This is more an exercise in getting my head around this concept than anything else. I have found a few articles on it but I cannot seem to find one on how this might work on a national scale.
The first question is why would we need it in the first place? Well, the AIs are coming and once they have been popped inside a robot (which they already have, see the youtube video below) they are going to be able to do all jobs better than humans, faster than humans and cheaper than humans. After playing with ChatGPT 4o for a day I have no doubt that this will occur and I am just moving my timelines further forward for this on a monthly basis.
The concept of UBI is older than you might imagine dating back to a book called 'Utopia' by Thomas More in 1516. Then Thomas Paine in 1797, Charles Fourier and onto Milton Friedman in 1962 and have a read up on Richard Nixon's Family Assistance Plan in the 1969 which is starting to look more and more like a lost opportunity - at least to get a really good idea on whether it would have worked.
The long and short of UBI is that every citizen gets paid a certain amount of money each month regardless of their financial situation. Ask the question to ChatGPT for a more in depth answer as to why it might work, why it might not and whether it is a fairer system than the one we have.
Whatever the rights and wrongs, and despite some research having been done in this area it has generally been at the lower end of UBI. i.e. low payments.
Those experiments have pointed to the conclusion that a UBI of sufficient level to have an impact is not affordable, and an affordable UBI would not be of sufficient level to have an impact.
But as there doesn't seem to be a whole lot of data on the high level of UBI payments, which is where we might have to head, I thought I would give it a go myself to see if there was anything I could bring to the party and to satisfy my own curiosity as to how these figures might be arrived at. Here goes.
Current UK population is around 67 million. 16 and over that comes to approx. 54 million. Lets keep it simple and divide the totals by this amount, extra subsidies for children can be factored in later or another time.
Most UBI seems to figure £20K a year to be a figure they use, I don't know why for sure but I imagine it gives a relatively good standard of living, so we will start with this. So, the amount of money required to give 54 million people £20K per years is £1,080,000,000,000 or £1.08 Trillion. The current GDP of the UK is £3.089 Trillion and the best sources I can get for the tax income for the UK is from The House of Commons Library.
This tells us we receive £1.1 Trillion in all tax incomes. The office for Budget Responsibility (oh the irony) tells us that the government spends £1.14 Trillion to run the country (which explains why the National debt keeps increasing) and the diagram below shows us where that money is spent (notice the debt interest which is almost 3 times the defence expenditure, but I digress).
Let us assume that we can remove pensions, universal credit and other welfare from this equation if it is to be replaced by UBI. That adds up to £266 Billion. That leaves us £814 Billion more to find for public spending and our UBI.
Now, will we need to spend as much on everything else if the machines are running everything? For example, £66 Billion of the NHS costs goes on wages. For defence we could probably find the information here at the MOD Departmental Resources but these are high level calculations we are making here so lets just assume we can cut 30% of the costs of staff wages from these departmental expenditures (because the machines will need some people around to tell them what to do - at least to start with and probably just before they start telling us what to do).
So for wages and efficiencies I am cutting 30% from health and social care expenditure, education, other public services and other spending but I shall leave defence because we need it. That comes to £232 Billion or so.
Thus, £266 Billion and £232 Billion total £499 Billion, lets say a nice 1/2 T we can remove from expenditure. But wait! We can't tax people on jobs they don't have so we are going to have to make adjustments for the £457 Billion in income tax and National Insurance. Lets say we have some people left working and part-time incomes and reduce this down to £100B.
So that comes off the total we had in the first place and now we only get £743 Billion of income (and we are still paying council tax!).
Still following? So we have:
Income: £743 Billion
UBI: £1.08 Trillion
New Public Spending total minus Universal credit, wages etc: £1.14T - £0.64T = £640 Billion
Total income: £743 Billion
Total outgoings: £1.72 Trillion
Deficit: £0.97 Trillion
Oh dear. So, we need to find around £1Trillion to fund UBI. I cannot see how this can work at a national scale, we will have to make some big compromises here but lets give it a go.
