Six questions about universal basic income answered

A planned trial of universal basic income (UBI) in England has been announced. If the scheme goes ahead, it will be the first time the idea has been tested in the country.

Unlike other forms of state benefit, a UBI payment isn't means-tested or tied to work. Advocates of the scheme claim that it can reduce poverty and improve wellbeing.

So, what exactly is happening and could it be introduced in the UK permanently? To find out, Which? answers six questions about UBI.

1. What is universal basic income?

UBI is a guaranteed regular payment awarded to everyone in society, regardless of circumstances – whether you're homeless or an investment banker.

It differs to other types of benefits in a number of ways:

• It's not means-tested or dependent on how much you already earn.
• It's not determined on factors such as employment, whether someone has children or whether they have a disability.
• UBI is paid directly into bank accounts as cash as opposed to vouchers or other non-monetary rewards such as food.
• It's not a lump sum – the money is paid at regular intervals in much the same way as a salary.
• There are no strings attached, such as proving you're actively looking for employment, and it's designed to cover people’s basic needs.
• It's paid to individuals not, for instance, households. 

The idea is to create a minimum income floor in order to reduce poverty, provide financial security, and boost personal wellbeing.

• Find out more: tax credits and benefits you could claim.

2. What will happen in the trial?

Researchers plan to run a trial of universal basic income in two regions of England: central Jarrow in the North East and East Finchley in north London. It follows a two-year consultation with members of the community living in those areas.

A total of 30 people (15 from each area) will receive £1,600 a month, before tax, for two years. During that time, researchers will monitor the participants to assess the impact the money has on their lives.

There will also be a control group that doesn't receive basic income payments. Instead, they will fill out questionnaires, attend focus groups and be interviewed to understand the difference in experience of those who are getting the money.

The trial is being funded by think tank Autonomy and is supported by the charity Big Local and Northumbria University. The organisers hope that it will be a success and eventually lead the way to the roll-out of a universal basic income nationally.

Autonomy told Which? that it's still trying to secure enough funding for the trial to go ahead and, as such, there's no set start date or process for participants to apply yet. 

3. Have any other countries tried it?

Yes. A UBI pilot is currently running in Wales, but is only open to young people who are leaving care. Around 500 18-year-olds are taking part in the three-year scheme, which launched on 1 July 2022. They're also being paid £1,600 a month (or £19,200 a year before tax at your normal rate) with no strings attached. 

The trial is costing the Welsh Government £20m and the experience of participants will be used to decide whether the the money can help the vulnerable care leavers to live more independently. 

Similar experiments have been run in cities in the Netherlands, Barcelona in Spain, the US city of Stockton in California, the Brazilian city of Maricá and the province of Gyeonggi in South Korea. But one of the most famous experiments took place in Finland. 

The two-year nationwide study ran between 2017 and 2018, with the government giving 2,000 unemployed people aged between 25 and 58 monthly, unconditional payments of €560. The main aim of the pilot was to find out what impact UBI had on employment.

• Find out more: payments to help with the cost of living.

4. Where did the idea come from?

Despite the current buzz around it, UBI isn't a new idea. In fact, the principle that the government should give everyone a minimum amount of cash to cover essential living costs, whether it's food or housing, has been around since the 16th century. 

Sir Thomas More was one of the earliest proponents of the idea. The former Lord High Chancellor of England during the reign of Henry VIII wrote about it in his book Utopia, first published in 1516. He suggested that it might be a good way to prevent petty thievery, reasoning that punishment was of little use when the criminal has no other choice but to steal. 

Since then, UBI has been championed by everyone from Abraham Lincoln to Bertrand Russell and Martin Luther King Junior. However, the concept really took off in the 21st century, when the economic turmoil of the Covid pandemic brought the need for a basic income into sharp focus.

Now, it's high-profile supporters include everyone from tech billionaire Mark Zuckerberg and pioneering computer scientist Tim Berners-Lee to former US President Barack Obama. 

5. What are the benefits?

Proponents of a UBI argue that it will reduce poverty, improve income security and boost people's overall wellbeing. New research by the Basic Income Conversation and Compass, estimates that the universal basic income model could cut poverty by more than half, reducing it to its lowest level for 60 years. 

Some believe that it also has the potential to simplify Britain's welfare system. Will Stronge, director of research at Autonomy, said: 'A guaranteed basic income could be transformative for welfare in this country.

'With the decades ahead set to be full of economic shocks due to climate change and new forms of automation, basic income is going to be a crucial part of securing livelihoods in the future.'

Interestingly, the final results of the Finnish trial, released in 2020, found that a basic income has a positive impact on employment. When the researchers compared the employment and wellbeing of basic income recipients with a control group of 173,000 people who were on unemployment benefits, they found that people on basic income worked an average of six days more than those on unemployment benefits.

• Find out more: Universal Credit explained.

6. What's the downside?

The biggest argument against UBI is, of course, that it would simply be too expensive to give everyone in society money for nothing and too complicated to implement.

Speaking to The Independent in October 2022, Matthew Johnson, Professor of politics at Northumbria University, said that governments would have to increase tax contributions to fund the scheme. 

In a research paper for the Institute for Social and Economic Research, Dr Malcom Torry – an honorary research fellow in the social policy department at the LSE – suggests a scheme that pays people a basic income of £60 per week, but that would have to be funded by raising the basic, higher and top rates of tax by two, three and four percentage points respectively.

Finally, critics of UBI claim giving people free cash without having to lift a finger could be disincentive to work and lead to a skills shortage in the UK.  

Writing in The Times, Mark Littlewood, director general of right-wing pressure group the Institute of Economic Affairs, claims that while Britain's benefits system is overly complicated, UBI isn't the answer. He says: 'If we want an economy in which people are encouraged to work productively if they possibly can, then establishing UBI could actively work against this.' 

• Find out more:  the latest on inflation.

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