Exclusive: Ed Davey tells Rishi Sunak to fund universal basic income with coronavirus debt-for-shares plan
The Liberal Democrat leader has outlined his plans to fund a universal basic income
Sir Ed Davey has called on the Treasury to allow struggling firms to swap coronavirus loan debt for shares as part of a scheme to fund a universal basic income.
The acting Liberal Democrat leader said ministers should reconsider their opposition to introducing a universal basic income (UBI) as he outlined plans for a new 'Sovereign Wealth fund' to finance the scheme.
Under the plans, firms who could not pay back their government-backed loans or believed the repayments would damage their growth would be able to exchange the debt for shares which could be then be used to fund UBI once the business recovered.
UBI would see all UK citizens handed a cash payment either yearly or monthly regardless of their income, with further additional support being made available for the most vulnerable households.
Calls for such a scheme have grown in response to the coronavirus pandemic amid warnings the fractured job market alongside gaps in the government's Universal Credit benefit system risk leaving people behind.
Chancellor Rishi Sunak has already dismissed a cross-party call to adopt the approach, saying in March it was not the "right response" to the pandemic.
But writing for PoliticsHome, Sir Ed said the debt-for-equity scheme would give firms an opportunity to rebuild from the pandemic whilst also providing a fresh revenue stream to partly-fund the benefit.
It comes as new figures from the Treasury show more than £50bn in government-backed loans have been provided to firms through the various coronavirus related finance schemes, despite fears that many business may struggle to survive the looming recession.
"A universal basic income would give people the security of a guaranteed payment every month, and be a huge boost to some of the most vulnerable in society like the homeless as well as Britain’s millions of unpaid carers," Sir Ed, who is running to become the next permanent Lib Dem leader, told PoliticsHome.
"A basic income is an engine for equality - delivering the most for women and for many in Britain’s black and ethnic minority communities.
"However, lots of politicians talk about a UBI, but few seem willing to set out credible ideas for how you pay for it.
"My plan for a new post-Covid sovereign wealth fund would go a big way to answering that question."
The Lib Dem leadership hopeful said the proposals were based on a previous plan, supported by his party but rejected by then-Chancellor George Osborne, to hand taxpayers shares in the Royal Bank of Scotland and Lloyds Banking Group following the Government bailout during the 2008/9 financial crash.
"We must not miss the economic and social opportunity this time," he added.
"I think Government should help businesses who can’t repay their loans – or who won’t be able to grow if loan repayments hold them back – by allowing these firms to turn their debt into shares – a classic debt for equity swap.
"And those shares should form a new UK-owned Sovereign Wealth Fund. And the dividends from that fund should be used to help pay for a new UBI."
He added: "Covid economics is all about the state investing for the benefit of our people – but if we are going to tackle the inequality in our country, a form of Covid economics must continue after the virus has been beaten."