Monday, 6 July 2020

Killer Arguments Against Citizen's Income, Not (30)

One argument from the hard left, who want the state to control everything, is that UBI supporters want to scrap state education, NHS and so on and replace it with vouchers for the private sector to soak up. Some neo-liberals clearly want to do this - so they sold off council housing at undervalue and are now overpaying Housing Benefit to the people who snapped it up.

But this is clearly untrue for most mainstream UBI supporters, who tend to be centre-left, centre-Georgist or centre-right.

I had to deal with such an objection on behalf of the Citizen's Basic Income Trust recently.

To clarify our/their position, I drafted the following article, which will hopefully be added to their FAQs soon:
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Would UBI replace other public services?

Like most countries, the UK provides 'free' state education and 'free' (or very low cost) healthcare. These are similar to a UBI. They are universal, non-means tested, non-taxable, easy to access and there is no stigma attached.

There are clear social and economic advantages to this:
- If left to the private sector, the quality would probably improve for those who can afford it, but the cost to parents and patients would double or treble (see US healthcare system and UK private schools). Lower income households would clearly lose out.
- Health and education businesses can make super profits (a form of 'rent'), because the value of healthcare or education is vastly greater than the cost of providing them. As a near-monopoly provider, the government can keep costs low and pass on the savings to the general population.
- Health and education are public goods and merit goods. We all benefit from everybody else having a reasonable level of education. Employers benefit from having healthy workers, as do members of patients' families. Even if you have no children, it is worth paying some extra tax to pay for other children's education (who will be paying for your state pension1)

So the answer is, no, of course not!

The UBI we envisage would primarily replace existing  benefits which are paid out in cash. The UBI would cover the costs of things which the private sector can provide more efficiently, at lower cost or at higher quality than the government - such as food, utilities, clothing, mobile telephones...

The UBI should not be earmarked for particular items (such as food vouchers or travel passes for the over-60s). For most households, the UBI would only be a small part of their total disposable income, and each individual household is in a far better position to decide how to spend it than the government. The mix changes every week and as children grow up. Some areas have good public transport, so a travel pass in London is worth much more than a travel pass in a rural village with an infrequent bus service.

The other downside of earmarked benefits is that the private sector will respond by increasing prices to soak them up if prices are not capped, so private providers will extract super-profits or rent.

For example, the UK has gone from a situation where over a quarter of households lived in social housing to mainly private provision. In the 1970s, social tenants paid affordable rents and local councils made a modest profit. This was replaced with Housing Benefit after much of the social housing stock was sold off. So instead of the council incurring the modest annual maintenance costs for a council house occupied by a low income household claiming rent relief, the government pays five times that amount to a largely unregulated private landlord, a huge cost to the taxpayer.

19 comments:

mombers said...

@MW the bus pass is crazy. Firstly, why 60 and not pension age? And secondly, considering that working people on average have lower after housing incomes and higher expenses (kids, commute etc) than OAPs, they should definitely be paying full price.

And of course another WTF is why does London once again get the lion's share of this subsidy, by cost and by value?

said...

My sole income is dividends from my SIPP and ISA. I have some other pots of assets too. Obv. I am not on benefits. Would I get some UBI payments too?

mombers said...

@2 If you're drawing from your SIPP, unless you're on early retirement you're already getting a non-universal UBI via state pension :-)

Mark Wadsworth said...

@2, everybody should get UBI. Either as cash payment or offset against PAYE liabilities.

said...

So if I'm in early retirement, get dividends from SIPP and ISA, have assets, am a non-taxpayer because I take out less than the personal allowance, dip into my assets a bit, and I could still get this UBI payment every month? Sounds like a no-brainer to me! Bring it on!

Mark Wadsworth said...

@2, UBI is for every legal resident with no means test. By and large, you're getting a refund of some of the tax paid by all the companies in which you own shares.

If you have £1 million in shares, you are still a net taxpayer. If you have £100,000 or less, you break even.

