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Unpublished Paper
The Cost of Basic Income in the United Kingdom: A Microsimulation Analysis
(2020)
  • Karl Widerquist
  • Georg Arndt
Abstract
This article uses microsimulation analysis to estimate that the net cost of a roughly poverty-level Universal Basic Income (UBI) for the United Kingdom is about £67 billion per year or 3.4% of GDP. The scheme examined involves a UBI of £7,706 for adults and £3,853 for children with a marginal tax rate of 50% on net beneficiaries. The cost of this UBI scheme adds only 39% to the cost of the UK’s existing transfer system and only 8.7% to the UK’s total government spending. About 70% of UK families would benefit from the transition to this UBI scheme, with the average gain for each net-beneficiary family being £4,056. The figure of £67 billion is a “net cost” in two senses. First, it subtracts the amount of UBI that individuals pay themselves as they simultaneously receive a UBI and pay higher taxes to finance it. This calculation alone shows that the cost of UBI is only about one-third of the often-quoted-but-not-very-useful concept of “gross cost,” which ignores the fact that it costs nothing for a person to give themselves a pound. Second, this article also adds and subtracts the costs and savings involved in integrating the UBI scheme into the UK’s existing tax and benefit system. This calculation further reduces the scheme’s cost to 13% of gross cost. Under this scheme, the percent of UK families with incomes below the current official poverty line would drop from 16% to 4% and poverty among children and the elderly would all but disappear. The largest increase in incomes would be felt by those most deeply in poverty so that absolute poverty would virtually disappear.
Keywords
  • Basic Income,
  • Universal Basic Income,
  • Cost Estimate,
  • Microsimulation,
  • United Kingdom,
  • Poverty,
  • Inequality
Disciplines
Publication Date
2020
Citation Information
Karl Widerquist and Georg Arndt. "The Cost of Basic Income in the United Kingdom: A Microsimulation Analysis" (2020)
Available at: http://works.bepress.com/widerquist/119/