How to Give Money to Everyone

“The conditional programs inherently use poverty as a threat. That’s Cruel. Shouldn’t we be ashamed of ourselves?” ― Karl Widerquist

The mounting crisis caused by the COVID-19 pandemic is forcing countries to adopt unprecedented measures to combat it. In addition to the public health measures such as physical distancing (not social distancing. At times like this we need MORE social solidarity) we’re also seeing unprecidented measures being deployed to salvage an economy that has practically ground to a halt. Unlike any economic recession since possibly the 1930s we’re seeing a combined demand and supply shock. The virus makes it hard to make and sell things and everyone is at home in quarantine so no-one is buying the things anyway.

This isn’t true of all sectors of course and a great deal of effort is being expended to keep essential services like food deliveries running. In addition to my friends working in the health service and my family working in the care sector, my hat goes absolutely off to my friends working in the food sector. When the day comes that we’re allowed to buy a round for each other again, they’ve all more than earned a few from me.

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But with so many folk not working, there remains the problem of ensuring that they can keep being fed. The Conservative UK Government announced measures the other day that went far, far beyond those things that they hounded the Labour manifesto for back in December. What was Evil Socialism just a few months ago looks like a pale shadow of the emergency packages being announced daily now by the Conservatives. The announcement that they’ll pay 80% of the wages of furloughed workers (whether or not their employer pays the other 20%) is impressive but does nothing for self-employed people, folk on contract work or folk – especially artists and performers – who work on commissions in a world where no-one is commissioning them. Their fate is to be drawn into the evil that is Universal Credit.

Measures to allow people to take a mortgage holiday of up to three months will be welcome (though my bank made it clear that interest would still be charged through those three months. I estimate that a three month holiday now would cost me upwards of £500) but will mean nothing to the thousands of renters who will still be forced be forced to pay rent even if their landlord is not paying for the mortgage for the building.

Impressive though the UK Government’s measures have been, they have also been very highly targeted and the message it is clear. If you’re a worker with a mortgage, you’ll be looked after. But if you’re a self-employed renter then you’ll take your £90 a week and be thankful.

We need a system that ensures that everyone – regardless of working and living conditions – can pay essential bills and feed themselves throughout what could be a very lengthy quarantine even if they’re healthy but especially if and when they fall ill.

I’m very glad to see the SNP join the Greens in calling for an emergency UBI (temporary for now though I’m sure I’ll have more to say about that in months to come) and I’m glad to see the Early Day Motion supporting an emergency UBI being signed by representatives almost every party in the House of Commons (with the notable exception of the Conservatives).

At this point, I’m not too concerned with the specifics of what we call it. A Universal Basic Income would be the best approach but if we want to discuss, say, a minimum income guarantee (which would effectively be the same as a UBI except the benefit would be tapered down for those who are working rather than income tax tapering up for those on higher wages) or a negative income tax (which would effectively taper down the benefit AND taper up the income tax given that they are effectively the same thing).

What is most important right now though is getting that money to everyone – and that means everyone. We can’t afford to miss people out because those people are very likely to be the ones most vulnerable to succumbing to the illness. The UK Chancellor Rishi Sunak was right when he said that this will be hard to do but that isn’t an excuse for inaction. We need to come up with a mechanism to help people and it needs to be done quickly. It’s possible to backdate wages and taxes but as Robin McAlpine has said recently, you can’t backdate a child’s dinner.

Mechanism One: Cut the Need for Payments

The primary reason that folk who are furloughed or in quarantine right now still need money is for regular utility bills (folk working from home will have noticed their electricity and heating bills creeping up through increased demand) as well as rent and mortgages. Many of these payments could be suspended. Some countries – like France and El Salvador – have started doing this. This wouldn’t be a total solution – people still need food – but it would greatly ease the burden for a lot of folk and would make it easier and cheaper to roll out any additional payments. Rather than a sole and sufficient solution, this could be paired with another of the mechanisms outlined below.

Of course, one advantage that many countries have and which the UK generally lacks is that they have kept the vast majority of their utility services in public hands. Suspending payments is therefore easier to see as a form of public rebate. In the UK though (and especially in England) most of these services have been privatised or sold off to the foreign public sector. The Government may be able to  order payments to be suspended though that will inevitably lead us to a discussion about how those companies would then be compensated…

Mechanism Two:- A Tax Rebate

The next mechanism, and first real option for me, is to work not through the DWP but through HMRC and to deliver the UBI through what would effectively be a tax rebate either via the income tax or via the National Insurance channels. The advantage of this method is that the PAYE infrastructure is already there and should be relatively easy to implement. Everyone with a tax code could be identified and paid the appropriate amount and, in the case of the payments being via a negative income tax or income guarantee, their existing income could be easily factored into those payments. UBI would, of course, pay a flat amount regardless of other income though the additional tax implications on other earnings could also be easily factored in.

The downside of this approach is, similar to the abovementioned wage guarantee, that it wouldn’t capture workers who don’t operate through PAYE such as the self-employed.

It also won’t capture the unemployed and non-employed (from those who were already not in work before the crisis to contractors who no longer have contracts due to shutdowns).

