Free cash machine 🎰

In the October Budget, Chancellor John Healey announced a £100 Household Energy Payment for up to 20 million households. It lands in bank accounts from January 2027, for households in England in council tax bands A to D. That’s about four in five homes. Cha-ching. Whether it will touch the sides, when the typical energy bill is set to rise by around £300-400, is another question. Nonetheless, thank you Mr H. The public are happy with Healey’s Budget.

No national government has ever rolled out a universal basic income. But something about free money from the state is just so captivating. The Basic Income Earth Network, the movement’s main international body, sets five tests. A basic income is cash, not vouchers or services. It’s paid regularly. It goes to individuals, not households. It’s universal, with no means test. And it’s unconditional, with no requirement to work or look for work. But once AI gets its feet under the desk, some form of UBI may be inevitable, even necessary.

Musk bucks

Some of the biggest backers of free money now come from tech. One SpaceX (SPCX) share was worth $146 when markets closed on 16 October. Three days later, Elon Musk promised to give one share to every child in America next year. With roughly 72 million Americans under 18, that’s about $10.5bn of stock. SpaceX only listed in June, raising $85.7bn in the biggest IPO in history.

Musk argues AI and robots will produce so much that work becomes optional within 20 years. He predicts a “universal high income”, paid as government cheques. Because AI will churn out goods and services faster than the money supply grows, he says, there’ll be no inflation. In Musk we trust.  

Trial and error

Since 1982, almost every Alaskan, child or adult, has received an annual payment from the Permanent Fund, a state wealth fund built on oil money. It’s billed as a dividend, rather than welfare, which has helped it survive four decades in a red state. This year’s payment, which started landing on 1 October, is $1,200, a $1,000 dividend plus a $200 energy relief payment. The amount varies. It hit $3,284 in 2022 and was just $1,000 last year.

Closer to home, Wales offered care leavers who turned 18 during the enrolment period £1,600 a month (£1,280 after tax) for two years. No strings attached. Of those eligible, 97%, 644 young people, signed up.

In interviews, many said the money eased their anxiety and gave them a sense of control over their lives. Not everyone found it easy to manage, though, and some struggled when it stopped. The numbers on work and education are still to come. Finland’s two-year trial, which paid unemployed people €560 a month, found a modest boost to employment and noticeably higher wellbeing. 

The biggest US study, funded by OpenAI boss Sam Altman, gave 1,000 low-income Americans $1,000 a month for three years. They spent it mostly on basics like food, housing and transport, and worked 1.3 fewer hours a week than a control group. 

PIP squeeze

The most anyone can get from Personal Independence Payment is £10,119 a year. That’s £194.60 a week for the enhanced rates of both daily living and mobility. Around 3.9 million people in England and Wales claim PIP.

It’s cash, paid every four weeks, to the individual. It isn’t means-tested, it isn’t taxed, and you can work full time and keep it, unlike Universal Credit. In July, the interim report of the Timms Review, the first full review of PIP since it launched in 2013, found the benefit vital but the assessment dehumanising and stressful. Stephen Timms concluded it’s not fit for purpose and his final report is due later this autumn.

Then there’s the state pension. From next April, it rises 3.9% to £13,036.40 a year under the triple lock. That takes it above the personal allowance for the first time. The state pension costs around £154bn a year, making it by far the biggest line in the welfare budget. The triple lock has pushed it up 89% since 2011. And there are no conditions on what you do. You don’t have to look for work, and you can carry on working and still claim it. It’s a UBI for OAPs. 

In for a penny

Paying every adult in Britain £100 a week would cost roughly £291bn. It’s why most UK proposals range from £50 to £150 a week for adults and £30 to £80 for children.

One way to do it would be to scrap the personal allowance, the £12,570 tax-free slice, and pay every working-age adult £70 to £90 a week in cash instead. Taxpayers would broadly break even, getting the payment but paying matching extra tax. The gains would go to people who earn too little to use their allowance in full. One model put the net cost of a poverty-level UBI at £67bn a year, about a third of the gross.

Going further means raising taxes. Each penny on the basic rate brings in £7bn to £8bn, so £100bn from income tax alone would need 13 or 14p. Smaller schemes are more manageable. Basic income researcher Malcolm Torry’s £60-a-week scheme was funded by raising the basic, higher, and top rates by two, three, and four points. It cut child poverty by 13%. Campaigners are also eyeing land, carbon, and financial transaction taxes.

In January, investment minister Lord Stockwood said people in government are discussing a basic income for workers displaced by AI. Nothing close to official yet. M’Lord has previously floated taxing tech companies to pay for one.

Big bother

A job is a trade, your labour for someone’s money, on terms set out in a contract. If one employer cuts you loose, there are other fish in the sea. Under a basic income, a big chunk of everyone’s income would have a single payer. The state.

The more people depend on one payer, the more power it has, and the state loves a nosey. Since 26 October, the DWP has been able to make banks screen accounts of people on Universal Credit, Pension Credit, and Employment and Support Allowance for signs they’ve broken the rules, such as savings above the £16,000 limit. It can’t see transactions – yet –  but money owed can now be taken straight from a claimant’s account.

Pop a basic income on top of that infrastructure, and it’s ripe for abuse. Miss a check, owe the wrong department money, or get flagged by an algo, and the payments could stop. And there’s no other employer to turn to. Supporters argue the reverse. It’s means-testing that needs all the surveillance. A payment everyone gets needs no checks. 

Help wanted

Despite a reluctance to give people money for nothing, governments might find their hand forced. I’m not sure if you’ve noticed, but AI is coming for jobs. Corpos laying off thousands make the headlines, and that’s a real worry. But AI hasn’t caused many lay-offs. Firms have taken a no hire, no fire approach instead, and it’s young people who miss out. That’s how automation has usually worked, from Victorian boot-making to call centres.

UK youth unemployment was 15.6% in June to August, with 715,000 16-to-24-year-olds out of work. Before too long, the state may have to step up and provide enough dollar to keep people afloat. That won’t be easy. The government is forecast to spend £1.39trn this year, around 45% of the whole economy.

Robotax

AI has twigged the growing unease around jobs. And it may proffer the solution to the problem it caused. One option is taxing the machines, though AI companies are global, and tax them too hard and the profits move elsewhere. Another is hyperabundance, Musk’s bet that AI makes goods and services so cheap that paying everyone becomes affordable.

In April, OpenAI proposed a Public Wealth Fund with a stake in AI-driven growth across companies, paying people whether or not they invest. If AI companies capture much of the gains from automation, sharing their equity could pay for support without huge tax rises. But for now, the £100 is what’s on offer.