Finland’s basic income plan could change everything

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Finland to test a basic income for adults

FINLAND looks set to challenge the global economic orthodoxy in a way that could usher in the biggest step change in economic thought since the Industrial Revolution – it could signify the end of the link between hourly work and income, signalling the true end of the industrial age. Its stated intent – to introduce a basic income for all adults – has a few economic commentators excited but so far hasn’t sparked the national consciousness. That’s partly because it is a fairly radical idea and partly because most progressive economists already see the end of the welfare state and a move to a basic income as inevitable. They just can’t decide on the timescales nor the method for implementing it or managing such a massive change.

The government in Finland is planning on scrapping all welfare payments for adults and paying an unconditional basic citizens’ income to all adults of €800 (£576) per month. The idea of a basic income is not a new idea. There have been several limited trials, but only one large-scale one, in the Canadian town of Dauphin, Manitoba between 1974 and 1979. That made the case for a basic income overwhelmingly, but the data was locked away in a warehouse until being rediscovered by Evelyn Forget, who was inspired to write the report The Town with No Poverty. She found that even in that short time the basic income experiment resulted in a significant reduction in hospitalization for accidents and injuries, and massive improvements in mental health, including far less anxiety and depression.

A higher proportion of high school students also went on to graduate and although some young mothers did spend more time at home looking after children as they could now afford to, main breadwinners kept working, and there was no increase in unemployment. Historically, basic income has supporters on the right who see the benefits of a smaller state and less complex welfare systems, and on the left, who see basic dignity and an end to poverty as motivating factors.

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Driverless Metro in Copenhagen runs 24 hours a day

If you thought automation had decimated the manufacturing industry, just wait till you see what happens when the new smart machines enter the job market over the next decade. Driverless cars are proving to be safer than human-driven ones. How long before all taxis, buses, trains and trams are automatic? Have you used the Dubai or Stansted Airport trains, Copenhagen’s trams or the Barcelona underground? There are no drivers and you didn’t even notice. How long before you see the rollout of 3D-printed housing with all wiring done by automated mice? Search the internet for “Monster machine building bridges in China” – there are humans involved: dozens not hundreds, and for weeks not months. Within a generation job availability will be limited to only the most creative and self-employed craftspeople unless we radically change the nature of work and remuneration – this makes basic income an inevitability. A recent American study estimates that 47% of jobs are in danger from automation in the next 20 years.

Many from the section of society that used to manufacture tangible goods now see jobs as dead-end, intangible and often soul-destroying roles in call centres and superstores that often pay less than the living wage, leading them into debt and qualifying them for a raft of complex and very expensive government welfare payments. Alcohol consumption, drugs and obesity are symptoms of excess in the wealthy but of desperation in the poor and the cost of the diabetes explosion alone to the NHS will soon reach unmanageable levels.

So how much would it cost? Applying a basic income level to all adults in the UK of around £6,000 a year (matching the state pension plus a bit) would cost £300 billion a year. That’s a huge figure but it applies to all adults and so you do away with the state pension, saving £75bn, you do away with all benefits (except disability and child benefits), saving £140bn. Anyone earning more than the non-taxable earnings threshold pays tax on it. Many administration jobs would go with time, and maybe that saves another £10bn, meaning an on-cost of £75bn per year.

Businesses would have to raise wages to above the living wage to attract people to what are currently lower-paid jobs – assuming that means they will have to pay living wage + 5%. This will generate billions in new taxes and National Insurance per year in the short-term and increase the consumer spending power of large sections of our economy, increasing VAT revenues.

Ending poverty would have significant health benefits, and although it is impossible to calculate, NHS spending would be likely to drop significantly, especially in rapidly expanding areas such as the diabetes crises, amounting to 10% (over £10bn) of the NHS budget, up 60% in the last ten years.

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Could using Quantitative Easing to underpin a basic income create QE that actually works?

Rough estimations on the above start to get us close enough for scrapping projects like Trident and HS2 to close the gap but why not look at radical solutions? Today 97% of new money is created by banks, and they then charge interest on that money they create, not just to mortgage holders and business lenders but to governments. It is the interest on sovereign debt that is driving the deficit. The government can simply issue the balance of the basic income cost through a new government-created currency. Bypassing the private banking sector’s monopoly on money-creation, and therefore paying no interest on the cost of the basic income, would significantly lower government indebtedness over time.

