Imagining a new social contract

After a decade of austerity, and in the midst of the disastrous rollout of Universal Credit, our public services and social security safety nets are in tatters. First introduced during the grand reforms of Clement Attlee’s post-war government, both need to be reimagined and rebuilt. We need nothing short of a new social contract.

Against this backdrop — a picture of decay and urgency — there are a growing and welcome number of proposals around state-funded income, welfare and public service reform.

Two particular groups of solutions are gaining ground. One, Universal Basic Income (UBI), is generally understood to be the universal provision by the state of a sufficient, unconditional sum of cash paid to all. The other, Universal Basic Services (UBS), aims to create a collective, ​‘social wage’ for all by expanding public services into areas such as transport and housing, and investing in areas which would bring down costs elsewhere — like preventative health reducing costs for the NHS.

Both UBS and UBI can sometimes be seen by their supporters as goals in and of themselves. But we should really see them as parts of a new social contract that requires some mix of minimum levels of cash payments to households and ample service provision. Together these two areas of provision can blend the merits of unconditionality, universality and collectivism into a promise from the state in return for the payment of taxes and participation. The question is not an either or, but to what extent?

An income floor for all

The concept of UBI has deep roots. Both Thomases More and Paine have argued that all citizens should be paid a basic income. Drawing on these radical roots and on the more recent work of Guy Standing for the Progressive Economy Forum, Compass, and the RSA, Labour has recently promised that in government it would sanction UBI trials. These would take place in Liverpool, Sheffield and one other location in the Midlands.

In recent Finnish trials of UBI participants reported better health and less stress than a corresponding control group, though there was not evidence that participants were any more or less likely to enter employment. There are lots of questions about the trial. The participants were all already out of work and the sample size was quite small, less that 2,000 people. But perhaps one conclusion is that the trial was too small, conducted over too short a time and with a cohort already out of work to provide conclusive evidence that UBI either does or doesn’t give people the breathing space they need to seek decent work.

Of course, the biggest challenge to fully sufficient UBI is affordability. Compass propose what they call partial basic income and have modelled a universal weekly payment of £60 to all adults under the age of 64, £40 for children and £175 for people aged 65 and over. They estimate a total cost of £300 billion per year, of which £118 billion would be met by replacing existing welfare payments. A further £101 billion would be raised from abolishing the personal allowance of income tax and the remaining £81 billion would be raised from higher rates of income tax and employee national insurance.

At NEF, we have also proposed a weekly payment. We call it a Weekly National Allowance, the attraction of which is that it is revenue neutral, using the budget recycled by abolishing the personal allowance of income tax and redistributing it as a flat payment of £48 per week to all adults (almost — it tapers off for those earning more than £100,000). This would be a net boost to people on lower incomes and a reduction for higher income earners, so as well as introducing the principle of a single, condition-free payment to be paid to most adults, it would help make our currently inequitable tax-benefit system fairer.

Neither £48 or even £60 per week can be considered basic in the sense that a full-blooded UBI proposition would have it, as they in no way cover living costs in a country such as the UK. Each proposal would co-exist with a benefits system that, while also needing substantial reform, must still cater for complex needs, such as disability and housing. Even a full-blooded UBI wouldn’t dispense with the need for a wider welfare system that met the sheer range of needs — it has grown complex for a reason! But the principle of establishing a condition-free income floor is an important line in the sand to bring a degree of dignity to all and reduce the stigmatisation of people on benefits as part of a new social contract. We should welcome Labour’s willingness to try it out.

Collective service provision

In cost terms, there is an inevitable trade-off between cash payments and service provision, but the challenge of resuscitating and reinventing the frayed post-war social contract is not going to be met without ambition and without government raising additional income. Though the Attlee government was forced to make some compromises on its original vision, it never approached the task of rebuilding the UK state post-depression and war with timidity; after asset-stripping, finance crisis and austerity, we now face a similar challenge.

NEF would almost certainly lean more towards collective service provision than raising and spending very large sums of money on a fully sufficient basic income. That’s because, especially for those on lower incomes and dependent on key services, the value of public services to livings standards is a critical part of their ​‘income’. The stampede towards market-based provision exposes this cruelly; when forced to pay people are driven deeper into poverty and become dependent on charity.

Everyone will use some public services all of the time and all public services some of the time. But some of the most vulnerable people in our society rely on many public services all of the time. Providing them universally is key to renewing the social contract, but expanding and deepening their universality to build social solidarity, in tandem with a minimum cash payment, will be an important response to 10 years of austerity which has not only stripped out many areas of service provision, but has also narrowed coverage to the extent that middle-class support has ebbed away.

One of the first substantial UBS proposals was co-authored by economist Howard Reed, who is also one of the authors of the Compass UBI report. Reed and his co-authors, including renowned economist Jonathan Portes, propose that the concept of basic services should be expanded to include food, transport and internet access. This is exactly the sort of boldness of vision that we need.

Last week, a further report on UBS was published, which argued even more forcefully for an expansion of the breadth of public service provision. My colleague Anna Coote writes brilliantly about this in the Times’ Red Box. Elsewhere, the Foundational Economy Collective are, from a different angle, essentially proposing the same notion; that key elements of the economy, upon which we all rely, should be collectivised and taken out of the market.

Saving the social contract

The whole concept of the social contract, which is in free fall post-Brexit and needs saving fast, is that individuals agree to franchise some of their freedoms and decision making to the state in order to pool risk and build social goods and protections. Thatcherism began the process of destroying this and post-austerity it is broken. More than ever we need to rebuild it, though in doing so we should be careful not to break bits that still work and to dispense with the paternal state. Co-creation and participation will be bywords.

But in creating a new, universal social contract that must genuinely include everyone, in the words of Reed, Portes and their co-authors: ​‘Progressive proponents of a UBI assume the pre-existence of a platform of social welfare services, and advocates of UBS must acknowledge that there are both personal and specific needs that will require some form of monetary distribution to preserve freedom and agency’.

Rather than pitting one against the other, the inspiring concepts of UBI and UBS should be seen as interlocking elements of a new social contract. After a decade of austerity, financial crisis and a whole era of economic globalisation, building social solidarity via renewed investment in universal public services is probably the highest priority. But more generous and unconditional cash support may not only bring additional breathing space for people who are otherwise forced into poor, low-income employment, but will also help wellbeing across the board. Let’s use them together and not trade one off against the other as we set about the task of reconstruction.

Image: Pixabay