Rather than UBI, the Tories should champion a negative income tax

Matt Gillow

August 12, 2018

The idea of a universal basic income (UBI) has been the trendy idea of the political class for months now. Indeed, Labour’s shadow chancellor, John McDonnell, recently announced that it will be in the party’s next manifesto.

Adopting a basic income policy does pretty much what it says on the tin. Everybody gets a basic state paid cheque, irrespective of other income streams. The differences between UBI and a negative income tax are essentially based around the universality of the schemes and how they are handled administratively.

For example, with a negative income tax – a proposal which I fully support – those with a gross income under, say, £10,000 per annum, would see it topped up by the state. So those over the threshold would pay a positive tax to the state, and those below the threshold would receive 50 per cent of the difference from the state – in other words, a negative tax.

The key here is that under this system an individual is always going to be better off in work, rather than on benefits – but, crucially, it removes the tremendous administrative workforce that current systems demand. And unlike UBI, those who are financially comfortable – and frankly don’t need state help – don’t receive any extra money.

However, my central point is not laboured around the intricacies of either scheme, rather the fact that the Conservative Party should start taking fresh ideas seriously, and not just dismissing all big thinking as fantasy.

The current system of Universal Credit has had a wildly contentious roll-out, facing bitter opposition in terms of its complexity and disregard for safety and individual liberty.

And while it is probably a stretch to say that our social security system has completely failed, it has undeniable major flaws. It simply cannot be ignored that over the last three decades the welfare state has led to a tripling in the levels of destitution. In 2015, research conducted by the Institute of Economic Affairs outlined how it was “not fit for purpose”, while half of all Brits thought the influence government has over people’s lives was too high, and most thought new regulations were causing more harm than good.

Adopting a negative income tax, in particular, would be a shoe-in to fix these issues and would also help change to the narrative on the Conservatives’ welfare attitudes away from being “the nasty party”.

In fact, I’d argue that a negative income tax would be an attractive model to many across the political spectrum. The intellectual heavy lifting for it initially stemmed from the celebrated neoliberal economist Milton Friedman, and would streamline our social security system; make it easier to understand; remove potential to game the system; and if set at the right level, still retain the incentive to find work. All while retaining key British ideas of fair play, entrepreneurship, individual liberty and enterprise.

In our wildly divisive political arena, this could be an opportunity to usher in a unifying policy. A negative income tax would be attractive to those on the Left because it improves the safety net – which I believe any progressive society should have – while also appealing to those on the Right because it streamlines the system while encouraging work and enterprise.

Consider, for example, how many more start-ups would we have, or the number of budding entrepreneurs who would be able to commit to projects they’re passionate about if there a genuine safety net existed. Contrary to any other social security system, a negative income tax could actually inject a renewed love for innovation into the British economy and improve productivity levels. I’m a vocal advocate for the Tories becoming the Party of competition and enterprise again – and unlike most fiddly welfare systems, a negative income tax isn’t only conducive with that vision, but a step towards it.

In Jamie Bartlett’s brilliant The People vs. Tech, he outlines the potential for, as we become increasingly used to AI and begin to properly harness it, the means of production and wealth being centred dramatically into the hands of a few digital demagogues in Silicon Valley.

So, if the Conservative Party is serious about social mobility, protecting the vulnerable, and being the party of entrepreneurship, politicians should stop sneering at Labour’s basic income proposal and instead put forward their own solution centred around the free market: a negative income tax.


  • Matt Gillow

    Matt Gillow is co-founder of 1828 and communications and events manager at the British Foreign Policy Group.

Written by Matt Gillow

Matt Gillow is co-founder of 1828 and communications and events manager at the British Foreign Policy Group.


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