesn't like a greater degree of security?"