The coronavirus pandemic has destroyed the livelihoods of many people who are self-employed or gig-workers. News that these individuals may have to wait five to six weeks before their first payments of Universal Credit has reignited the debate around universal basic income. Surely, the argument goes, now is the time to introduce UBI?
The numbers are huge. Estimates suggest that, in 2019, there were around 5 million workers in the gig economy. Add to that around 5 million small, self-employed businesses and we’re looking at around 10 million people plus their dependents. How can it be justifiable these people should have to wait so long for cash after the coronavirus has destroyed their income from work?
Other numbers are huge too. Paying UBI of £1,000 per month to every UK resident would cost the Government around £800 billion per year. With an eye to reducing costs, the New Economics Foundation has suggested that the income tax personal allowance should be scrapped and replaced by a weekly cash payment of £48 per week. We looked at this in 2019. Scrapping the personal tax allowance would, the reasoning goes, save the Government around £110 billion per year so this payment would be affordable. As an aside, it’s easy to overlook the fact that the personal tax allowance costs the UK Exchequer about the same amount every year as the latest estimates for building HS2. And while HS2 is intended to close the North-South divide, £48 per week doesn’t go far. Nor does a Universal Credit payment of £94.25.
This illustrates the problem: neither Universal Credit nor an affordable UBI will protect from financial destitution those people who are self-employed or gig-workers whose income has collapsed in the last couple of weeks and may not recover for many months to come.
The Government’s silence on the acknowledged plight of gig-workers and the self-employed confirms just how difficult these issues are. One of the uncertainties is obvious – those who are suffering need cash now.
We therefore suggest that the Government urgently – that means this week – implements a system for all workers not protected by the employee furlough scheme. This group should be entitled to claim online the difference between 80 per cent of their typical earnings and their current monthly earnings (computed as four times the last week’s earnings) subject to a maximum of £2,500. Claims would be self-certified and should be paid immediately and continue monthly until the crisis is over. Inevitably there would be some over-paying, but the effect of this could be reduced by after-the-event checks via self-assessment tax returns.
This might cost up to £25bn per month. It would put gig-workers and the self-employed on the same footing as employees who found themselves on furlough. It would also be a humane and positive response by the Government to the new world of work.