A workaround for this might be the one I suggested in my Social Security policy paper a few years ago where we adjust our thinking on tax codes and integrate things like that into a digital citizenship ID. This would probably be the best solution in the long term but it might take too long to deliver in the midst of this crisis (which, itself, will be an argument for making sure the “temporary” system becomes a permanent one. Times of crisis are the times when things like this are most needed but hardest to set up.

Mechanism Three: Direct Bank Payments

The UK Government, through HMRC, has the power to forcibly remove missed tax payments from your bank account if you persistently miss them so the infrastructure again is already there to do this in reverse and to directly credit bank accounts with a regular payment. Similar proposals like a “helicopter drop” or a “People’s QE” work in a similar way although these schemes often focus on a one-off payment rather than a regular one. This mechanism would capture more people than the tax rebate and would include more self-employed people, however it would miss the 1.2 million people in the UK who do not have a bank account.

In normal times, the workaround for this would be to instruct people to go to their local Post Office or bank and set up a basic bank account. But we’re losing Post Offices and banks at a frightening rate. In normal times we’d strengthen this plan by setting up a network of local, public bank branches to ensure that everyone is contacted and offered these basic bank services and get their UBI.

But again, this takes time and effort and telling people to go out and visit a physical branch is a direct contradiction of the instruction to stay at home to avoid contracting and spreading COVID-19. Folk could do this online but many of the folk without bank accounts may also find this difficult as it’s difficult to purchase an internet connection without a bank account and public access points are also shuttered right now.

Mechanism Four: A UBI Card

This is a novel solution that I’ve seen discussed in a few places and is now being mooted by a member of the US Congress. The idea is that everyone would be posted a debit card pre-loaded with a certain amount of cash and then regularly topped up (The US proposal suggests $2,000 initially and then $1,000 per month).

This mechanism would work best with a true UBI rather than a negative income tax or minimum income and would solve the problem of making sure that everyone has a bank account by effectively giving them one behind the card. Again, the lack of a public retail bank is a barrier here but either the UK Government could decide to leverage its majority ownership of RBS or it could co-ordinate with the other banks and the Post Office to make this possible.

Cards could be mailed directly to every household and could be made available in, say, shelters, so that folk who are homeless could pick one up.

There will be an issue with cross-identification to ensure that someone doesn’t obtain more than one card and in normal times this would be done by presenting at a bank to activate it. ATMs may be able to do this too but even if they can there is the issue of trying to do this while maintaining physical distancing and minimising the need to leave lock-down. Activation by phone is a likely solution to this.

The other barrier is the need to physically create up to 65 million cards and distribute them. Again, in normal times, it wouldn’t be too much of an issue to have folk wait a while for their card (and to accumulate UBI on it while they do) but folk really don’t have time to wait. You can’t backdate dinner.

So maybe the solution is to couple this with an online banking service. Encourage those who can use that to use it until their card is ready and to prioritise production and distribution for those who can’t. Maybe, as with vital medical equipment, production lines currently not being used for something else can be turned over to card production.

Conclusion

Of the four mechanisms, I think number Four, the Debit Card, is the one that would capture the most people with the minimum of barriers (considerable though they may be). Looking forward, this system could be converted into a full public retail bank and payments system infrastructure so that it could be made permanent.

I call on the UK and Scottish Government to immediately do everything they can to bring about a Universal Basic Income. If this mechanism does turn out to have fatal flaws in it, then do it by some other means but do it now and do it effectively. We can’t have any more half-measures that only target the folk you think are important enough to be protected. All of Us deserve that protection.

The primary lesson in all of this is that coming out of this crisis we must learn from it so that we can make our society and economy more robust in the face of these emergencies. We cannot just drop the “emergency” measures and go back to normal.

Emergencies are the moment when folk think at their most creatively to solve things that urgently need solved when the “normal” tools have failed and they are the points when these solutions are at their moments of most need but also the moment when it is hardest to deliver them.

The solution to that problem is to try to create a culture where we maintain that creativity and maintain that emergency infrastructure in times of calm so that when they are needed again, we are ready.

If we don’t want to go back to normal after this, let’s try to go back to something even better.

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3 thoughts on “How to Give Money to Everyone

  1. How about, everyone on the electoral register gets a UBI payment, those in that group that are on PAYE receive their salary as normal, if above UBI value, otherwise they get a top up, and the company paying them claims back the UBI. Money gets sent from treasury to councils, or they coordinate the distribution. No, not a quick easy mass payment, but then our governments appear to be dragging this out for maximum economic damage, so there should be time to get some proper systems in place. I know I know, I don’t really know enough about it. It’s all a bit doom and gloom so just trying to explore ideas, so some random questions:

    How quickly could a Scottish HMRC be set up? Would keeping current tax systems allow for quickest set up, or would creating a brand new tax system be quicker?

    If the latter isn’t quicker – would we be better, on independence, taking our time and setting up a good basis for the system? Could this be created to incorporate UBI right from the start? Would we want to?

    Would there be economic arguments for or against Scotland calling for an indendence referendum in 2021? (obviously there are always constitutional arguments FOR independence) Seeing as how the UK and global economy is about to tank.

    Like

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