What happened when Finland scrapped benefits and just paid everyone £490 a month

Imagine if the UK scrapped Universal Credit – and every single other benefit – to give everyone a basic income instead?

It’s a concept that’s been toyed with in the past – and would end the bureaucratic nightmare that the six-in-one benefit seems to have turned into – but how would it work?

A basic income would, in theory, pay every person the same amount – whether they were employed or not – and would be used to boost workers’ pay, help others save and keep people out of work afloat.

And Finland has just completed a major experiment of it – paying 2,000 unemployed people £490 (€560) a month for two years, instead of unemployment benefit.

The basic income was paid with no strings attached. Recipients weren’t required to seek or accept jobs but still received the payment if they found a job.

The Finnish government wanted to see if it encouraged people to get jobs or start businesses – and the BBC followed two people on their 24 month journey to find out what happened.

"It felt like I’d won the lottery"

One man, a journalist who’d been made redundant, said it felt like he’d ‘won the lottery’ after discovering he qualified for the payment.

But two years later, he’d only managed to secure one interview, which he blamed on his age, experience and the lack of vacancies in his field. The basic income, he said, helped him but he wasn’t sure how he was going to cope after it ended.

Another woman described it as a "genius idea" that for the first time allowed her to work.

She was able to take on a low-paid telesales job because of the Government boost. It gave her the independence she desperately wanted.

For the first time, she was able to shop in a supermarket instead of relying on her parents’ food.

Could it work in the UK?

In 2018, campaigners put forward the idea of a single payment for all people in the UK.

Rather than a string of different benefits, the Royal Society for the encouragement of Arts, Manufacturers and Commerce (RSA) said it would make sense to give everyone a universal income.

This would be £3,692 a year for all qualifying citizens between 25 and 65, while pensioners would be paid £7,420 over the age of 65.

It’s essentially a pension for everyone – at £71 a week – without having to make the National Insurance contributions first.

Then there would be a basic income for children aged 0–4 of £4,290 for the first child and £3,387 for other children aged 0–4.

There would be a reduction for a third child or more, potentially to zero.

This, it said, would be comparable to the benefits available to low-income households before their child begins school.

Once in education, the payments would then fall, as parents would be able to work more hours.

The redistribution would be paid for by a charge on people earning more than £75,000 a year.

The RSA estimated that removing benefits, tax reliefs and allowances (excluding those relating to disability and housing), the Government would save a total of £272billion.

It also proposed to give £10,000 to every person in the country under 55.

Payments would not be means tested but applicants would have to show how they intended to spend the money.

It said this would help people cope with the effects of rising automation and help them manage their work/life balance.

The idea would see anyone able to claim a £5,000 “dividend” for up to two years, collected at a time of their choosing over the course of a decade.

This Universal Basic Opportunity Fund (UBOF), which would cost around £14.5 billion a year, would be funded by either a “modest increase” in taxes on top earners or through levies on large corporations, to create a British sovereign wealth fund.

The report proposed that the Government borrow £200 billion while interest rates are “historically low” to establish the fund, which would be “potentially able to pay itself back through economic growth engendered by investment in human capability”.

    RSA’s Action and Research Centre director Anthony Painter said: “The simple fact is that too many households are highly vulnerable to a shock in a decade of disruption, with storm clouds on the horizon if automation, Brexit and an ageing population are mismanaged.

    "Without a real change in our thinking, neither tweaks to the welfare state nor getting people into work alone, when the link between hard work and fair pay has broken, will help working people meet the challenges ahead.”

    Scotland is currently exploring the idea of a basic income to help lift people out of poverty and boost entrepreneurship.

    The Scottish Basic Income Steering Group was set up in 2017 to assess whether it was feasible in the country – and the consultation will end in 2020.

    The concept is not without its critics though, with many saying it would prove cripplingly expensive and provide little benefit.

    A report by the Organisation for Economic Co-operation and Development (OECD) said a British UBI funded only with money saved by abolishing existing benefits systems would lead to higher levels of poverty.

    It added that, even if taxes were raised significantly to pay for it, the fund would “not significantly reduce poverty”.

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