Wednesday 18 March 2020 6:16 am

DEBATE: Is now the time for the UK to trial a temporary Universal Basic Income?

Julian Jessop is an economics fellow at the Institute of Economic Affairs
and Matt Kilcoyne
Matt Kilcoyne is deputy director of the Adam Smith Institute

Is now the time for the UK to trial a temporary Universal Basic Income?

YES, says Julian Jessop, an economics fellow at the Institute of Economic Affairs.

In normal times, cash payments regardless of individual need would be too expensive, poorly targeted, and distortionary. It is therefore right to use existing means-tested benefits (notably universal credit) as the first line of defence to protect people’s incomes from coronavirus. 

But these are not, of course, normal times.

Economic activity is collapsing, mainly because we actually want some people to stop doing what they would normally do. Self-isolation is not a credible strategy without effective income support. The current benefits system could break down if too many people apply at once, and many could fall through the gaps.

An initial lump sum payment of, say, £1,000, to each person of working age would go some way towards making sure that all households can continue to afford essentials. Some of the money could be recouped from the better off (at a later date) by making it taxable. If this payment has to be repeated, so be it.

NO, says Matt Kilcoyne, head of communications at the Adam Smith Institute.

Some are set on using this public health crisis to push their pet projects. In the case of Universal Basic Income, this is blinding them from the reality that it is the wrong prescription at the wrong time. 

No firm or individual could have reasonably anticipated a multi-month pandemic-induced shutdown. Demand has collapsed in sectors like travel, hospitality and leisure. In normal times, you might think that a broad brush demand-side boost would be a good idea. 

But while a cheque for a thousand pounds a month to every one of us might sound nice right now, it won’t help us do what we need. We don’t need to boost spending — we want people to stay at home to save lives. 

We need liquidity for households and struggling firms — a kind of state-backed insurer of last resort — but money must be targeted where it can do most good. Don’t splash cash, target limited resources at those who need it the most.

Main image credit: Getty

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