Covid economics have made a Universal Basic Income possible
Covid economics is all about the state investing for the benefit of our people, says Ed Davey MP | Credit: PA Images
If we are going to tackle the inequality in our country, a form of Covid economics must continue after the virus has been beaten.
A Universal Basic Income – UBI - has long been a liberal aspiration. The concept that every citizen should receive a small payment, unconditionally.
UBI supporters like myself have a range of objectives but for me the most compelling include the way a UBI will help the most vulnerable, who too often slip through our byzantine welfare state, from the homeless to young people starting out, and how a UBI will recognise the crucial work of millions of unpaid carers in our society. For me, a UBI is all about creating a fairer, more caring society.
The challenge for UBI supporters has always been the question – how will you pay for it?
Having worked on the first substantial proposal for a UBI back in 1989, when as Paddy Ashdown’s Economics Adviser, we developed what we called the Citizen’s Income, the power of this objection is overstated – as tens of millions of people already in effect get a UBI, either via their personal tax allowance, state pension or some other credit or payment.
So the real fiscal challenge is, how to meet the cost of paying this sum to those who currently miss out support from today’s gargantuan tax and benefit system?
I think Covid economics provides the answer.
While attention has understandably focused on the furlough scheme an equally huge state intervention has been the loans and loan guarantees Government has provided businesses.
Worth tens of billions of pounds, the key future consideration from this Government lending will be, what happens to those businesses who will struggle to repay the loans? How should the Government respond?
When the banks were bailed out in the 2007/8 financial crisis, Liberal Democrats argued this could be turned into an economic and social opportunity.
My friend and former MP for Bristol West, Stephen Williams, developed a brilliant idea that every adult on the electoral register should be given shares in the Royal Bank of Scotland and Lloyds Banking Group, as a way of redistributing wealth, whilst maximising the return to the taxpayer.
It was an opportunity George Osborne refused to take up.
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
But we must not miss the economic and social opportunity this time.
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.
Sovereign Wealth Funds used to help the citizens of a country are not a new concept.
There are many successful examples worldwide, like Norway and Singapore, where Governments have taken a long term view, investing for the benefit of their people.
Again, if you look round the world for inspiration, you see how Canada has used its public pension funds to invest successfully for its citizens.
You see how the state government of Alaska pays its people a dividend, averaging over $1000 a year, from the returns to the Alaska Permanent Fund, its equivalent to a sovereign wealth fund.
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.
Ed Davey is MP for Kingston and Surbiton and co-acting leader of the Liberal Democrats