Universal Basic Income (UBI) – a policy that would provide a regular, cash income to every citizen without means test or work requirement – is surprisingly inexpensive. The United Kingdom could introduce a full UBI (one large enough to live on) for just £67 billion per year or 3.4% of Gross Domestic Product (GDP), according to a study Georg Arendt and I recently completed.
Attention to UBI in the United Kingdom has increased substantially as the Scottish Parliament discusses experimenting with it and as policymakers discuss it as a temporary measure to boost the economy during the Covid-19 outbreak. While a pilot project can examine some of the effects of UBI, this kind of study is necessary to determine how much it is likely to cost.
The cost of UBI is often exaggerated because many authors focus on its ‘gross cost’: the size of the UBI times the population. The gross cost of UBI is not a cost in any meaningful sense, because it ignores the great extent to which the new taxes people pay to support UBI are cancelled out by new money they receive in UBI. The real cost of UBI is the ‘net cost’ – the amount people receive or pay after subtracting the amount they pay themselves. The net cost of a full UBI for the UK is only about one-third its gross cost.
Our study is based on data from the 2014/15 UK Family Resource Survey. It uses microsimulation analysis from the European Union’s EUROMOD Tax-Benefit Model to subtract out the amount people pay themselves and determine the cost of a roughly poverty-level UBI of £7,706 per adult and £3,853 per child.
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