The basic income could be issued as sterling to those under a certain income and in the form of a new electronic currency (pegged to sterling) to higher earners. This e-currency, the Basic Income Grant (or Biggies), would pay no interest as a disincentive to save, increasing the turnover of currency in the economy. It could also have a time value reduction so if it is not spent in a year it loses 25% of its value, which returns to the Government who can then (exclusively) convert unspent Biggies into sterling and pay back sovereign debt with it. On top of that the ability to accept Biggies could be withdrawn by the government should a company transfer profits out of the UK to avoid tax, possibly adding £3bn more in tax revenue.

An answer to end poverty, to bring respect and dignity, hope, and a feeling of being valued, rather than pitied, by society, to our poorest communities. A solution that prepares us for the coming unemployment crises of the new automation wave, increases tax revenues, addresses inequality, raises wages and addresses growing health crises and their associated costs. Right now critics will say we can’t afford it, and yes, it needs a lot of work, but in ten years we may realise we can’t afford not to. Finland is going to test it, and it might change everything.

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About the Author ()

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before joining Business for Scotland full time first as its MD and then CEO he ran a small social media and sales & marketing consultancy. With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G). Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and The Huffington Post.

Comments (11)

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  1. Joe P says:

    “Have you used the Dubai or Stansted Airport trains, Copenhagen’s trams or the Barcelona underground? There are no drivers and you didn’t even notice. How long before you see the rollout of 3D-printed housing with all wiring done by automated mice? Search the internet for “Monster machine building bridges in China”

    All these require one common factor which is energy, current economic turmoil is clear indicator we cannot randomly create currency – all those mal-investment in fraking, cracking, shale etc are clear proof enough.

    Life is “manifestation of energy”, only real currency is energy or promise to deliver energy. Indian civilization prospered for thousands of years using food grains – human usable stored energy – as currency – absolute real currency.

    All currencies that do not promise to deliver energy are fake currency including Bitcoin.

    Humans need on average 2700 calories of energy per day, this is absolute minimum wage, today minimum wage should be calculated based on average energy requirement as per standard of living or average energy use, if business are allowed to pay less than this minimum wage – economic system will collapse – Walmart experiment.

    When currency becomes promise to deliver energy, all systems including climate issues will fall in line.

    Basic income plan should be envisioned using real currency – promise to deliver energy.

  2. On this topic: we made a simple but effective 4 page comic strip for the UK branch of the ‘Basic/Citizen’s Income’ campaign. “The Citizen’s Income Trust promotes debate on the desirability and feasibility of a Citizen’s Income…” You can see it here:

  3. Jane Johnson says:

    This plan is the first radical step towards free flowing goods and services, and as such would make the potential for a less money-dominated society, but could also usher in a deeper unrest as the concept needs the support and understanding of the people. Otherwise they would just continue to find ways around the system in order to protect theirs and their families interest.
    On the plus side, no more poverty, but also less need for wholesale economic migration. But it would also bring in the question of how to deal with the International community and with despotic or revolutionary uprising. The system is so like new world order, and the lean gene could react against a pod existence such as E M Forster’s ‘The Machine Stops.
    In fact the control of the poor is not the issue as much as the control of the controllers. It’s a political matter.

  4. geoffrey torkington says:

    Wow exciting message. Also are you familiar with Invisible Hands, an even larger paradigm shift. I would love to hear more about what you wrote. Any suggested resources?

    • Gordon MacIntyre-Kemp says:

      The invisible hand was concept introduced by Adam Smith in the Wealth of Nations – by seeking to improve their own wealth all individuals unintentionally benefit society. The idea in its original meaning (my interpretation) is that the more people you have earning good wages and with access to economic opportunity the better the general prosperity of society. However I have heard it argued that extremely wealthy people drive our economy more effectively through the trickle down effect – That however is utter garbage. Inequality in our society is stopping a large percentage of the population from being positively economically active and that slows down growth – we have moved beyond Adam Smiths capitalism to rampant consumerism and the invisible hand has been replaced by the grasping hand.

  5. Kath says:

    Sounds great – but what about housing costs?

    • Gordon MacIntyre-Kemp says:

      Can you explain your concern in more detail? Possibly answered in my article in today The National where I set out an alternative to the debt based money system that encourages lending to pay for recoverable assets and creates housing bubbles and cyclical recessions?

      • Jane Johnson says:

        I’d like to read your account of how to substitute the present boom and bust housing market with sustainable homes on a human scale. Please post links or a post on my Facebook page, or inbox me. Evidently, with a copy on here – or a second article on the Huffington Post.

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