UBI FAQs

We want to make information on UBI as accessible as possible. We want to answer the tough questions as clear as possible. Below are some answers to frequently asked questions to do with UBI.

How will you pay for it?

When thinking about how much a UBI will cost, we should analyse the gross vs net cost. UBI will save on homelessness, crime, mental health, food banks, etc in the long term. The net cost will be significantly less because of the saving a UBI creates. Raising taxes on high earners, carbon taxes, financial transaction taxes and land taxes are other possible funding mechanisms.

A number of progressive and sensible funding options have been put forward by experts. These include progressive taxation, where the higher your earnings the more of your UBI you pay back in tax; closing some of the tax loopholes (there are estimated to be over 1,000) that disproportionately benefit the wealthiest in society; a tax on high levels of pollution; a carbon tax and dividend; or by creating a sovereign wealth fund and paying out the dividends to British citizens as a UBI, which is how Alaska have funded their UBI since 1982. Other mechanisms to fund a UBI include transaction and land taxes. There is also the idea of a Sovereign Wealth Fund to pay for a UBI (see for information below).

More information on how we can pay for a UBI:

Will UBI cause high inflation?

If we fund a UBI through redistribution of the money we already have in the system, it will very likely not cause inflation. There is a higher chance of inflation if it is only based on central money creation. But it is very unlikely a UBI would ever be funded without redistribution.

It is important to remember that UBI should not be implemented on its own - we need tax changes, changes to our welfare system, controls on the housing market and greater investment in our health system and communities. Different ways of funding will create different effects - some will create inflation and some will not. It is important to note that even when the money supply is vastly expanded, the effects on prices need not to be extreme. For example as Scott Santens explains, ‘the Fed’s quantitative easing added over four trillion new dollars to the U.S. money supply, and the results were not enough inflation, as defined by the Fed’.

Macro Economist Josien Piek adds more insight into this discussion. Piek argues that speculative inflation since 2008 has led to economic equilibrium between the speculative market and common goods. The speculative market is a static market where most of the world’s money is. UBI can bring back the equilibrium by increasing focus on basic goods in the economy through increasing demand for basic goods. The velocity of money will increase (the amount of times money changes hands will grow significantly). This will control inflation if demand and productive capacity rise at the same level. More transactions mean more growth. Money will flow easier and we will be able to create more eco-friendly socio-economic communities.

UBI can have a deflationary effect on the economy. By providing a basic income to all citizens, a UBI can help reduce poverty and increase the bargaining power of workers. This can put downward pressure on wages and prices, as businesses compete for the purchasing power of consumers. A UBI could reduce inflation by improving market efficiency and reducing economic inequality.

More information on UBI and inflation:

But won’t landlords just exploit renters?

A worry for people who first learn about UBI is that landlords might just raise rents. But this is very unlikely.

For example, a high amount of UBI (let’s say £1,600 a month) should give individuals and families a higher income, thus they are not tied down to a particular location (whether it is a town, city or borough). A UBI, unlike high paid jobs, are not tied to a particular location. There will be more people thinking about moving because they have more economic stability. The argument here is that if people are less tied to a particular location, the less likely they are to pay higher rents where they currently live. Individuals and families will have more power in the housing market and potentially it will be landlords who will have to lower rents to attract tenants. Landlords will rent as high as the market allows, but they, like renters, are subject to the market. If a UBI does not cause inflation because it redistributes money instead of creating new money, landlords will not be able to raise rents substantially high.

One issue could be a lack of affordable housing and a lack of housing in areas when demand is high. The above theory is based on more economic freedom creating changes in where people live. Over the long term the effects of a UBI on the housing market will be limited. In the short-term, we need rent controls and more affordable housing. A UBI cannot solve problems around housing on its own.

Another change involves focusing on mortgages. ‘Provision of mortgages primarily drives inflation in the housing market. Introducing legislation that restricts lending by a financial institution for the purchase of residential property to a percentage of its insurance value will, in most sectors of the market, eliminate mortgage-driven house price inflation and curtail inflation driven by the building industry’. The effects of UBI are not easy to predict.

But if we implement UBI with planning and as a package of socio-economic policy change, we can mitigate and control adverse effects. See the RSA’s report that mentions Land Value Tax and Basic Rental Income below.

More information on UBI and the housing market:

Will UBI mean people will not work?

A UBI would incentivise and reward work. Like Child Benefit it is not withdrawn if income increases. A UBI would be a financial certainty giving people more chances to think and explore job prospects. In this way, a UBI acts not just as a safety net but as a launch pad to live a more fulfilling life that is not just driven by working to meet individuals’ and families’ needs. Yes, it is possible more people will work part-time. But it gives individuals more free time to spend with family, creatively or voluntary work in the community. Becoming less tied to income from our labour is a good thing.

‘People didn’t work less when it was tried in Finland, or Canada recently – in fact there was an increase in local economic activity when it was tried in villages in Namibia and India.’

More information on UBI and work:

Who Will Receive a UBI?

A Basic Income would be universal and unconditional. This means everyone would receive it. Wealthy people would receive it, but they will very likely pay their UBI and more in tax. Whether children should receive a UBI and at what age it goes directly to them and not to their parents/guardians are major questions. Children should receive it, but this could be a lower amount until they reach a certain age, for example 16 years old. As you can find out in the more information section, a UBI significantly reduces child poverty even with a much smaller amount given to children per month.

Other questions surround whether prisoners and ex-convicts should receive it. The answer is normally yes to this because of the effects it has in rehabilitating ex-convicts into society and reducing the likelihood of them returning to prison.

Another question about who should receive a UBI are non-citizens of the country they are in, for example refugees and asylum seekers. We believe they should receive it but there are many questions around the practicalities of this, such as how they receive the money.

More information on UBI and who receives it:

How will it be distributed?

It would be distributed universally and equally (however it is possible children may receive a lower amount). A UBI would work as a direct cash transfer to bank accounts. There is potential to use the Universal Credit system to pay everyone by uploading everybody’s details onto the system. The government has bank details of individuals through tax payments, but this will certainly not include everyone. The difference would be the government would contact you to get your details. Temporary mobile phones could be used to deliver payments to refugees, the homeless and the poorest. Every adult will receive the same amount of money.