Short term - how we pay for it in 2021/22
People’s Quantitative Easing (PQE)
Whilst we have all heard the rhetoric of ‘there is no magic money tree’, one always seems to spring up in a crisis. In 2008 the Government borrowed £500bn to bail out the banks, and in 2020 alone it borrowed over £100bn to bail out businesses and households as a result of Covid-19.8 In fact, the UK now has the highest ‘deficit’ since the end of the second world war.
Medium term – how we fund a permanent ‘Full UBI’
Income Tax
Proposals by the Citizen’s Basic Income Trust suggest a modest UBI of around £200 could be funded primarily through reducing the PTA and increasing the rate of tax on each tax band by just 3%.
National Insurance Contributions
A vital component of the welfare state, a National Insurance tax was first introduced in Britain in 1911 and expanded in the postwar period. Payment of National Insurance Contributions (NICs) is seen as an important means of tracking entitlement to state welfare programmes such as pensions and some benefits.
All employees earning above £183 per week in 2020/21 will pay National Insurance Contributions of 12% on their wage, up to £962 per week at which a lower rate of 2% is levied. Employers pay a flat rate of 13.8% on all employees earning above £169 per week…
Value Added Tax (VAT)
Value Added Tax on goods and services, which increased from 17.5% to 20% under the coalition government in 2011, makes up just over 20% of HMRC’s tax revenue.15 Essentially a tax on consumption, VAT was decreased during the financial crisis to 15% before being returned to 17.5% and then raised. The amount earned through VAT in the UK varies year to year and has been increasing by around £5bn a year, totalling £125bn in 18/19 with each 1% of VAT equaling approximately £5.5bn in revenue on average over the last 5 years.16 T
Scrapping the Personal Tax Allowance (PTA)
Perhaps the lowest hanging fruit of potential UBI savings is the Personal Tax Allowance. The PTA is essentially a basic income of £2,000 given to everyone earning above £12,500 and less than £125,000.
Close tax loopholes
Before even looking at any new taxes, efforts should be made to clamp down on legal and illegal forms of tax avoidance and evasion, and close loopholes that contribute to a significant tax gap in the UK. The Citizen’s Basic Income Trust found that as of October 2019 there were 1,190 legal tax reliefs, many of which could be reformed, reduced or closed altogether to help fund a UBI.
Financial Transactions Tax (FFT)
This would consist of a charge on each stock and shares trade and other related financial transactions. While a stamp duty on share trading currently exists in the UK, more progressive proposals do exist, the most famous of which is the ‘Tobin tax’ proposed by economist James Tobin, which would be levied on foreign currency trades and has broad support among EU nations but strong opposition from the UK and US.25 Because of its nature such a tax would only work multi-laterally, but the Labour Party’s 2019 manifesto references plans for additional UK based FTT on foreign exchange which the party estimates could raise as much as £8.8bn. However, other sources put this figure as low as £2bn.
Wealth Tax
The UK is the world’s fifth richest country, with high levels of wealth and income inequality. The top 1% (those with wealth above £680,000) own 21% of the country’s total wealth, which is estimated at around £14.6 trillion in 2018.28 Therefore the idea that the UK lacks the resources to pay for a UBI should the political will exist to do so, is nonsense. There is a huge disparity between how we tax earned income, whether from paid employment or self-employment…
Reform Corporation Tax for the common good
There is no doubt that the majority of Britain’s businesses have suffered as a result of Covid-19, especially the high street and those in the worst affected sectors such as travel and hospitality. However, Covid has also delivered a huge dividend for many large multinational companies who do the majority of their business online – Amazon, for example, almost doubled its income in 2020.30 This presents the questions of how additional taxes on business activity can balance supporting those who are struggling against taxing those who can clearly afford to pay more. The current regime of a flat rate Corporation Tax of 19% is therefore outdated
1. Robot tax
Robots (taken broadly here to mean automation, AI and other forms of labour-replacing technology) already have the capacity to create huge value for businesses at relatively little cost compared to labour, and…
2. Carbon tax
A UBI is often presented as society’s share in the ‘commons’, representing our shared ownership of the earth’s resources. However there are those, particularly large multinational companies, who use far more than their fair share of resources…
3. Data tax
A data (or digital) tax would be levied on companies, such as Google, Facebook and Amazon, who use consumer data (generated through clicks, screen time and other interactions online) to sell targeted advertising. It is difficult…
