New fund demanded
Think tank calls for £10,000 citizen dividend
Individuals need help to cope with challenges of change, says paper
A think tank is calling for £10,000 to be handed to every citizen under 55 through a sovereign wealth fund to support caring, training and entrepreneurship in Scotland.
A Joint RSA (Royal Society for the encouragement of the Arts, Manufactures and Commerce )and RSA Scotland paper says it would help people adapt to the changing nature of work.
The model is based on the current tax/benefit system but could be configured differently if Scotland’s fiscal powers were to change in future.
The Universal Basic Opportunity Fund could ease individuals through the challenges of the 2020s – from retraining to social care – amid widespread economic insecurity, the paper says.
Pathways to Universal Basic Income proposes a universal £10,000 “dividend” for all under 55s, for citizens to learn, retrain, care, or set-up a new business: key challenges and opportunities of the next decade.
The report is the third and final in a series on modern economic insecurity: last month, the think-tank warned 40% in the UK have less than £1,000 saved and 30% are at risk of a financial shock, such as from automation, showing the need for more widespread asset-based redistribution.
A Universal Basic Income (UBI) is coming into the mainstream in Scotland, and RSA Scotland is exploring a UBI pilot with four Scottish local authorities and the Scottish Government.
Although the Opportunity Fund is calculated on a UK-wide basis, it could be adapted to work within a Scottish context, particularly if any fiscal changes were to take place over the coming years.
Universal Basic Opportunity Fund: how could it work?
- £10,000 over two years, available to everyone under 55 to help meet the challenges of the 2020s – such as upskilling, starting a business or combining work with care.
- Individuals claiming the £10,000 would be required to demonstrate how they intend to put the fund to good use but would need to ‘claim’ via a local authority, accredited employer, union, university, college, or other public body.
- Funded like student grants but wealthier individuals could be required to pay back more in tax as their earnings increase.
Under the RSA’s “pro-work not post-work” model, UBI would be designed to enhance access to good work, and would complement rather than replace key welfare policies like housing benefit or disability benefit, providing more economic security.
The paper suggests how this policy could be funded:
- An endowment for a sovereign wealth fund, the returns on which would fund the Fund’s dividend. The fund would be built up over time by issuing ‘debt’ at a low-rate, investing globally in a portfolio and aiming to achieve the same funds as Norway style pension funds i.e. 4% return a year. There is huge demand for ultra-safe government bonds: the last round of public gilts for investment were hugely over-subscribed. Ultimately this could then fund a Universal Basic Income.
- Levies on untaxed corporate assets such as individuals’ data transfers on which business models, such as Facebook’s, are built; and modernising the tax system for the 21st century’s challenges, prioritising taxes on wealth as opposed to income.
- In-year savings from individuals’ tax/benefits for each of the two years the policy is taken (paid at £5,000 over two years). Key benefits like housing benefit or disability benefits would not be affected.
The report is the next from the RSA’s Future Work Centre, which follows from Matthew Taylor’s Good Work Review for the Prime Minister.
Jamie Cooke, head of RSA Scotland, said: “We are delighted that the Scottish Government has taken a positive stance towards experimenting with social policy, and now we’re calling on the UK government to back imaginative thinking too.
“Our proposals are modelled on the current devolution settlement, with 85% of the Social Security spend controlled by Westminster, but could be adapted to work within a Scottish context, particularly in the event of any future fiscal or constitutional changes.
“We know that in Scotland and the UK more widely, economic insecurity is quickly becoming the new normal: around 70% of us either struggle to get by or live from pay check to pay check. The simple fact is that too many households are highly vulnerable to a shock in a decade of disruption.
“This is especially the case in Scotland, as and when oil and gas comes to an end: we must not repeat the mistakes of the 1980s, whether that’s a failure to invest today’s profits for tomorrow, or helping communities manage through difficult transitions.
“Without a real change in our thinking, neither tweaks to the welfare state nor getting people into work, when the link between hard work and fair pay has broken, will help working people meet the challenges ahead.
“This impacts on more than just economic activity – insecurity and poor work contribute to reduced physical and mental wellbeing, stunted productivity and social incohesion.
“Those of us who advocate a Universal Basic Income must show how it is pro-work rather than post-work, and develop specific ideas to fund it. Our report is an attempt to do exactly that. It aims to build upon the exciting progress underway in Scotland, and to offer other routes for delivering on our ambitions.”