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Daily Mirror
Daily Mirror
Business
Patrick Daly

Basic income - why some people get free money and eligibility to receive £1,600 a month

There can't be many people who wouldn't like the idea of free money being passed their way.

Benefits payments are often based on earnings or are means-tested, meaning they apply to those who are worst off.

But universal basic income (UBI) works differently in principle, with the idea being that anyone and everyone should receive a fixed amount from the government in what would amount to a colossal overhaul of the benefits system.

Pilot schemes have been carried out in some countries and the UK has just signed off on the concept for a select group in society.

Who in the UK is receiving 'free money'?

Welsh First Minister Mark Drakeford has announced a pilot basic income scheme for care leavers (Getty Images)

The Labour-led Welsh Government launched its basic income pilot scheme this week, with the idea of giving young people leaving the care system regular payments.

The scheme, introduced today (Friday July 1), will see more than 500 people leaving care in Wales offered £1,600 before tax each month for two years to support them as they look to make their way in the world as adults.

The £20million pilot will run for three years and has been labelled “gloriously ambitious” by ministers.

In a hint that the idea of basic income could be extended if the pilot is successful, First Minister Mark Drakeford said this could be “just the first step in what could be a journey that benefits generations to come”.

What is basic income?

The Labour administration in Wales has been keen to drive home that those receiving the monthly payments (they can choose to receive the cash broken down to fortnightly payments if desired) have not been “lucky enough” to receive the same support as those from conventional family set-ups, and so the money is a helping hand as they fend for themselves.

But the idea of basic income actually goes further than that definition - hence why it is sometimes called a “universal” income.

It is the idea that giving money out with no strings attached removes the bureaucracy and worry around applying and processing benefits.

It also seen to help remove money worries for the working poor who are earning just over the threshold for being able to receive Universal Credit, with one study last year concluding that a full rollout of UBI in Wales could halve poverty in the country.

It is also designed to create better flexibility for those already in the job market. Want to change careers? Re-training or going it alone can be a huge financial risk.

But if the state is paying everyone a set amount each month, then workers could choose to go part-time while they take on a second venture or go back to college to help them learn new skills.

In short, it could potentially cut red tape, ease poverty and make the economy more productive.

Which countries have basic income?

Finland conducted the largest basic income trial in 2017, putting together a national experiment that saw about 2,000 randomly selected unemployed people, aged between 25 and 58, given a tax-free income of £430 a month for two years with no questions asked.

A study found the pilot - the first of its kind in Europe - had not increased employment during its first year, but the general wellbeing of recipients appeared to increase.

Smaller trials have been carried out by not-for-profits groups in Germany, Spain and the Netherlands, while similar cash handout programmes have also been seen in countries such as Iran and Kenya.

In the US state of Alaska, each citizen has received a cheque from the government since 1982, mainly thanks to a state-owned investment fund financed by oil reserves.

The money — which can range from around $2,000 (£1,645) per person when oil prices are high to $1,000 (£820) in cheaper wholesale years — has helped to wipe out extreme poverty in the region.

Former shadow chancellor John McDonnell said that if Jeremy Corbyn ’s Labour Party had won the 2019 election, the party would have commissioned a basic income pilot in Britain.

What is bad about universal income?

Some critics perceive the idea of giving people money without conditions as “free money” - a line voiced by the Welsh Conservatives when the pilot was announced recently.

Joel James, shadow minister for social partnership, said it had been “proven time and again that so-called universal basic income doesn’t work” and pointed to Finland discontinuing its pilot in 2020.

There are concerns that large sections of the British electorate would not accept such a massive handout of public money, particularly because it might have to be paid for via higher taxes.

Under the purest form of UBI, even the wealthiest would receive the money, including millionaires and rich landlords, which some argue would be money wasted.

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