To cite this paper: Bernard Mulholland, ‘What impact derives from a Universal Basic Income of £30,000?’, Polyphony, 363, pp. 26-27.
In this paper it is argued if a tax-free universal basic income (UBI) of £30,000 was introduced then the entire Welfare State would become redundant in the United Kingdom, and so could be dismantled. A simple illustration (Figure 1) can help to make this point. Under current legislation for Income Tax rates there is tax-free Personal Allowance of £12,570, and earnings up to £50,271 are taxed at a basic rate of 20%, £50,271 to £150,000 at 40% and earnings over £150,000 at 45%. Therefore an individual on average salary of £31,096 gets their first £12,570 tax-free, and they then pay 20% on earnings up to £50,271, which amounts to a grand total of £3,705 Income Tax. And, of course, they also pay National Insurance, and many receive working tax credits and other benefits that can be offset as they are scrapped.
Firstly, however, under a tax-free UBI of £30,000 our average taxpayer’s total wage is first boosted up to £61,096. Their first £30,000 is tax free, and they then pay 20% Income Tax on the amount from £30,000 up to £50,271 which is £4,054, and they pay 40% on the rest, which adds another £4,330 to total £8,384. From Figure 1 it is apparent that individuals with a salary of £91,096, and who now have their total income boosted up to £121,096 by the UBI of £30,000, will now pay far more Income Tax than they receive in UBI. And so the top 5% earners, give or take, will not be a liability, but instead will be net contributors.
Secondly, factor in Class 1 National Insurance and our sample will easily cover the entire £30,000 UBI at a lower total salary of £81,096.
Whilst the author does not have access to HM Treasury modelling, it still seems likely from a cursory analysis of the available data and evidence that the increased take from Income Tax and National Insurance would render a £30,000 UBI fiscally neutral, i.e. they balance each other out.
However, these raw statistics disguise the real benefits to be accrued from a UBI at £30,000 (give or take). Real tangible benefits would arguably accrue from closing down the entire Welfare State. In the first instance, consider the saving from releasing all those working in the Public Sector (including Civil Servants) from their servitude. The Institute for Government indicates there are 456,410 Civil Servants and their median salary varies by department. Of these, just under 90,000 civil servants earn over £40,000 a year, which alone amounts to a minimum £3.6 billion per annum. However, it is argued (civilservant.org.uk/) that there are around 5.5 million Public Servants in the UK, and the tangible benefits therefore could be far greater.
Moreover, the real benefit here again is not accrued by removing the Public Sector wage bill from the public purse, which is considerable, but from (i) sequestrating their gold-plated pension pot and investing it in a sovereign wealth fund, and (ii) their redeployment from mostly unproductive Public Sector jobs to fill the vast number of current job vacancies. There is also (iii) the vast amount of capital that can be released by either leasing out or selling off the thousands of offices vacated by these Public Servants, privatising the NHS, schools, and other public estate.
Dr. Bernard Mulholland