Firstly, lets question whether we need to get £20,000. Lets assume that that there will significant reductions in costs of goods and services for a highly efficient, automated society. This is now purely guesswork and won't take into account housing costs etc. but again, high automation may very well be applied to house building and significantly reduce purchase and rental costs here too. (I feel like exploring this in another post).
So lets reduce the UBI to £15,000 per adult per annum. This might encourage people to be more entrepreneurial to increase their income and we can capture some further tax for that but we won't account for it here.
We are now down to a mere £750B or so.
Next lets take a run at reducing these outgoings and hope that further efficiencies can reduce the costs. For example, social care. We may find that as we all have more time on our hands we can shoulder the burden on the state and spend more time looking after our loved ones. Health will most likely increase without working (and skiving) so lets reduce this to by another £25B and other public services, lets knock a massive $50B from this for wages and whatever (yes I am getting desperate now). Maybe £25B form 'Other spending' and reducing the interest payments on the national debt. (I'm reaching). That's a £100B reduction. It's massive so we really are looking for some sort of transformative change even here but let's continue.
£650B to go.
A further investigation with ChatGPT reveals (and I have shortened the workings significantly for sanity's sake) show that we may be able to raise further taxes and to these amounts.
Ways to increase tax revenues
Robot tax
A 50% 'wage' tax on companies using robots. Effectively allowing the company to make significant savings through automation but boosting the revenues for the exchequer to pay for the UBI. This might work by for example getting Amazon to half of what their wage bill would have been in tax. In that case in the UK that would equate to approx. £1B extra in taxes. Extrapolate this out and an additional £70B might be added via this tax.
Wealth tax
Several proposals have been suggested to enhance wealth taxation in the UK, which could generate substantial additional revenue:
Capital Gains Tax Alignment: Equalizing CGT rates with income tax rates could raise up to £15.2 billion annually (Tax Justice UK).
Wealth Tax: Introducing a 1% annual wealth tax on net assets over £10 million could potentially raise £10 billion annually (Tax Justice UK).
Reforming Inheritance Tax: Eliminating or reforming Business Relief and Agricultural Property Relief on Inheritance Tax could raise an additional £1.4 billion annually (Tax Justice UK).
Non-Dom Reform: Reforming the non-domiciled (non-dom) status rules could generate up to £3.2 billion per year by taxing offshore income and capital gains of UK residents (Tax Justice UK).
Tax on Share Buybacks: Implementing a 4% tax on share buybacks could raise approximately £2 billion annually (Tax Justice UK).
I am not sure I agree with all of these but lets dump them in here to come to our total. Lets say ballpark £30B here. And it has to be said we couldn't swing this without some very serious international co-operation on tax evasions because everyone with any money would up sticks. Some light reading on the Laffer Curve may be in order.
Anyway, we are at £550B
Privatizations and Public Private Partnerships
We are really scraping the bottom of the barrel here. I have quizzed ChatGPT on this and it is immensely boring and doesn't give a lot of cash, suffice to say you might squeeze £10B a year from it.
What's left?
Well, reducing tax avoidance, carbon taxes, monetary policy adjustments but we are looking at diminishing returns and then we have to start looking at increasing national revenue which is a whole other topic - might we consider energy exports such as fracking, wind power, drilling for oil in the BAT (the Antarctic and not as lucrative as you might think) and investment in new technologies. All very hard to measure.
So all told we are looking at an extra £110B and we are now missing £440 billion.
Conclusion
Although these are back of the fag packet calculations to give everyone £15K per year on Universal Basic Income I just don't think it can be done unless we have some sort of transformational event in our society.
That said with the way things are going, the sheer speed of the AI advancements, we might not have any choice but to make it work.
We will have some more evidence arriving soon as there is an experiment on UBI being conducted on a small scale which started last year in London and is being conducted by The Autonomy Institute. Should be interesting.
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