An opinion piece written by Edward Sumner, Chief Operations Office at the Centre for Welsh Studies: During the Covid-19 pandemic we have seen an array of new ideas of how to combat the economic fall out that we face on the other side of this lockdown. In Wales and across the UK we have seen louder and more frequent calls for the introduction of Universal Basic Income (UBI). Plaid Cymru, Liberal Democrats, SNP and various Labour MP’s have led the campaign for this radical change, a change which would drastically increase the size of the state and the tax burden on the people. A drastic change such as this would have serious effects and consequences, which have yet to be addressed from the UBI advocates.
The cost of implementing any hypothetical UBI scheme in Wales varies depending on which proposal the Welsh Government decide to take. Varying amounts and how to pay for UBI have been put forward by the think tank Compass, The Green Party and The New Economics Foundation. The current adult population of Wales as of 2018 was 2.57 million, with a working population of 1.47 million. If every one of these adults was paid £100 per week, the Welsh Government would need to raise £13.39 billion per year. A stark figure which should be big enough to make politicians wise up to how unaffordable such a policy would be. This is 74% of the annual Welsh budget and £4.49 billion more than the current Welsh NHS budget at £8.9 billion. Even by modest figures and considering that over 1 million people in Wales are either retired or not in employment, then an expenditure of this size would mean other areas would be neglected or need substantial capital raised aka tax rises.
The tax burden in Wales is already at its highest in over a generation and with tax rises being the most feasible option for increasing revenues to pay for this implementation of UBI, the Welsh taxpayer would be burdened with taxes which may not be tolerable to even the most generous of workers. Without addressing this question of how we fund such a project first then UBI wouldn’t ever get off the ground. If it is left entirely to the individual taxpayer to foot the bill, then the Welsh Government would need to adopt a level of taxation never seen before in our history.
When looking at UBI it becomes apparent that for every potential benefit of Universal Basic Income there is a negative to counteract said positive. We can sympathise that Universal Basic Income can initially seem very attractive, especially for a country the size of Wales where politicians try to compare our economy on Nordic nations. With our annual budget of £19bn, would need to raise a further £13bn to fund UBI and this is simply not financially viable without huge tax hikes to both workers and businesses, plus a national debt that will have to paid off for generations to come.
When we face the economic consequences of Covid-19, it would be wise to make sure we are on the best footing possible to stage a strong economic recovery. In Wales we would be severely hampered in our recovery if we had an extra ¾ of the budget to find to cover the basic costs of UBI. People in Wales may feel initially more financially secure but once they see larger portions of their wages going to the state and businesses struggling under pressure of higher business rates, the economic cost will become all too real.
The Welsh Government must place their trust in our market economy and instead of looking to increase the burden on workers, they should be looking at ways to increase their prosperity without asking us to pay even more into the state coffers. The only way this can be done is if the Welsh Government ditch the idea of central planning and the notion that they can tax our nation into prosperity.
So, although the initial appeal of Universal Basic Income may come across as a sensible idea, a caring idea that shows devolved politicians do have hearts, it just fails to make any fiscal sense and would pile further pressure on taxpayers and business. Although these times are testing, we must not allow the state to control more and more of our lives out of fear from the impacts from Covid-19. Now we must be brave, we must stand up for less state intervention and talk proudly of the achievements of capitalism and free markets, as these ideas are the only route back to prosperity.