Podcast: The Detail

UBI - could the free money scheme work?

At first it sounds like a giant welfare grab - free money for everyone, regardless of their status. But talk of a Universal Basic Income is gaining traction in a post-Covid world. Could it work here?

Pope Francis wants it; so does Mark Zuckerberg, Gareth Morgan and Bishop Desmond Tutu.

Morgan describes it as a revolution of the tax and social welfare system.

It’s called the Universal Basic Income, also known as the citizens' income or basic living stipend or as some call it, free money.

It's a payment, like the pension, to every individual - including millionaires and billionaires - no questions asked, no means test, no requirement to work.

And it’s a hot topic around the world right now, including in New Zealand. Finance Minister Grant Robertson says it’s on the table, with a situation from now where a large proportion of people will be relying on income from the state for an extended period. It’s not front of mind though – there were no changes to welfare payments in last week’s Budget.

The Universal Basic Income is nothing new, but as the queues for food and benefits grow around the world, the debate has resurfaced.

Spain is rolling out the "minimum vital income" to the poorest, Italy already had a version of it for the most vulnerable even before Covid-19, and groups have been pushing for it in Germany and France.

Finland trialled the UBI for two years with 2000 randomly-chosen unemployed.

While the experiment helped many to gain employment or start businesses, some saw no benefit at all.

In New Zealand, the UBI was raised during the last election campaign by Gareth Morgan and The Opportunities Party - TOP - and it’s back again pushing for it, (although Morgan is no longer the party leader) - saying this is an important transitional period in people’s lives and they need support.

None of the parties in Parliament have picked it up so far.

Max Rashbrooke writes about economic inequality and is a 2020 JD Stout Fellow at Victoria University.

He says UBI is not the answer - not because he thinks we'll end up with a workless society, but because the system is hugely draining on the economy.

“When you start doing the numbers, the good intentions of the UBI just fall to bits on the hard rocks of practicality,” he says.

If you want to pay it at the level of NZ Super, about $22,000 a year - enough to lead a life of minimal dignity as long as you own your own home - it would cost about $90 billion a year.

“And that’s about the ballpark of how much money the Government currently spends on everything it does,” says Rashbrooke. “So you’d have to double government spending overnight. That’s obviously completely unaffordable.”

He says the main popular objection to UBI – that it would encourage laziness – is the one objection that has no grounds after the small scale pilots that have been run over the decades.

In today’s podcast Rashbrooke talks to Sharon Brettkelly about the pros and cons of the UBI.

Want more from The Detail? Find past episodes here.

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