Andrew Carey said...

the government pays five times that amount to a largely unregulated private landlord
That has to be bull shine. The worst set of data I've seen is that private landlords pocketed around 37% of the HB bill, and housed about 33% of the claimants. You might be able to find data that tilts it a few % further away from that. And you can probably find data that suggests if you take out the cost of empty exemptions for council tax, housing association bungs to build in the first place, and costs of advertising and vetting tenants which get submerged in other parts of council budgets, then you can tilt the figures slightly the other way. In Liverpool and Middlesbrough there are many private rentals going cheaper than council ones.
If you were to want to make a point about the LHA in Greater London being a ridiculous subsidy to property owners there, then I'm with you.

Mark Wadsworth said...

AC, you are comparing total figures. If you read it again, you'll see that I was looking at ONE specific low income, non-rent paying household.

If they are in a council home, it costs the council £1,000 a year on maintenance, insurance etc. If they in private rented sector, the DWP has to pay £5,000 a year in rent. Even if that home is an ex-council home.

"In Liverpool and Middlesbrough there are many private rentals going cheaper than council ones."

How is that relevant? It is still cheaper for the council to house non-rent payers than it is to pay private sector rent.

Mark Wadsworth said...

AC, to give a folksy comparison, what's cheaper? Your unemployed adult child stays in a spare room at home, or you pay for him to rent a room somewhere else.

Bayard said...

"costs of advertising and vetting tenants"?

Where is this local authority that doesn't have a waiting list for its few remaining council homes?

Lola said...

"...(see US healthcare system and UK private schools)..." Re US healthcare. US healthcare is a mess and expensive because of go'v meddling not despite it.

Mark Wadsworth said...

L, it's not government meddling, it's government monopoly protection, subsidies and absence of any sort of sensible price controls. It's the 'medical-insurance-complex' as Eisenhower would have called it.

Derek said...

Yup. The best way to break a monopoly is to give the consumer a choice. And that's the point of government-provided housing, education, healthcare or whatever: it's there to provide a low-cost option.

It doesn't prevent you from going private; it doesn't even prevent private providers from charging an arm and a leg for something that should really cost a foot at the most; but it does prevent providers from soaking consumers who have no cheap alternative.

Mark Wadsworth said...

D, that's a good way of putting it. There is plenty of cheap food, clothing, utilities, mobile phones, so no need for government to intervene.

Bayard said...

"There is plenty of cheap food, clothing, utilities, mobile phones, so no need for government to intervene."

Although it would make sense if the government owned all the infrastructure, the masts, the wires and the pipes, not just some of it.

Mark Wadsworth said...

B, maybe, maybe not. The mobile phone people are doing a great job. The monopoly utility people aren't. But that wasn't the point of the article.

Robin Smith said...

More than 9 out of 10 emergency calls are not emergencies. Is this number a fair representation of the UBI healthcare across the board? If so, triple the cost for a thousand percent increase in health service value is good value, no?

You also need to ask how UBI will be paid for. Even with an LVT working reasonably well, a surplus means the rents being collected are obviously too high.

Any opportunity to redistribute spare or stolen wealth ends up in unjust distribution. Tax today is just another perfect exposition of this. UBI would be yet another tragedy.

I do keep saying.

Mark Wadsworth said...

RS, you do keep saying. And you show a deep misunderstanding of anything every time you say it. A surplus simply means that society is running well.

Bayard said...

"The mobile phone people are doing a great job."

Showing your age there a bit, Mark. When the Great Nationalisation happened after WwII, it was done so that the workers, through the state, could own the means of production. It wasn't because the private sector wasn't doing a good job. Fast forward to when you and I came along and practically every nationalised industry was losing money hand over fist and being subsidised by the state. Thus the notion was born that industries should only be nationalised when the private sector makes of a cock of them and they need to be subsidised.
So what if "The mobile phone people are doing a great job"? They'd be doing an even better job if they didn't have to pay to put up the masts and had access to every mast that there was, in exactly the same way as publicly owned roads that everyone can use benefits everyone.
BTW, yes this is OT, but I thought we were allowed a bit of drift in the comments.